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Questions About Form 982 Foreclosure

Taxes – 1099A & 1099C what do i do?? 982??

I owned a home in 2007, lost it in Feb 07, i filed a deed in lieu of foreclosure. But tech a foreclosure that i am learning now. Me and my ex fiance both rcvd the 1099A and 1099C, i need to know what we can do or what steps we need to take to file, either long form or through turbo tax. he made less then 12000.00 for the year and i made ovr 40k. keying into turbo tax i owe over 10k and he owes 6-7K. then found out about the 982 form. is there a way that i/we can qualify for it? do we both need to file all these forms? why did we get both? im panicking, how can i pay something like this when i was not able to pay my mortgage?? does irs take min payments? do they charge interest? help me please thank you in advance for anyone able to help me!!!

Industry Expert answers:

You may qualify under the Mortgage Forgiveness Debt Relief Act of 2007. Review the instructions to Form 982 and try completing. The form and instructions are at:

http://www.irs.gov/pub/irs-pdf/f982.pdf

The 2007 Mortgage Relief Act excludes from a taxpayer’s gross income any discharge of indebtedness income by reason of a discharge (in whole or in part) of qualified principal residence indebtedness before Jan. 1, 2010. The exclusion applies where taxpayers restructure their acquisition debt on a principal residence or lose their principal residence in a foreclosure.

If need help with completing Form 982, you may want to contact a tax professional.

Income tax refund if foreclosure?

I normally get a decent income tax refund every year. My house foreclosed last year and I need to file a 982 debt forgiveness form. Does this mean I will not get any tax refund?

Industry Expert answers:

It might, it might not. There are multiple factors that determine if you have to pick up income from the cancellation of debt, and we don’t know what your individual situation is. The IRS has setup a website regarding foreclosures/cancellation of debt income, and provide the following worksheets:

Use the following steps to compute the income to be reported from a foreclosure:

Step 1 – Figuring Cancellation of Debt Income (Note: For non-recourse loans, skip this section. You have no income from cancellation of debt.)

1. Enter the total amount of the debt immediately prior to the foreclosure.___________
2. Enter the fair market value of the property from Form 1099-C, box 7. ___________
3. Subtract line 2 from line 1.If less than zero, enter zero.___________

The amount on line 3 will generally equal the amount shown in box 2 of Form 1099-C. This amount is taxable unless you meet one of the exceptions in question 2. Enter it on line 21, Other Income, of your Form 1040.

Step 2 – Figuring Gain from Foreclosure

4. Enter the fair market value of the property foreclosed.For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure ________
5. Enter your adjusted basis in the property.(Usually your purchase price plus the cost of any major improvements.) ____________
6. Subtract line 5 from line 4. If less than zero, enter zero.

The amount on line 6 is your gain from the foreclosure of your home. If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income. If you do not qualify for this exclusion, or your gain exceeds $250,000 ($500,000 for married couples filing a joint return), report the taxable amount on Schedule D, Capital Gains and Losses.

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