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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4006
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I live in North Carolina. Husband lives in Florida. Do I

Resolved Question:

I live in North Carolina. Husband lives in Florida. Do I need to file a federal and state tax return? I have been separated for all of 2012 (although no legal separation papers filed with court). I have not worked in 22 years. In 2012, our home in NC was foreclosed on. First mortgage company sent me a 1099-A in my name only. Second mortgage compay sent me a 1099-C in my name only. The second mortgage was used to payoff credit card debts. Husband of 33 years abandoned me and kids and all debts. I am indigent and my minor son and I are living with my mother. I have no income (no alimony or job). I have no child support order in place, however, husband sends some support money. I understand that if no legal separation papers filed on 12/31/2012, then options for filing are mfj or mfs. I don't want to file jointly with him if I am left responsible for taxes that may be due to these 1099-a and 1099-c. Do I need to file a tax return because of these. Was going to use catholic charities to file if needed because I cannot afford to pay, however, they are telling me their volunteers cannot help me too complicated. Please help.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

Hi, I can help with this

NPVAdvisor :

Although quite honestly you're quite knowledgable....you are right that you'll have to file in one of the Marries statuses MFJ, MFS

Customer:

Hi. Can you help with this even if I am required to file a NC Tax Return as well?

NPVAdvisor :

FIrst lets take the 1099s

Customer:

Ok.

NPVAdvisor :

the 1099 A is not reporting income

Customer:

The 1099a is reporting the following:

NPVAdvisor :

Its provided to let yuo show the "sale" of the home on a schedule D and report a gain or loss

NPVAdvisor :

the 1099C IS reporting ince (the forgiven debt)

NPVAdvisor :

sorry ... IS reporting "income" ... the 1099C

NPVAdvisor :

and yes, you should file a tax return for a couple of reasons

Customer:

Balance of principal outstanding: 297,146.89 in box 2. Fair market value of proeprty in box 4: 321,200.00 ( I disagree with this value; i called them and they stated based on bank's internal appraisal of property). Box 5 checked personally liable.

NPVAdvisor :

(1) you can attach form 982 andunder the Mortgage Debt forgiveness act the income iws waived ... but you can't do that unless you file a return

NPVAdvisor :

Remember that since this was your rimary residence.....

NPVAdvisor :

you can exclude up to 250,000 (500,000 MFJ) of gain ... so there's no problem there

NPVAdvisor :

and again, the 982 will waive the taxes on the forgiven debt from the 2nd mortgage

Customer:

Should we continue because remember i don't want to file jointly with separated husband and be responsible as I have no income:

NPVAdvisor :

you can certainly file separtely

NPVAdvisor :

tat's one of the few good reasons to file separately

NPVAdvisor :

financially, MFJ can make more sense ... but

NPVAdvisor :

if you feel that he's irresponsible and there could be problems on his side them, MFS is the way to go

NPVAdvisor :

Have you heard of the low income tax clinics?

Customer:

The second mortgage was used for paying off credit card debts. The home sold at foreclosure for 265,000.00. The husband won't give me any form to say he will be responsible for any taxes due. Well how do I file separately, plug in all numbers from original mortgages, closing statements, refinanced mortgages, etc. I have heard of low income tax clinics but not one in Fayetteville NC WHERE i am.

NPVAdvisor :

you can file electronically for free at the IRS site and (let me look, here) bu I think NC has something similar

NPVAdvisor :

And yes, you just check the Marriel Filing Separately box on the return

NPVAdvisor :

If you can handle buying a copy of turbo-tax, it has an interview where you just answer the questions along the way

Customer:

If I pay for turbo tax myself and use that I believe i can get free answers to questions. Should I do that? I really don't have two nickels to rub together. I am 56 years old and have not been able to get a job. Do I need to file NC as well. There is no child support agreement for my son, husband sends what he wants, when he wants. Basically i feel my mother supporting us.

NPVAdvisor :

Also, if you DO fle separately, you're basically forcing hm to do the same

NPVAdvisor :

he would have to FORGE your signature, to file jointly

NPVAdvisor :

Yes, (please don't shoot the messenger here, but because IRS and NC dept of revenue get a copy of those 1099s they will be looking for some reporting BUT AGAIN, you won't owe anything

NPVAdvisor :

One thing that Might help ....

Customer:

IRS rules also state that if I file separately, he must also. Also, I can not itemize because i have no income. It states that both must file the same (eg itemize both). I was thinking to file the form claiming the indigency exclusion if need be because I am .

NPVAdvisor :

If your mother has income, and can claim you and your son as dependency exemptions under the QUALIFYING RELATIVE test, you may be able to help her generate refunds

Customer:

Since I can't itemize due to rule that both must have income. Will that also force him to take standard deductions, right?

