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September 13th, 2009:

Mortgage Forgiveness Debt Relief Act

Mortgage Forgiveness Debt Relief ActIf you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:What is Cancellation of Debt?If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.Is Cancellation of Debt income always taxable?Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

ExceptionsWhat is the Mortgage Forgiveness Debt Relief Act of 2007?The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.What does exclusion of income mean?Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. But the Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.Does the Mortgage Forgiveness Debt Relief Act apply to all forgiven or cancelled debts?No. The Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes. In addition, the debt must be secured by the home. This is known as qualified principal residence indebtedness. The maximum amount you can treat as qualified principal residence indebtedness is $2 million or $1 million if married filingseparately.Does the Mortgage Forgiveness Debt Relief Act apply to debt incurred to refinance a home?Debt used to refinance your home qualifies for this exclusion, but only to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified. For more information, including an example, see Publication 4681.How long is this special relief in effect?It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?The maximum amount you can treat as qualified principal residence indebtedness is $2 million ($1 million if married filing separately for the tax year), at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982 and the detailed example in Publication 4681.If the forgiven debt is excluded from income, do I have to report it on my tax return?Yes. The amount of debt forgiven must be reported on IRS Form 982 and this form must be attached to your tax return.Do I have to complete the entire Form 982?No. Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.Where can I get this form?If you use a computer to fill out your return, check your tax-preparation software. You can also download the form at, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.How do I know or find out how much debt was forgiven?Your lender should send a Form 1099-C, Cancellation of Debt, by February 2, 2009. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982. Can I exclude debt forgiven on my second home, credit card or car loans?Not under this provision. Only cancelled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion. See Publication 4681 for further details.If part of the forgiven debt doesn’t qualify for exclusion from income under this provision, is it possible that it may qualify for exclusion under a different provision?Yes. The forgiven debt may qualify under the insolvency exclusion. Normally, you are not required to include forgiven debts in income to the extent that you are insolvent.  You are insolvent when your total liabilities exceed your total assets. The forgiven debt may also qualify for exclusion if the debt was discharged in a Title 11 bankruptcy proceeding or if the debt is qualified farm indebtedness or qualified real property business indebtedness. If you believe you qualify for any of these exceptions, see the instructions for Form 982. Publication 4681 discusses each of these exceptions and includes examples.I lost money on the foreclosure of my home. Can I claim a loss on my tax return?No.  Losses from the sale or foreclosure of personal property are not deductible. If I sold my home at a loss and the remaining loan is forgiven, does this constitute a cancellation of debt?Yes. To the extent that a loan from a lender is not fully satisfied and a lender cancels the unsatisfied debt, you have cancellation of indebtedness income. If the amount forgiven or canceled is $600 or more, the lender must generally issue Form 1099-C, Cancellation of Debt, showing the amount of debt canceled. However, you may be able to exclude part or all of this income if the debt was qualified principal residence indebtedness, you were insolvent immediately before the discharge, or if the debt was canceled in a title 11 bankruptcy case.  An exclusion is also available for the cancellation of certain non-business debts of a qualified individual as a result of a disaster in a Midwestern disaster area.  See Form 982 for details.If the remaining balance owed on my mortgage loan that I was personally liable for was canceled after my foreclosure, may I still exclude the canceled debt from income under the qualified principal residence exclusion, even though I no longer own my residence? Yes, as long as the canceled debt was qualified principal residence indebtedness. See Example 2 on page 13 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.Will I receive notification of cancellation of debt from my lender?Yes. Lenders are required to send Form 1099-C, Cancellation of Debt, when they cancel any debt of $600 or more. The amount cancelled will be in box 2 of the form.What if I disagree with the amount in box 2?Contact your lender to work out any discrepancies and have the lender issue a corrected Form 1099-C.How do I report the forgiveness of debt that is excluded from gross income?(1) Check the appropriate box under line 1 on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to indicate the type of discharge of indebtedness and enter the amount of the discharged debt excluded from gross income on line 2.  Any remaining canceled debt must be included as income on your tax return.(2) File Form 982 with your tax return.My student loan was cancelled; will this result in taxable income?In some cases, yes. Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation.Are there other conditions I should know about to exclude the cancellation of student debt?Yes, your student loan must have been made by:

(a) the federal government, or a state or local government or subdivision;(b) a tax-exempt public benefit corporation which has control of a state, county or municipal hospital where the employees are considered public employees; or(c) a school which has a program to encourage students to work in underserved occupations or areas, and has an agreement with one of the above to fund the program, under the direction of a governmental unit or a charitable or educational organization.

