1099-S for timber sale. Where do I report it?

[DS30 · Accepted solution]

 It depends,

If you are not in the business of selling timber (as a general rule if you only occasionally sell timber (one or two sales every three or four years) you are not in the timber business) then this sale would be considered an investment and the sale of a capital asset.

(If you are in the business of selling Timber, you will report this income and related expenses as self-employment income on Schedule C)

To enter this as a capital asset sale in TurboTax, log into your tax return and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information (see step 6 below) 

Alternatively, To enter this transaction in TurboTax Online or Desktop, please follow these steps:

1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
3. Next click on “I’ll choose what I work on”
4. Scroll down the screen until to come to the section “Investment Income”
5. Choose “Stocks, Mutual Funds, Bonds, Other” and select “start’ (or “update” is you have already worked on this section) (see Screenshot #1)
6. The first screen will ask if you sold any investments during the current tax year (This includes any asset held as an investment property so answer “yes” to this question)
7. Since you did not receive a 1099-B, answer “no” to the 1099-B question
8. Choose type of investment you sold - select everything else
9. Some basic information:
1. Description –  Usually the address of the property sold
2. Sales Proceeds – Your net proceeds from the sale (usually reported on 1099-S)
3. Date Sold – Date you sold the property (on 1099-S)
10. Tell us how you acquired the property - purchased
11. Enter the your cost basis- You may be able to recover your cost basis in the timber sold, also referred to as a depletion allowance. Click this website for more information about this topic http://www.timbertax.org 
12. Date acquired  (Just remember that the date acquired should be more than a year before the date sold in order for the sale to get long term capital gains treatment and the lower capital gains rate)

Click this link for further information about reporting the sale of a capital asset

[DS30]

Please see edited and updated answer.

[Easterlymo]

I followed your steps and everything was good up to Step #8. After answering the 1099b question with a "no", a new screen appears and asks "Tell us about this sale". It did not then ask to "choose type of investment you sold" and the is no option to "select everything else". Instead it gave two options, either to enter aa "one sale at a time" or to enter a "summary for each sales category". The "one sale at a time" option has boxes similar to those you listed in Step #9. Our timber was harvested on different dates and the "summary for each sales category" box, does not ask about the nature of the sale. It does ask for net sales proceeds, the cost basis and a holding period check box. The holding period can be other short term (box C) or long term (box F). Neither box C nor box F a[[ear on my 1099-s.  

I thought there my have been a problem since I was using TurboTax Deluxe version, so I upgraded to Premier, but nothing changed.

So is there a program glitch, or what?

[DianeW777]

Timber sales are reported on Schedule D and in TurboTax it will be reported as noted with the following changes. This actually starts with step 7, where you began having difficulty.

1. The first screen will ask if you sold any investments during the current tax year (This includes any asset held as an investment property so answer “yes” to this question)
2. If you are using the online version - there will be a box to select Other (see image below) Do not select the Stocks, Bonds, Mutual funds box.
3. Since you did not receive a 1099-B, answer “no” to the 1099-B question - not in Online version
4. Choose type of investment you sold - select 'Other" see image below
5. Some basic information:
   1. Description –  Usually the address of the property sold - Timber
   2. Date of Purchase
   3. Sales Proceeds – Your net proceeds from the sale 
   4. Date Sold – Date you sold the property 
   5. Cost - if timber was purchased on property with your main home and the price was not separately stated this will be zero.
   6. Continue to finish your sale.

[JM1959]

I'm using Turbotax Premier and the steps and screenshots are not the same.  Can you describe how to enter pay as you cut for timber sales for that edition?

[PattiF]

Here are some screenshots from TurboTax Desktop:

Here is a link to aid in determining the basis of the timber.

[gregmelissasmith]

@PattiF Thank you for the help with reporting timber sales. We inherited some land out of state from my in-laws and sold timber in 2021. One follow up question I'm hoping you can answer. My husband is the only one who received the 1099S for the timber sales, but he will split the sale proceeds with his two brothers who are equal inheritors. In the "Less Common Adjustments That Apply" section after reporting income, there is an option to "adjust the gain or loss if not all of the proceeds apply to me." That is our case, but since the brothers didn't receive 1099S forms, does this actually apply or should we be paying the tax on the gross proceeds and deducting that from what we distribute to the co-inheritors? 

[Vanessa A]

No, you would not pay taxes on the entire income and then split between everyone.  Everyone has different tax rates, so you would enter 1/3 of the income on the 1099S then issue his two brothers 1099's for their share of the income. 

[gregmelissasmith]

@Vanessa A Thank you for your reply. How does an individual issue a 1099 to another individual, and can that still be done for the 2021 tax year since it’s after January 30?

[DianeW777]

You can simply nominee the appropriate distributions to the right persons. You can file them now without concern.

Nominee returns. 

Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received).  You must also furnish a Form 1099 to each of the other owners. 

File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)

• On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer.  The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner. 

If you choose this one here is the TurboTax program for creating 1099s.

The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here: 

• Form 1096-Transmittal
• Form 1099S 2021

@gregmelissasmith

[gregmelissasmith]

@DianeW777 Thank you so much for your guidance! 

[Loblolly]

I have to enter a timber sale as well..  Year 2020, desktop version.   I can follow the directions.  Question, I have always reported un schedule F.... not C.  My activity does rise to material participation, but when I sale on a schedule D, I see I need to make an election to ensure capital gains.. A 631 election, can I do that on Turbo Tax.  

  But another question since my sales are all capital gains, and recorded on Schedule D, the revenue for the sale is not reported per schedule F, and therefore, I always have an operating loss.   Any issues with that?

  Jeff

[MarilynG]

You could manually enter the enter the Sales Proceeds as Schedule F income, and Depletion as a Miscellaneous Expense.  

Click this link for more info on Reporting Timber Sales

Yes, an operating loss year after year can raise a flag at the IRS. 

This link has details on Schedule F. 

TurboTax does not support Schedule T, used for reporting a 631 Election. 

@Loblolly