Customer:

Since I am in NC and he is not then all bill collectors have filed liens against me, attached bank accounts, etc.

NPVAdvisor :

AGain, you're just filing to reconcile the reporting .... If you have no income, there's no need to worry about trying to lower your taxes

NPVAdvisor :

Ok slow down a bit and hang with me here

Customer:

ok

NPVAdvisor :

Look at this ... (everyone gets a standard deduction and a personal exemption) THe amount depends on your filing status ...See this:

NPVAdvisor :



Table 1.2012 Filing Requirements Chart for Most Taxpayers



























































IF your filing status is...AND at the end of 2012 you were...*THEN file a return if your gross income was at least...**
singleunder 65 $9,750
65 or older$11,200
head of householdunder 65$12,500
65 or older$13,950
married, filing jointly***under 65 (both spouses)$19,500
65 or older (one spouse)$20,650
65 or older (both spouses)$21,800
married, filing separatelyany age $3,800
qualifying widow(er) with dependent childunder 65$15,700
65 or older$16,850

NPVAdvisor :

so you can see wht FINANCIALLY the married filing separately almst never makes senses .... a threshhold of 3800 each as opposed to a household of19,500

Customer:

Well I know that but even if I would get a refund, NC already sent me a letter stating they will intercept all tax refunds.

NPVAdvisor :

I was just trying to get to a point where I could address your earlier questions about filing options

NPVAdvisor :

The botXXXXX XXXXXne here, if you don't file you be in even deeper

Customer:

well i feel my husband can't be trusted and he is only trying to lessen his tax burden even though he hasn't done the right thing as far as support. he won't even give me an income statement so i can get medicaid.

NPVAdvisor :

IRS and NC will start to be after you about this additional 1099 and apparent gain on a sale

NPVAdvisor :

If you simply file, that all goes away

NPVAdvisor :

982 to waive the 1099C and exclude gain as personal residence on the 1099A

NPVAdvisor :

Again, if you aren't making any mony the FINANCIAL reasons for filing jointly apply (AND if he isn't)

Customer:

So basically your advise is to file married separately, claim my child, and all forms. Do you think I need to file the form for indigency listing all assets/liabilities before foreclosure?

NPVAdvisor :

If the house was your oprimary residence you dont have to do that

NPVAdvisor :

that's only for investment property

NPVAdvisor :

you'll be waived under the mortgage forgiveness act because it was your primary residence

Customer:

By the way nothing was provided to me from bank regarding how much the foreclosed home was sold for, i discovered this myself. Does that 265,000. auction price come into play anywhere with the tax forms needing to file. Also, the value they placed is certainly way over the top of what it was worth at the time:

NPVAdvisor :

It's irrelevant

NPVAdvisor :

you didn't have more than 250,000 of gain

NPVAdvisor :

anyway

Customer:

ok thanks. and will owe nothing on the cancelled debt by second mortgage even though used for credit cards?

NPVAdvisor :

that's right ... as long as it was secured by the home

NPVAdvisor :

use form 982

NPVAdvisor :

or if you use turbo tax it will generate the form itself from the answersw to your questions

Customer:

It was secured by home. But why did they not check that I was personally liable to rePAYMENT OF DEBT. Was this because it was secured by home?

NPVAdvisor :

YEs, it's because of the loan agreement

NPVAdvisor :

But what makes it forgivable is that very fact

NPVAdvisor :

AND the fact that it was secured by your primary residence

NPVAdvisor :

Sorry ... the reason the DIDN'T check that was because the debt has been forgiven

NPVAdvisor :

That;s what' causing taxation

NPVAdvisor :

forgiveness of debt is taxable income

NPVAdvisor :

BUT becausethe mortgage act was extended you can waive those taxes this year with form 982

Customer:

Ok. Thanks for the clarification. And again, if I file separately, and can't itemize because of no income then husband will be forced to take standard deduction. So I will owe taxes due to the second mortgage and the cancelled debt:

Customer:

Ok didn't see your last sentence until after i sent last.

NPVAdvisor :

All is right except that if you file form 982 with your return you won't owe anything on that forgiven debt

Customer:

Is form 982 the form for indigency that i spoke of?

NPVAdvisor :

Technically, you do owe taxes... BUT the mortgage act lets you waive the tax liability

NPVAdvisor :

it IS, but again, only thos who are asking for forgiveness of tax debt on NON-residence home need to fill out that part of the form .... you only have to complete the very top where you state that this was your private residence .... insolvency desn't come into play here

NPVAdvisor :

sorry PRIMARY residence

Customer:

ok good less paperwork. nc is going to be harder because their requirements are different.

