IRS Rules That Redfin Does Not Have to Report Commission Refunds as Taxable Income

Mar 07, 2007, 00:00 ET from Redfin

    SEATTLE, March 7 /PRNewswire/ -- Online real estate broker Redfin
 Corporation today announced a ruling from the U.S. Internal Revenue Service
 that Redfin does not have to issue Form 1099 to customers that receive
 commission refunds because such amounts generally are not taxable as
 income. Redfin is notifying all of its home-buying customers by mail that
 the company will not report their commission refunds to the IRS.
     Redfin Direct combines an e-commerce application with the services of a
 local, experienced Redfin agent who handles home tours, pricing advice,
 offer presentation, negotiations, inspections and the closing process.
 Home-buyers who can find a home to buy on their own get two-thirds of
 Redfin's commission refunded at closing.
     Across Washington and California, Redfin's average commission refund is
 more than $10,000. Redfin customers typically apply their refund to closing
 costs, which include loan fees, local property taxes and escrow-related
 costs as well as an initial mortgage payment. As the commission refund
 usually exceeds closing costs by thousands of dollars, Redfin often issues
 its customers a check for the excess.
     Prior to Redfin Direct, commission refunds in excess of closing costs
 were relatively rare, and no ruling existed as to whether such amounts were
 required to be reported on Form 1099. Accordingly, Redfin petitioned the
 IRS in November 2006 for a ruling, which Redfin received from the IRS last
     Because an individual or corporation can only petition the IRS on its
 own behalf, Redfin could only seek a ruling to clarify its own reporting
 obligation, not to address the individual circumstance of each customer's
 tax return. The ruling does however state that "a payment or credit at
 closing from [Redfin] represents an adjustment to the purchase price of the
 home and generally is not includible in a purchaser's gross income."
     In support of its ruling, the IRS cites guidance addressing a
 non-profit's down-payment assistance to low-income families buying houses
 or a manufacturer's rebate on a car, neither of which are taxable. The full
 text of the ruling is available on Redfin's blog at
     "Seeking a ruling from the IRS is not an insignificant undertaking,"
 said Redfin VP of Real Estate Operations David Wilner. "Rather than having
 hundreds of customers make inquiries with the IRS on a case-by-case basis,
 we felt it was the right thing to do as part of our commitment to
 supporting customers through every phase of the home-buying process from
 offer to close and beyond."
     About Redfin
     Redfin ( is the real estate industry's first online
 brokerage, currently available in Greater Seattle, the San Francisco Bay
 Area and Southern California, including Los Angeles, Orange County, the
 Inland Empire and San Diego. By combining maps, listings, tax records,
 analytics and eyewitness property reviews, Redfin has become one of the
 most popular brokerage sites. Customers who use to buy or sell
 properties earn a refund of most of the commission traditionally due their
 broker, and get full support in paperwork, offer presentation, negotiations
 and closing. Redfin has one of the highest customer satisfaction rates in
 the industry, and is the only brokerage with a 100 percent customer
 satisfaction guarantee. To give the Redfin service a try, visit, or keep track of our daring exploits via our blog, at