Tax Time Question: Anything about my foreclosure?

[Amy26]

Hihi, I was just wondering. My condo that I let go in my bk foreclosed in April of last year. Do I need to do anything on my taxes when I file this year to let the IRS know I lost the house?

I ask because I have been taking in prior years the real estate credits and now of course I won't be ... and on the turbo tax screen it is asking me about changes in 2010 and it says "bought, sold refinanced or lost real estate" ... so, I didn't know if my foreclosure counts as "lost" in that category?

[Ifonly]

Yes, you answer positively to the fact that the home was "lost". You can still claim the itemization for any mortgage interest/real estate taxes you did pay during 2010. Other than that, I don't believe it should affect your taxes. However, please note you can not e file a 2010 tax return right now. Tax season has been delayed until mid to late February to allow the IRS to update the regulatory changes from the 2010 tax legislation. You'll be able to download updates for your Turbotax but if you itemize, you need to wait.

[Amy26]

Oh thanks for the update... I wasn't really ready to file yet, but I was just curious and trying to estimate what I might owe this year. Without my mortgage interest credit... I do not believe I can itemize anymore :/ ...

[Ifonly]

I completely understand. One of the things I had to fight for in our CH13 was increased federal withholding. I knew that we would have a much larger tax liability without the ability to itemize.

[BobMango]

Did you get 1099'd by the bank? There is an IRS form you may need to complete to claim insolvency so that you are not liable for the deficiency balance. This is all dependent on a number of things and you may not be liable for the tax on that in any case, but filing the form will ensure the IRS doesn't come after you. I lost a rental property in California to foreclosure prior to filing bankruptcy in 2009 and filed the insolvency form. The bankruptcy discharges the deficiency balance and provides a presumption that you are insolvent, but my tax professional didn't want to take any chances.

[Flamingo]

If it foreclosed April of 2010 that means you did not make payments for quite some time prior and did not make any tax (escrow) payments in your mortgage or paid any mortgage interest for 2010. Therefore, you have nothing to deduct. You may get a 1099 by or around the end of January as to any deficiency amounts and that would be income for you for tax y ear 2010 unless you can prove to the IRS that you are insolvent via IRS standards. I suggest if you get a 1099 that you contact a tax professional to handle your taxes for you as your chance of getting audited increases if you attempt to prove insolvency. Best of luck to you.

[panda]

If this was discharged during bk use form 982 and check box 1a bankruptcy.

[Ifonly]

I was logging back in to say exactly what Flamingo said. I assumed you surrendered the property in the bk which would make the debt unsecured therefore no 1099. I should have asked for more details. If you receive a 1099, you absolutely need to see a tax professional (NOT a store front like H&R Block,etc.).

[bulletproof77]

My foreclosure was sold 02/10, Included in Chapter 7. My tax person (CPA-retired IRS) will file a Form 982 just for "insurance", but anticipates no consequences with the 1099. And she has done a lot of these lately.

[Amy26]

Oh ok... so, what if I don't get any 1099 by 1/31... should I assume that's ok then? I believe my mortgage company has a very old address for me and if they tried to send me something I would never get it... should I call them?

[Ifonly]

I can not offer you professional advice but I can tell you that you should never assume when it comes to your taxes. The IRS' position is that all individual taxpayers are responsible for knowing what they should be reporting - for instance, even if you employer failed to give you a W2, you are still responsible for reporting your income, etc.

I would make certain that the company had my current address for starters.

[Amy26]

Hmm ok thanks... I am just worried that if I call to give them my new address that it might trigger them to send me one. Or if they would even take an address change to a closed file.

[tobee43]

Hmm ok thanks... I am just worried that if I call to give them my new address that it might trigger them to send me one. Or if they would even take an address change to a closed file.

i would call the bank and see if they issued their 1098's...that's what it is for interest...and if you paid your taxes it should be on the same statement...if they have and you didn't pay anything i wouldn't worry about it....HOWEVER...that being said you need to make certain the bank did not include it with their foreclosure fees and cost to YOU because then you ARE in FACT entitled to the deduction....just to make it easier for you...

[Amy26]

Hi tobee! I really didn't quite catch what you're saying there... it confused me muchly.

Little background... I stopped paying everything on this house in april of 2009. Then filed BK and discharged by 09/09. They paid taxes for me, so I had an escrow account and I did not pay those either. So, last year I just got January - April of deductions for my interest in the house when I filed my taxes. It took them about a year to foreclose and that was final April 5, 2010. So, I paid absolutely nothing on the house in 2010. So, I know I'm not entitled to any deductions....

I just want to make sure I report the loss of the house properly and not get into any trouble with the IRS. I'm a little confused and concerned with what you said about the foreclosure fees? :0

[free2breathe]

We received a 1099-A (abandonment of property) when we went through foreclosure. We, unlike so many in today's housing mire, were not upside down, so there was no cancellation of debt, thus no 1099-C (cancellation) for us. I found this article that explains what to expect fairly well.

http://ezinearticles.com/?IRS-Form-1099-A,-1099-C-and-the-Cancellation-of-Debt-in-Foreclosure&id=3928162

I hope that you can get some clarification by reading through this Amy ;)