How to file Form 1099-S for real estate and digital assets

Changes are coming in 2026 to how 1099-S forms are filled out and filed. Digital assets sales and exchanges in real estate will now need to be recorded, and the legacy FIRE system is being retired. Along with these changes come increased penalties for filing late or with errors.

Here’s what the deadlines and penalties look like for 2026:

So, if you fixed an error on a 1099-S on April 28th, you’d get hit with one $60 penalty for the IRS filing and one $130 penalty for furnishing the seller copy.

To avoid these costly penalties and ensure you are filing your Form 1099-S on time and accurately, we’ll explore what you need to know about the changes for 2026, what the exemptions are, and how you can file your 1099-S returns with automated help from QuickBooks.

What is a 1099-S?

A 1099-S is an IRS tax form used to document the gross proceeds from the sale of real estate. This can include mortgages, commercial buildings, and land. While traditionally issued in relation to mortgages and cash sales, with the 2025 tax law changes, a 1099-S is now crucial for documenting digital asset exchanges in real estate.

It is the responsibility of the settlement agent to accurately fill out all parts of the 1099-S and file it with the IRS in a timely manner. As digital asset exchanges become more common in real estate, small-firm lawyers and solo title professionals may find they need help handling the reporting in a scalable way.

Key 2026 changes to 1099-S filing

Digital asset reporting was initially added to the tax code by the Infrastructure Investment and Jobs Act in 2021. Over the last few years, tax forms have been updated, and reporting requirements have been further detailed.

For 2026, the new 1099-S form will include two key changes: [image2]

• Digital Asset Gross Proceeds (Box 2c): In this box, you will need to report the fair market value of digital assets used in the sale or exchange of real estate.
• Identifying digital assets (Box 8a-8d): These new boxes will record the digital token identifier, asset name, number of units received, and the date the digital assets were received.

In addition to the changes related to digital assets, the legacy Filing Information Returns Electronically (FIRE) system is being officially retired in 2025. If you haven’t already made the switch to the new Information Returns Intake System (IRIS) introduced in 2023, you will need to do so ahead of filing 1099s for 2026.

The good news is that the new system lets you file up to 100 returns at a time and provides you with real-time validation. For small businesses that need to file more than 10 returns (1099-S, 1099-K, 1095-C, 1099-NEC, 1099-MISC, etc.) in 2026, the IRS requires you to use IRIS.

• Digital Asset Gross Proceeds (Box 2c): In this box, you will need to report the fair market value of digital assets used in the sale or exchange of real estate. 
• Identifying digital assets (Box 8a-8d): These new boxes will record the digital token identifier, asset name, number of units received, and the date the digital assets were received. 

In addition to the changes related to digital assets, the legacy Filing Information Returns Electronically (FIRE) system is being officially retired in 2025. If you haven’t already made the switch to the new Information Returns Intake System (IRIS) introduced in 2023, you will need to do so ahead of filing 1099s for 2026. 

The good news is that the new system lets you file up to 100 returns at a time and provides you with real-time validation. For small businesses that need to file more than 10 returns (1099-S, 1099-K, 1095-C, 1099-NEC, 1099-MISC, etc.) in 2026, the IRS requires you to use IRIS.

How to file a 1099-S in 4 automated steps

Filing a 1099-S is not as complicated as other tax forms, but you’ll need to gather and store specific information, such as seller data and gross proceeds. Failing to do so can result in significant IRS penalties exceeding $680. Fortunately, software and automation can make the information-gathering and form-filling process a breeze.

Below, we’ll explore how you can fill out and file your 1099-S returns on time using the QuickBooks system.

Step 1: Collect seller data via digital W-9s

The first step in filing a Form 1099-S is to gather the seller’s information. This includes their name, current address, and most importantly, their TIN (Taxpayer Identification Number). 

If the seller was an individual, this will most likely be a Social Security Number or Individual Taxpayer Identification Number (ITIN). But if the seller was a business, this would be their EIN (Employer Identification Number).

The best way to obtain this information is through a W-9 prior to or at closing. QuickBooks will store the information from the W-9s for you, so that it is available when you are ready to file the 1099-S.

Step 2: Track gross proceeds and box 2c data

The second key element to the 1099-S is the gross proceeds. For each sale, you’ll need to record and track the total gross proceeds as well as the individual amounts for cash proceeds and digital asset proceeds. These need to be reported separately, and accurately, or you could get hit with a penalty ranging from $60 upt to $680+. 

For QuickBooks users, the software will not only track different gross proceeds amounts but also flag transactions involving tokens or virtual currency to make your January tax filing easier.

If you discover you’ve made an error on a 1099-S, get it fixed and re-file ASAP, as penalties begin to increase at the 30-day mark.

Step 3: Automate the settlement ledger in QuickBooks

Once you have gathered all your information, you need to verify it to ensure accuracy. This includes reconciling the gross proceeds reported against the actual movement of funds. Doing this helps ensure your 1099s are accurate and can decrease your audit risk. 

Automation can save you significant time. QuickBooks offers instant reconciliation when closing occurs, leaving you one less thing to worry about at tax time. And setting up a dedicated escrow account in your chart of accounts can help you easily track which transactions will require a 1099-S.

Step 4: E-file via IRS integration

The final step in the process is actually to file the 1099-S. This is done electronically through the IRIS system. Up to 100 returns can be filed at a time using a CSV format, or you can manually enter each 1099-S on the IRIS portal. Once submitted, you’ll receive confirmation within 24-48 hours. 

To streamline the process, QuickBooks allows you to sync your 1099-S data directly to IRIS-compatible filing partners like IRIS Payroll Solutions and Tax1099. Using one of these partners, your 1099 information is transmitted directly to the IRS, without the need to download CSV files or log in to the IRIS portal.

When do 1099's need to be mailed in 2026? If you are filing a 1099-S by mail, it will need to be postmarked by February 28th. For 2027, the postmarked date will be March 1st.

Common 1099-S exemptions and how to document them

Before you prepare your 1099-S filing, it's important to know that not all real estate sales require a Form 1099-S. To save yourself some time, here are the six exemptions the IRS lists:

As a law firm or title professional, you need to ensure you’ve gathered all the information necessary for the exemption. For example, for the primary residence exemption, you’ll need to have a signed Certificate of Exemption from the seller on file. In QuickBooks, to help declutter your year-end reporting list, you can flag these sellers as exempt in the Vendor Center.

When in doubt, it's better to file the 1099-S to avoid potential penalties. If the seller is exempt, they can note this on their tax return.

Find peace of mind come tax time

Tax time for a small business owner can be stressful and time-consuming. But what if it didn’t have to be? With QuickBooks Online, your data will be reconciled and ready instantly, so you can knock out all your filings in a fraction of the time while avoiding accuracy-related IRS penalties. It's a win-win scenario for tax season.