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 am planning on starting my 2008 U.S. Federal Income
Tax Return as soon as I can this year. I am not sure if I will
get a refund though, but I want to find out quickly. When I
filed my tax return last year, I was able to itemize deductions
on Schedule A since I had a lot of mortgage interest which was
deductible. This year, however, I will have very little mortgage
interest to deduct since I stopped making mortgage payments and
lost the house in foreclosure. The difference might mean that I
actually owe money on my taxes if I do not have enough other
deductions or if I did not have enough money withheld from my
paychecks for taxes.
If I owe money, I still
do not have to file the return and pay the money until April
15th. If I somehow get a refund though, I need to file the
return as quickly as possible. Why am I so anxious? Let me
explain. I have lost a house in foreclosure this past year. The
mortgage company, although they have not yet notified me, could
file for a deficiency judgment against me at any time (although
my lawyer tells me that they will probably wait until the house
sells - not likely anytime soon - in order to more accurately
determine how much is left owed on the mortgage). If a
deficiency judgment is filed against me, all of my assets may be
used to settle the debt. Tax refunds, whether they be U.S.
federal income tax refunds or individual state income tax
refunds or any local income tax refunds, are considered assets
by the state of Florida and would be used to settle any
deficiency judgment. At least, this is my understanding from my
lawyer and from a friend who went though bankruptcy last year.
Currently, I have no judgments against me. This is great for the
time being, but I clearly do not expect that to last forever
with the pending foreclosure sale.
While I did my own taxes
last year, I plan on using a local accountant this year. I have
already started discussing my situation with her. She will be
doing my federal income tax return for 2008 (tax returns are in
arrears) and any state returns that are required (Florida does
not have a state income tax, but I do have a rental property in
Alabama which does have a state income tax). I will also ask her
to review my tax return from the previous year to check for any
errors that I might have made or deductions that I might have
missed. She can file an amended return for me if she finds
anything amiss.
I do not expect any
1099's issued from the mortgage company for any type of mortgage
debt forgiveness. I have not been notified of any such thing
thus far. This is a good thing as my understanding is that
mortgage debt forgiveness could be considered as taxable income
and result in a hefty tax bill in some situations. My
understanding is that even bankruptcy might not clear me of any
tax debt obligations (check with your attorney and your
accountant for your particular situation).
My W-2's are already
available from my job so I will be giving these to my tax
accountant next week (I would do it this week, but I am away on
business although I might fax them to her so that she can at
least start entering the information). I am hoping that my
various income statements and deduction statements start
arriving in the mail over the next few weeks. I hope to file my
returns by early February. You should consider doing the same.
If you need assistance
filing your returns, find yourself a good tax accountant now.
Just as you would interview any doctor or lawyer or other
professional, make sure your tax accountant has a good education
and ample experience and the required professional designations.
There are plenty of people out there who do taxes for a living
and have none of these - Buyer Beware. Plus, consider
getting yourself a tax accountant with whom you feel comfortable
discussing your compete financial situation (foreclosures and
bankruptcies will need to be discussed openly). Also, I would
suggest someone whom you think will be available during tax
season as well as the rest of the year and for the years ahead.
Some tax accounting offices close up shop right after tax season
is finished. Just as you should have a long standing
relationship with your doctor and your attorney, you should have
a long standing relationship with your tax accountant.
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