Wednesday, July 30, 2008
The economy is hurting and we all know it. The IRS knows it too. We have been receiving more and more calls about folks getting 1099-C's turned in on them. This takes most people by surprise. They thought that they were done with the whole ordeal, and then they get a notice saying they owe the IRS money. Most of the time it gets blown off as a mistake by the IRS. It is no mistake! On December 20, 2007, the Mortgage Forgiveness Debt Relief Act was put into effect. Usually when you have a cancellation of debt by a lender, it has to be included as income on your taxes. This act now allows tax relief from a portion of that forgiven debt. The act only applies to your primary residence and only to forgiveness or cancellation on money used to buy, build or substantially improve your primary residence. You can also apply the act to refinancing debt incurred up to the amount of the principal balance of the old mortgage right before the refinance. There are a lot of details that can't be covered in a short post. For more info consult with a PROFESSIONAL.