Did you get a Form 1099-C or Form 1099-A after you’ve renegotiated debt or had a foreclosure, deed-in-lieu of or short sale? Don’t ignore it! It means you owe taxes, but there could be a way out.
We’ve got a number of forum posts about specific circumstances at the USTaxAid Forum. Please check in “general” for Business and for Real Estate for these posts.
Some of the specific cases covered:
o What if you get a Form 1099-A or Form 1099-C for your personal residence
o What if you get a Form 1099-C for credit card debt
o What if you get a Form 1099-A or Form 1099-C for a second home
o What if you get a Form 1099-A or Form 1099-C for an investment property
o What if you get a Form 1099-A or Form 1099-C for a rental property
And you’ll find some specific strategies for minimizing or completely avoiding the tax due.
Tags: debt forgiveness • form 1099A • Form 1099c
Related posts:
- Reporting Form 1099-A & Form 1099-C
- Form 1099-A & Form 1099-C Problems
- Got a Form 1099-C? Now What?
- How To Report Form 1099-C Income Without Paying Extra Taxes
- Form 1099 Due Out By End of January
On February 17th, 2010 | 3:09 pm
Nicole Katz said:
I am currently going through a short sale and will be hit with a loss of around $100K. My accountant in MA advised me that as my primary residence I would not be required to pay any tax on the 1099 that I received due to the tax forgiveness act of 2007 which is not through 2012. Is this act just for foreclosures or also for short sales?? Please help.
On February 17th, 2010 | 4:18 pm
Diane Kennedy said:
The short sale will be in 2010, I’m assuming. The 2007 Act included any debt forgiveness through 2010, so you’ll be okay on the date.
And yes, it does cover debt forgiveness on short sales.
Just curious - are you getting an estoppel as part of the short sale process? That means that the lender agrees to not later pursue you for the debt and means that the debt is actually forgiven.
One more caveat: Make sure that the debt is original indebtedness. In other words, if you had original debt of $200K and refi’d it for $300K to pull out cash, you’d only have part of the debt forgiveness covered by the act.
On February 19th, 2010 | 6:58 pm
roni lopez moore said:
How does one get an estoppel during the short sale process for an investment property? Does Megan have a form that can be submitted for lender to fill out?
I have a short sale with a loss of $125K that lender has agreed to, but they are not providing an estoppel. I am challenging them on this point. I would probably be better off letting them foreclose than leaving door open for $125K personal debt collection later. The tax consequences would be the same whether short sale or foreclosure right?
On February 20th, 2010 | 3:06 am
Diane Kennedy said:
I’m sure that we’ll get Megan to comment on the form.
Roni, my understanding is that the foreclosure would still leave you open for personal debt collection.
One thing to check, though, is whether your state law allows it. Some states do not allow the lender to come back after you. For example, in some circumstances AZ does not. Check with a lawyer to be sure.
The tax consequences will be the same whether it is a short sale or it is a foreclosure.
On February 20th, 2010 | 11:51 am
Michelle E. said:
Hello, I am currently in a 2nd forclosure on my primary residence in Mi. Both my husband and I lost our jobs in 2008 and we are both back in school for new careers. We already modified with our lender July 2009 (who is a local credit union) who put us back into the same situation as before……high payment and not enough income. Although they lowered our rate, combined our first and second mortgages (both with the credit union), they slapped on 25k in late fees, back owed and new escrows, and interest to the principle. We owe 235k and the FMV is 175K. My question is, being a non judicial state, will we have to pay taxes on this? I am not sure the differences on the 1009A or 1099C. With our income being so low currently will we be able to claim insolvency?
On February 20th, 2010 | 5:44 pm
Diane Kennedy said:
Michelle, I’m sorry you got caught up in that ‘refi’ scam. And it really is a scam that I’ve seen too many times. All these ‘bail-out’ modifications did is increase the principal.
The question will be what was your original indebtedness? In other words, how much did you originally pay for the house and how much was the original loan(s). From that we can figure out if you qualify for the 2007 Act exemption.
Insolvency means that you owe more than you own. So, if you don’t have any other assets or investments, you could very well qualify for this exemption as well. It’s not so much income - it’s about what you own.
If you could share a few numbers here, I think I can give you some peace of mind.
On May 14th, 2010 | 4:21 pm
jason m halliday said:
Hey Diane,
can you shoot me an e-mail with your contact information. i am trying to find a tax cpa/attorney for my clients. I do about 50 short sales a year, but want my client to be able to consult with the correct cpa/attorney to make sure what i am telling them is accurate.
thank you,
jason halliday
remax
colorado