Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

How do I file a debt that was not cancelled with the IRS?

I received a Form 1099-A...

I received a Form 1099-A from my mortgage company for my principle residence home that I could no longer make payments on (abandoned), and it included the outstanding principal balance and FMV. This debt is not cancelled because I did not receive a 1099-C. How do I properly file this with the IRS?

Show More
Show Less
Ask Your Own Tax Question
Answered in 20 hours by:
1/27/2008
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Verified

Dear Customer,

what did your CPA say?

The 1099-A has a FMV or sale price on it in one of the blocks. If the FMV of the home is more than the remaining debt, then you do not report this as income, but you may have to determine capital gain on schedule D. You would be entitled to take any capital gains exclusions, which generally are 250,000 of capital gain excluded from tax if you owned and lived in the home as your primary residence for two of the past five years (500,000 if filing a joint return). Since this is lost because you could no longer pay the mortgage, then the IRS allows a reduced capital gains exclusion if you lived in the home and owned it less than two years. Most likely this means you will not have to pay any tax .

If hte FMV or sale price of the home is less than the debt,then it is reported as taxable income.

Customer reply replied 9 years ago

Thank you for your response. Now I have two different answers to my question. The CPA I consulted said, "This information needs to be reported on your tax return. Under the "Mortgage Forgiveness Debt Relief Act of 2007," the amount of forgiven debt is not taxable income if the debt was acquisition debt (incurred to purchase a home), and the home qualified as your primary residence. If you qualify to exclude the forgiven debt, file Form 982 with your tax return. If you do not qualify, you should report the forgiven debt on line 21 as "Other Income."
It's a bit confusing when I looked at Form 982. Then you are mentioning Schedule D, which I had looked at previous from the information I got off the IRS website. Which is correct? I am trying to file my taxes properly without the CPA doing it for me. I am an accountant, but do not specialize in taxes. The FMV is $134,000 and the debt is $121,000, thus I have no income? Which is the correct form to file this information, and do I file the $121,000 amount or both? I usually complete my tax return on Turbo Tax. Does Turbo Tax allow you to file this information along with your 1040? If I comfortable that your answer provides me with the proper IRS treatment, then I would love to make another donation to you, just let me know how.

Thank you very much.

Thank you for asking for additional information. My answer did not cover the circumstances of getting forgiveness because that was not included in your question.

But the Form 982 is used to reduce the attributes in order to seek forgiveness of taxes owed as a result of debt forgiveness. The IRS, under the act, is permitted to forgive taxes.

However, the basis is by adjusting the attributes of the property based on the amount of your liquidity, sometimes called insolvency. The amount of your insolvency IF ANY, determines the adjusted attributes which can in effect result in less taxes owed, zero taxes owed, or no change.

The Schedule D I mentioned was for the condition that you would have a capital gain. Where there is no debt forgiveness because your property sold for sufficient income to pay off your debt. In this circumstances you would not be counting any forgiveness of debt as income, because there would be no debt forgiveness. Debt forgiveness only happens in the property did not bring in enough money to pay off the debt.

From 982 is only used when you have forgiven debt, and you seek tax abatement for the taxes on the forgiven debt. Every 1099-A does not have forgiven debt. Some 1099-A's reflect capital gains. Two different situations.

So tell me this: Was there enough money from the sale of the home, to pay off the debt?

Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Verified
Ed Johnson and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 9 years ago

As far as I know, the home was taken over by the bank in May 2007 and has not been sold. The bank has not given me any correspondence since. If I have received the 1099-A from the bank, does that mean they have sold the home or should I just try and contact the bank to find out? How do I know from the 1009-A that I have debt forgiveness? Is there any other information that needs to be given to determine which form I need to complete?

Block two has the amount of the loan.

Block 4 is the fair market value most generally the price at which the property was sold.

If Block 4 is greater than or equal to Block two, then there is no debt right off.

If Block 4 is less than block two, then you have a right off situation.

Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Verified
Ed Johnson and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Ed Johnson Your Own Question
Ed Johnson
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
10,760 Satisfied Customers
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee

Ed Johnson is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,336 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,906 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I'm working to understand capital gains tax for California
I'm working to understand capital gains tax for California property purchased 4 years ago. It's a primary residence, purchased 4 years ago for $385k with $285k principle outstanding. Expected sale price of $630k … read more
abci168
abci168
Principal
27 satisfied customers
TURBO TAX SAYS THE IRS OWES ME 1000$ FOR 2016. THEY SAID
TURBO TAX SAYS THE IRS OWES ME 1000$ FOR 2016. THEY SAID THIS IN FEB1 . IN AUG8TH I RECIEVED A FORM FROM IRS SAYING MY SCHOOL HAD NOT SENT A 1098T NOT TRUE BUT IT SAID SCHOLARSHIPS AND GRANTS INSTEAD … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Suppose my taxable income in 220,000 this year and the tax
Suppose my taxable income in 220,000 this year and the tax rate is X up to 200K, but Y for 200and over, do I pay Y on the full 220K or just that above 200K? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Is the sale of customer list a capital gain or ordinary income?
Is the sale of self-created intangibles, such customer lists, digital files, web sites, etc subject to capital gain or ordinary income treatment?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Are you familiar with Capital Gain taxes on rental property?
Are you familiar with Capital Gain taxes on rental property? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I sold a rental property at a loss (no capital gains);
I sold a rental property at a loss (no capital gains); however should I pay the $133,000 on the principal of my house I owe 166,000 at 2.8% or buy another rental? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Tax Atty or CPA only: I donated intellectual property to a
Tax Atty or CPA only: I donated intellectual property to a charity last year and as it was over $5K, had an IRS -qualified appraiser value the asset. He used the cost-to-replace method (what the chari… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
If your taxable income is $0 (actually negative) is there a
If your taxable income is $0 (actually negative) is there a penalty for late filing? Do you need to file at all? What is the 2016 filing deadline with an extension?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,581 satisfied customers
My wife and I file a joint return she makes much more than
My wife and I file a joint return she makes much more than I , about 1/2 or less , for paying my share of the taxes would it be better for me to file separately or is it the same amount keeping it as … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,906 satisfied customers
I successfully filed my 2016 return with Turbo Tax. Now the
I successfully filed my 2016 return with Turbo Tax. Now the only file references that I find are " Usaved Turbo Tax document" which does not open. Anyway I can get to this doc for use or view? … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
My wife and I have always filed joint returns. We were
My wife and I have always filed joint returns. We were audited in 2003 and 04. We owed taxes. Our returns were always filed on time. We set up an installment agreement for back taxes in 2008. All taxe… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,581 satisfied customers
I filed my tax return in March 2017 using turbo tax through
I filed my tax return in March 2017 using turbo tax through T.D.Ameritrade. I expected a return of over $2000.00. I filed electronically, but have heard nothing since. I checked Turbo Tax and they say there is no refund due. This also includes my state tax. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,906 satisfied customers
Undistributed taxable income previously taxed. Have 3
Undistributed taxable income previously taxed. Have 3 shareholders with balances due to them from previous years. Can it be paid all in one year to bring their amounts owing to zero until the next pro… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,251 satisfied customers
I would like to stop filing a married joint return and go
I would like to stop filing a married joint return and go back to filing married single return. my wife has my return and wants to file jointly we have filed an extention 4868. … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I filed my taxes with Turbo Tax and submitted the forms with
I filed my taxes with Turbo Tax and submitted the forms with E-File on April 11. A few days later I received an e-mail saying that my file was rejected due to a Turbo Tax problem, so following instruc… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,251 satisfied customers
I filed a joint return through TurboTax. My taxable income
I filed a joint return through TurboTax. My taxable income was $87,829. Using the IRS's published tax rate schedule, the tax I owe should be $13,499.25. TurboTax calculated I owe $17,787 (this compare… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
THE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS
tHE irs STATED THAT TE TAXCALULATED ON SCHEDULE D WAS INCORRECT . i CAN NOT ACCERSS dD. p;EASE DVISE HOW I CAN ACEESS THE SCHEDULE … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can you file schedule D for capital gains and losses if you
can you file schedule D for capital gains and losses if you take the standard deductions? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,251 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x