NPVAdvisor :

May not be as ba as you think

NPVAdvisor :

If you use TTax

NPVAdvisor :

you'll notice that most of the input is for federal

NPVAdvisor :

whan you click the button to do state, everything just fows to the state return

NPVAdvisor :

The program will walk you through some adjustments ,,,but MUCH easier than trying to crank out the whole state return by hand

Customer:

I just want it to be right and done with, so i can get back to trying to get employment.

Customer:

By the way, last year i filed jointly federal and did not file nc return because i had no income and he did not live in nc. Do you think i did it right?

NPVAdvisor :

i think you have enough awareness of how it works now, that you can work through it with turbotax OR if you want me to give you the Low Income Taxpayer Clinig number ... you'll be able to talk with them in an informed way

NPVAdvisor :

YOu were probably below the filing thresshold

Customer:

That would be great.

NPVAdvisor :

Hang on if you will and I'll chec NC

Customer:

Can you send me transcript to email so i can refer to when i get into doing the return?\

NPVAdvisor :

First, here's this

NPVAdvisor :






































Low Income Taxpayer Clinics (LITCs)


StateCityOrganization

Phone


Type of ClinicLanguages Served in Addition to English
NCCharlotte

Legal Services of Southern Piedmont, Inc.
www.lssp.org



(NNN) NNN-NNNN(E)
(NNN) NNN-NNNN(SP)
(NNN) NNN-NNNN/p>
Controversy/ESLSpanish
NCDurhamReinvestment Partners
www.reinvestmentpartners.org
919-667-1000ESLArabic/Spanish
NCDurham

North Carolina Central University School of Law


919-530-6333ControversySpanish
NPVAdvisor :

you can (1) save this as a favorite place (bookmark) and it stays here for you forever or (2) copy and paste into a word file ...or (30 you can print from your browser

NPVAdvisor :

They won't let us Email or phone in order to protect privacy/anonymity

Customer:

ok thank you very much. I am so glad i found this service, it has been worrying me too death. One last thing, did you see my questions re last year's tax return?

NPVAdvisor :

Yes, I was trying to see if NC has a threshhold... I did see that the first dollars is a 6% (they really are aggresive aren't they) i you can heang with me I'll keep looking

NPVAdvisor :

Also, I just found this video from the IRS taxpayer's advocate office about using form 982

Customer:

ok i already looked at that video from advocate office.

NPVAdvisor :

Found it

NPVAdvisor :

Filing Requirements
For Most Taxpayers




















































If You Are:A Return is Required if Your Gross Income is More Than:
Single$5,500
Single (age 65 or over)$6,250
Married:
Filing Joint Return$11,000
Filing Joint Return
one spouse age 65 or over
$11,600
Filing Joint Return
both spouses age 65 or over
$12,200
Married:
Filing Separate Return$2,500
Head of Household$6,900
Head of Household
(age 65 or over)
$7,650
Qualifying Widow (or widower)
with dependent child
$8,500
Qualifying Widow (or widower)
(age 65 or over)
$9,100
NPVAdvisor :

so ... if no income .... no need to file last year

NPVAdvisor :

here's the link for that

Customer:

well see i was nc resident all year without income. he was not nc resident so that is why i filed jointly with him using florida address.

NPVAdvisor :

I doubt you hear anything from them for last years as you didn't have any income reported

NPVAdvisor :

It's this year thatm filing the return will will all this to bed

Customer:

hope so.

NPVAdvisor :

I will just remember the wo important pieces....

NPVAdvisor :

"two" pieces...

NPVAdvisor :

(1) capital gains are excluded for primary residence

NPVAdvisor :

(2) the tax on fogiven debt is waived with form 982

NPVAdvisor :

Filing, is what will make it (this year's 1099s) go away

Customer:

thanks again for the clarification. I researched and read everything but I just wanted a professional's opinion that I am doing the right way.

NPVAdvisor :

(and there's really a sub-part to number (2) ... if it was your primary residence you don't have to prove insolvency

NPVAdvisor :

You're very welcom

NPVAdvisor :

I commend your being proactive ... the stress will start to go away as your working through it

NPVAdvisor :

If that's all for today ....

NPVAdvisor :

I would appreciate either an “accept” or a feedback rating of 3 (OK) or better. That's the only way they will pay us here

NPVAdvisor :

But again be sure to bookmark this... that way you can come back for the links, tables and phone numbers, etc.

Customer:

yes ok have a great day!

NPVAdvisor :

you too

NPVAdvisor :

Thanks

NPVAdvisor :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4006
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 3 other Tax Specialists are ready to help you

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