As many of you may remember, we sold a house as a short sale in April 2013.
The house we sold was not our principal residence, we did not declare bankruptcy in 2013, and we were not insolvent at the time of the sale...therefore, we should be required to pay tax on the amount of debt cancelled.
We did not receive a 1099-C from our mortgage holder. As I understand it, they were required to mail the 1099 on or before Jan. 31. We waited 7 "mail days" (days we received mail) for the 1099 before we bought Turbo Tax. The reason that's important is that if we had received the 1099-C, we probably would have hired a CPA to complete our return, and not bought TT.
I bought TT yesterday. We don't plan to inform the IRS about our forgiven debt.
I have no clue why our mortgage holder wouldn't report our forgiven debt to the IRS. It seems to me that if they wanted to declare the loss for their own taxes, they would have had to issue is a 1099, right? But, we didn't get a 1099, and I think we waited long enough, didn't we? We waited until February 9.
I seriously do not want to volunteer to the IRS that we owe them about 20K in taxes. But, if the 1099 had shown up, we would have figured it out (as I've mentioned before regarding this issue, most of it would have been covered by the adoption credit from our 2012 adoption of a special needs child).
So, we're going to complete our taxes as is, without declaring the cancelled debt.
Any thoughts on this would be appreciated.
Thanks.
We began our tax return
February 10th, 2014 at 07:46 pm
February 10th, 2014 at 08:12 pm 1392063130
February 10th, 2014 at 08:35 pm 1392064516
I personally like being able to sleep at night. & that means not messing with the IRS, and it means paying every penny of tax I know that I owe. Penalties and interest could make the situation far worse in the long run.
Regardless, the last thing I would do if I were to make a decision like that, is to advertise it publicly.
February 10th, 2014 at 09:00 pm 1392066000
Ironically, I have only dealt with one foreclosure and it was in Nevada. HA! (Ironic because California is like foreclosure central). SO... I am not well versed and nothing I can really offer. Plus, I don't know anything about your state (may owe state taxes too?). But I can't help but wonder if it was your primary residence for 2 of the past 5 years??? (Though I think we had this discussion already?). Regardless, there are some other rules and who knows...
I understand though. It's not fair. IRS has let many many people walk away from their homes with no tax consequences. You try to do the right thing, and you might owe $20k. I get that. But, two wrongs don't make a right. I'd hate for you to be hit with worse problems down the road.
February 10th, 2014 at 09:01 pm 1392066078
Do you have access to your former account with the lender online? I would look to see if there is information about that document there, or any information about mailing. If it were me personally, I'd even call the lender about the form. I would be planning to declare it so it wouldn't bother me to check with them directly.
February 10th, 2014 at 09:54 pm 1392069246
February 10th, 2014 at 09:59 pm 1392069565
February 10th, 2014 at 11:02 pm 1392073350
And I completely agree that it isn't fair that others get to walk away without consequences. It actually is pretty upsetting to me, because now ALL tax payers will effectively be paying more to the government to cover these bailouts for years to come.
February 10th, 2014 at 11:08 pm 1392073731