2023 Fraudulent Vacant Lot Sale, 1099-S submitted to the IRS by Title Co., Lot recovered through a Quit Claim Deed, How to fix/correct the 2023 1099-S

[Priller]

Hello Turbotax community,

A vacant lot I've owned for more than 30 years, was "sold" through a fraudulent transaction that used my name back in May of 2023 and the title company "closing the sale" submitted a 1099-S with my name for $55,000 to the IRS.

I reported the fraudulent sale to the County Sheriff Department in Dec of 2023 and the title company retained an attorney who investigated the fraudulent sale and last month, November of 2024, the attorney returned the property back to me through a Quit Claim Deed.

I'm currently trying to complete my 2023 Federal tax forms, but I don't know how to correct the 1099-S for $55k submitted by the title company to the IRS. I never saw the $55,000.

Is the title company responsible for submitting a corrected 1099-S showing a -$55,000 or $0 to the IRS?

Thank you all for your assistance in this matter,

A grateful and loyal Turbotax customer since 1993 🙂

[DoninGA]

Since the title company issued the original 1099-S they have the responsibility to issue the Corrected 1099-S to the IRS and you should also receive a copy of the corrected form.

[M-MTax]

Sounds like a mistake on the part of the title company and you might want to demand a corrected 1099-S since you received ZERO proceeds. If they do not have a reasonable explanation maybe tell them you're going to retain legal counsel if they fail to correct their error. Otherwise you can always enter the 1099-S on your return and then reverse the figure on Schedule 1.

[Opus 17]

If you are preparing your 2023 return now (late), I would leave the 1099-S off the return, attach a copy to your return, and attach a written explanation of why it is not valid/taxable income. (Since you have to file by mail, anyway).  This is the IRS recommended procedure.  I would not wait to file your return for the title company to show you proof of the canceled 1099-S because you don't know how long that will take.  

[Priller]

Thank you for the prompt response DoninGA,

I just got an email from the title company indicating that their accounting department is unaware of any means "to correct or revise" a previously issued/submitted 1099-S to the IRS... A very odd response indeed 🙂

By the way, without wanting to sound unappreciative, you meant to say 1099-S, not 1099-R, right?

Best,

Priller

[DoninGA]

@Priller Correct, the 1099-R was a typo on my part.  I have corrected the original response so that it now reads 1099-S.

For the corrected 1099-S, the IRS form allows the issuer to indicate the form is corrected by checking the CORRECTED box at the top of the form.  They then send the form to the IRS using the normal procedures.

Go to this IRS website for the Form 1099-S - https://www.irs.gov/forms-pubs/about-form-1099-s

[Priller]

Thank you for the advice M-MTax,

I agree with you that it was an "oversight/mistake" by the title company in charge of verifying the authenticity of the sales transaction back in May of 2023.

As I mentioned in my previous response to DoninGA, I had sent a request for a corrected 1099-S to the title company that closed the fraudulent sale in May of 2023 and their response indicating that the title company's accounting department was "unaware of any means of correcting a previously issue 1099-S" was bit surprising to say the least. It appears the title company is unable to own its "mistake" after having to reach out to the title company underwriter which investigated the sale of the vacant lot and determined that the sale was a fraudulent one.

I'm very interested in your second advice regarding the inclusion of the fraudulent 1099-S for $55,000 in my 1040 form (where?) and the its reversal in Schedule 1.

Since I never done this before, isn't there some additional documentation I should provide to the IRS as well?

Regards,

Priller

[M-MTax]

If you are preparing your 2023 return now (late), I would leave the 1099-S off the return, attach a copy to your return, and attach a written explanation of why it is not valid/taxable income.

Don't do that. They do NOT read letters of explanation attached to returns. 

[M-MTax]

Since I never done this before, isn't there some additional documentation I should provide to the IRS as well?

No. Just report the 1099-S and then reverse that amount on SCH 1, Line 24z 

@Priller 

[Priller]

Thank you for your comments and advice Opus17,

Just wanted to clarify that Turbotax and the IRS indicated that I can submit my 2023 1040 form electronically after the 2024 e-file shutdown (which started on November 30, 2024) ends, sometime in January of 2025. Apparently this is applicable for two tax years prior to the current tax year.

By the way, I increased my contributions to my retirement account in 202. Hopefully, I am getting a tax refund. So if I can clean up this $55k 1099-S issue, I should be good to go.

Though, the uncertainty associated with the title company willingness to issue a corrected 1099-S and the waiting period weighs heavily on my mind... I've dealt with this situation since December of 2023 when I found out someone had fraudulently "sold" my property in May of the same year... 

I do appreciate the insightful comments and recommendations.

Best,

Priller

[Mike9241]

Th IRS allows e-filing. Turbotax 2023 does not support it. Alao online prep of 2023 has ended. 

[Mike9241]

@M-MTax that won't work. the $55K will likely be on schedule D and treated as long-term capital gain while the deduction on schedule 1 would be treated as ordinary loss resulting in an incorrect tax calculation. Better for the taxpayer if needed, to show the $55K as an adjustment on Schedule D so there is no gain or loss.  

[M-MTax]

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@Mike9241 wrote:

@M-MTax that won't work. the $55K will likely be on schedule D and treated as long-term capital gain while the deduction on schedule 1 would be treated as ordinary loss......

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Yes, well wherever the adjustment needs to be made it should be done that way if a corrected 1099-S can't be obtained.....whether an 8949 or whatever.

[Priller]

@Mike9241 thank for your comments.