If you are considering a real estate short sale of your home, be prepared to receive a form 1099-C for the amount of the lender’s losses. In the eyes of the IRS, this is considered “loan forgiveness”. You may be responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure, property repossession, or credit accounts that you don’t pay.
If a lender writes off a debt of $600 or more principal balance, they must send you and the IRS a Form 1099-C at the end of the year. When you file your taxes on that respective year, the IRS will require that you include the amount as income.
While you may not receive this form from the creditor, the creditor may have submitted one to the IRS. If you do not list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or a request for an audit.
There are several exceptions to this as stated in the IRS tax code. For example, you do not have to report the income if the write off of the debt is intended as a gift, your debts are discharged in a bankruptcy proceedings, or you were insolvent prior to the settlement with the creditor. Always consult a qualified tax professional when contemplating your situation. Remember, information is power. It is Empowering.
This information is not intended as legal or tax advice. Always consult your tax professional or attorney prior to making any decision regarding these types of situations.
Tags: 1099-c,
creditor,
debt,
empowering,
home,
income,
IRS,
lender,
Loan forgiveness,
Real Estate,
Short Sales,
tax,
Tax Issues
Being an entrepreneur has given me a deep appreciation for individuals who are success oriented and never give up. The drive to always “push through” is a trait of successful people.
I have been fortunate to associate myself with many successful individuals over my life. It began with my father who instilled in me the ability to step outside of the box…to create something out of nothing. He taught me the importance of integrity in business...traits that I have incorporated into the various business models I employ.
I spent the first ten years of my career in the medical field. I worked side by side with amazing individuals who put their own self-interests aside in order to nurture others back to good health. Many times I witnessed life and death situations. It was always humbling to experience the team-work that evolved around trying to save a lives.
As my career path evolved into the business world, not only could I bring those experiences into my persona, I saw a need to spread information…real information for real situations. A close friend of mine began to mentor me in aspects of blogging. He has given me incredible insight into how a blog should be developed…how to focus my passion for helping mentor people to becoming successful entrepreneurs. This passion for mentoring others began when I was a young child and continues today. It is not about me, but rather those who have influenced my life.
I am a work-out addict and a real “ski dog”. Sorry guys and gals…I do not “ride”. I live for deep powder and steep chutes. I love the feeling of looking over the edge of a steep run…feel my heart beat faster with that adrenaline rush and then “jump in”. I love golf…but I always wonder if I will ever break 100…lol! Most of all, I love my wonderful family…they are the best! Thanks for stopping by and I hope you feel empowered today.
More posts by
Martin Casper
