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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 14097
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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We are about to file our 2012 taxes via Turbo Tax. Yesterday

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We are about to file our 2012 taxes via Turbo Tax. Yesterday we both received a 1099 A from a collection agency. Our home foreclosed in April 2012. We consulted with an attorney at that time who advised us that our original bank lender was not pursuing us personally, but only pursued the property. The Principal Balance amount on our 1099 A is higher than the FMV amount. I don’t know what this means or what we need to do with this form 1099 A? I’ve heard that a 1099 A with a higher FMV needs to be reported as gain but a 1099 A with a lower FMV is useless, and nothing needs to be done until/if you get a 1099C. Please advise us how to handle this on our tax return for 2012, or if we need to bother at all b/c of our retired status and fixed income.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thank you for your question, and thanks for using JustAnswer.com. This is not a taxable transaction, provided that the gain on the disposal of your home is not greater than $500,000. How you account for this is on Schedule D you will report the gain, which is your original purchase price subtracted from the selling price. You sold the house effectively to the bank for your principal amount. When you calculate the gain, fill in "excluded under section 121." If there is a loss, it's not allowed, either.

Additional resources may be found, HERE

Either way, there's no taxable income to you as a result of the 1099-A provided that the gain on the sale of your home is not greater than 500,000. Please let me know if you need anything additional. Thanks again for using JustAnswer.com and have a happy, and safe, 2013.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Customer: replied 1 year ago.

we didn't get a Schedule K either, and I'm a novice at all of this. Seniors are not very savvy with technicalities. I don't know if it's ok to file my taxes or not? Must I wait for a 1099C (I think that's what is next?!), or can I go ahead and file? The principal balance = 132,931.41 (box 2) and the fair market value = 83,300 (box 4). Please just answer me simply if they will attach my refund - only received retirement income and paid taxes on it in the year 2012. the lender didn't pursue us, it's the collection agency who sent us the 1099A.

Customer: replied 1 year ago.

You did understand that Chase foreclosed on our property in April 2012, didn't you? The collection agency who sent us the 1099A is Seterus, Inc.

Expert:  Megan C replied 1 year ago.
You should not receive a schedule K for this transaction. I cannot tell you whether or not the lender will attach to your refund, because I am not an attorney and I don't know the details of your agreement with the lender. Typically a lender would have to have a judgment against you (from a court- and you would know about this) before they can do any collection activities such as attaching to assets. So I do not believe you will have any trouble, there.

The 1099-C will not be issued until the lender is done with collection activities. Therefore, if they are still trying to collect the balance they would not issue a 1099-C. I would wait a week or so to make sure you don't get one in the mail (they were supposed to be mailed by January 31). In any event, that 1099-C will not impact your tax either, because you can exclude it under the Mortgage Debt Forgiveness Act.

I did realize that you were foreclosed in 2012 and that it was the collection agency that issued the 1099-A.

Please let me know if you need anything additional. Please follow up if you need more assistance. Thanks again for using JustAnswer.com and have a happy, and safe, 2013.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 14097
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and 2 other Tax Specialists are ready to help you
Customer: replied 1 year ago.

OK, I will proceed with my taxes after waiting one more week for the 1099C, but as far as I know the house did not sell yet.

Expert:  Megan C replied 1 year ago.
Thank you for your follow up. Please let me know if you need anything additional, and please don't forget to rate my response as excellent so that I may be compensated for assisting you today.
Expert:  Megan C replied 1 year ago.
Thank you for the positive rating. Please remember me the next time you have a question. Simply enter "MyVirtualCPA" in the subject of your question, and it will be routed directly to me. Thank you again for using JustAnswer

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