Disclaimer: I am not a lawyer. I am
only publishing my interpretation of my situation. You should seek your
own legal representation for your own particular
situation. Do not rely on my
opinions or statements for your own purposes as state
and local law varies as do individual circumstances.
I received a 1099-A Acquisition or Abandonment of
Secured Property for the house that I lost in foreclosure last
year. This is a little scary. There is an amount of $###,### (a
lot of money) in box 2 which is for the balance of principal
outstanding. The form lists the fair market value of the
property as only $100! To me, that would look like they expect
me to pay federal income tax on the difference... very scary,
indeed, especially when you get the I.R.S. involved. I do not
think even bankruptcy absolves federal tax debts.
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I started this blog entry
on the second of February. It is the eighth now. I have taken
the 1099-A and the 1099-C to my tax accountant who is still
researching the two forms and calculating my tax liability based
on these two tax statements.
I got the 1099-C the day after the 1099-A arrived. The
1099-C is for Cancellation of Debt.
Both of these forms
relate to my primary residence that went back in foreclosure
last year. The 1099-A is for the primary mortgage. The 1099-C is
for the secondary mortgage. These were both taken out at
closing, and all of that money went to the prior owner, the real
estate agents, the mortgage broker and various other people.
None of that money went to me. I just got the house keys to a
house that I truly love but lost in foreclosure around October
of last year. Still, the I.R.S. may consider some or all of that
money as taxable income.
The day I received the
first notice, I was worried. Then, I got the second notice the
following day; and I was even more worried. I realized when I
got the first form that I might be liable for taxes (Of course,
I knew that was a possibility even last year as I had read a lot
on the Internet about foreclosures and such). That second night,
the day I received the 1099-C, I did not sleep at all. I lay
awake all night in bed thinking about owing the I.R.S. so much
money in taxes that I would never be able to pay it off, not
even in installment payments. It was a horrible night and a
horrible week. I was very depressed. Of all creditors, having a
debt to the I.R.S. seems to provoke more fear than any other
creditor - maybe even the Mob (I have no debts with the Mob. I
was just making a dramatic point). Those feelings of fear and
depression and helplessness have subsided. I still have some
worries as my tax accountant has not gotten back with me yet (I
will be calling her tomorrow), but the worries are not as bad as
they were the first three days (probably because my heart could
not take more than three days of stressing myself out that
much).
I will have a follow-up
post as soon as my tax accountant tells me what she figures will
be my tax liability. Oddly enough, I have a degree in
accounting; but I did not want to take my own judgment on the
foreclosure issues. I would highly recommend a tax accountant
for anyone else in a similar situation. A tax attorney might not
be a bad thing either. I will be looking into that this week as
well.
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