A debt that is forgiven to you on your Bucks County residence is considered as income to you. Your mortgage company reports the forgiveness to the IRS which will then send you a form 1099c with the amount of the forgiveness which is subject to federal tax. Different states have different standards as to whether or not the forgiveness is considered as state income. In any event, you may have to pay taxes on this amount unless you qualify under the Mortgage Forgiveness Debt Relief Act passed in 2007.
In addition, if an individual enters into a debt forgiveness or consolidation with a company, they are likely to receive a 1099c at the end of the year if the company reduces their debt. I have written about my disdain for "debt settlement" companies before, and the 1099c "surprise" many of their users receive is another reason I still detest them. Rarely do they reveal, or only in fine print, that if the company is able to negotiate a debt (which they rarely do), you get stuck with taxes due at the end of the year.
No comments:
Post a Comment