IRS Tax Form 6252: Installment Sale Income
An installment sale income refers to one or more payments that a person receives from the property’s disposition after the end of the tax year. However, individual properties, such as inventory sales, installment obligations, securities & stocks, and purchase made by dealers, cannot be sold by using installment sales. Taxpayers use Internal Revenue Service (IRS) Form 6252 to report income from the sale of property coming from the installment sale. They also use this form to report the income acquired from selling something higher than the original paid cost. The primary purpose of IRS Tax Form 6252 is to determine money received during a given tax year, returns on capital, total gain, and total interest.
You should file this form for the year when you received a payment from an installment sale. For the year in which transactions occurred, fill out lines 1 through 4 and parts I and II of the form. Furthermore, for any other year, fill in these same lines and part II of the form.
How to File Form 6252
For filing of the IRS Tax form 6252, firstly, you must input your name and identification number. That means an employer identification number for a corporation and a Social Security number for an individual.
After that, you have to provide the following information regarding the sale of the property or product:
- Description of the product and how you acquired the product
- Date of sale
- Money received from selling of that product
- Debts or mortgages by the buyer
- The real cost of the property
- Allowed depreciation
- Sales commissions or any other expenses
- All payments received in the current year or years prior
Furthermore, part I of the form deals with gross profits and the contract price. This part also includes installment agreements for the years in which you are filing. Part II asks you to provide information regarding the installment sale income. Part III deals with information regarding related party sales. A relevant party is that member of your family or business to whom you have made the sale of the product or property and received the payment thereof. However, if you receive the final payment in the tax year, you will not be required to fill out Part III of the form.
Failing to File
If you fail to file this form with the IRS, it can result in the imposition of a fine or penalty for the non-compliance of tax laws and can also cost you tax credits.
When You Cannot Use IRS Tax Form 6252
You cannot always file for this certain tax with the use of the IRS tax form 6252. There are certain circumstances such as sales of a business property, where you have to use IRS form 4797 or Schedule D for tax filing.
When You Cannot Use Tax form 6252:
- For sales of the property that do not result in profit.
- If you want to report sales of stocks or securities on established markets.
- If you elected not to report the sale using the installment method, you could report your full profit on Form 4797 or Schedule D.