Can I exclude cancellation of credit card debt?In some cases, yes. Non-business credit card debt cancellation can be excluded from income if the cancellation occurred in a title 11 bankruptcy case, or to the extent you were insolvent just before the cancellation. See the examples in Publication 4681.How do I know if I was insolvent?You are insolvent when your total debts exceed the total fair market value of all of your assets.  Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts.How should I report the information and items needed to prove insolvency?Use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation.  You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.To claim this exclusion, you must attach Form 982 to your federal income tax return.  Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation.  You must also reduce your tax attributes in Part II of Form 982.My car was repossessed and I received a 1099-C; can I exclude this amount on my tax return?Only if the cancellation happened in a title 11 bankruptcy case or to the extent you were insolvent just before the cancellation. See IRS Publication 4681 for examples.For more useful information on the Mortgage Forgiveness Debt Relief Act, please visit Debt

John is a DJ and radio producer by trade who has performed in the U.S., Russia, Turkey, Macedonia, Serbia & Kosovo. Through a strange twist of fate he found himself working in the debt consolidation and debt settlement field in Chicago. John has a great interest in charity work as well.

His other interests include fitness, science & technology, modern medicine, poltics, world events and pop culture.
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Reduction of debt to be canceled is the most excellent debt elimination

Is it a possibility that there are ways to eliminate debt from credit cards or obtaining debt relief for the balance of payments and height interest? Can I just get full debt cancellation? Do you really think there are applications that are positive for the credit card? Just as the miles and the delivery of the airline? Let me give you the gospel in this: the good use of a charge by the credit card does not exist. Debt by the credit card is a major issue in America. We need to all eliminate debt by any ethical means necessary! Do you actually think that there are positive applications of a plastic bank account? How about rebates and airline miles? Let me give you the truth in this, the responsible use of a bankcard does not exist. The responsibility for the credit card is a serious problem in America. We have a need to eliminate all the duty of the kind of money owing! There truly is no positive side to the use of credit card. You will spend more money when you load. Even paying bills on time, you’re not beating the system! But most families make the payment over time. The average family today carries $ 9,000 in debt on their credit card according to the American Bankers association. Now let ‘s talk about the reductions. If you use a credit card at 3%, you would have had to spend $ 60,000 to $ 2,500 rebates on new cars that lost $ 7,000 of value when you drove off the lot. That is not much! Focusing on the temptation of financial institutions taking advantage of consumers misled in with low interest, no fees and a high credit line. These banks encourage consumers to upload a lot saying that after receiving a small percentage of the interest savings when the banks receive from consumer’s twenty percent interest or more in purchases. When you pay cash, you can feel money out of you. This is not true with credit cards. Moving a card from a bank pull up records against anything emotionally. If you use plastic instead of cash you will spend 10-19% more. This is money you could save. If you must use plastic, I suggest a debit card. I use them for travel and the occasional convenience of asking something about the Internet or telephone. Except that, I use cash. Personal finances are mostly behavior. You need to cut the habits that make you spend more. Think of using the credit lines of cash to buy! You do not build wealth with the use of plastic payments. Use common sense. If you play with a multibillion-dollar industry in the dollar and you think that with reference to go to win the game, you are naive. You cannot beat the banks and financial institutions. Banks and other lending companies are making millions of dollars off of our purchases and then give us back pennies as an incentive to charge more. How can you eliminate debt and all the money you owe using your program? I think there are many people who are struggling with money and see no reason other than bankruptcy or exit the building. I think there is a way to get their debt canceled or reduced to pennies on the dollar. There must be a new option out of these obligations for the person who does not have the resources to pay the money owed.

Bill Naugle Th. M. Financial counselor, Information Technology Certifications. Microsoft (MCDST) and CIW Server Administrator. Home Internet Business Entrepreneur. Writer of many articles, books and ebooks.
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Debt Relief Solutions from Counseling to Canceled

Many consumers are looking similar like you for a cash advance quickly to provide emergency money so they will achieve the cancellation of accumulated debt; all want the fastest possible financial break. You can also designate a certain company of money management, which can confer with your last creditors that will consider your interests. You may need to launch a deficit due to an emergency situation that scream for the cash, and your next check is just too far off, and then consider getting a cash advance loan now.

And if you are in mixed condition to jump out of liability and get rid of all the harassing phone calls from your creditors, there are some options for the temporary suspension of a punishment from liability for bad creditors. There are financial services that advise clients with respect to multiple forms of release because they are legally available and then you can proceed to pursue the correct course and best option for your individual situation. If only our computer mouse was the science of debt relief that those bad spam emails promise.

With the help of calculated consolidation, one may decide to obtain a loan as appropriate solution and building support. The resources will direct you to your rights as a debtor, the law, constitutional law, and more aid for money due. Which includes consolidation of a business. The business of consolidation is one of the mechanisms of deficit and most acclaimed free solutions applied today including a financial system of debt canceled.

Millions of people have found relief in having no debt and happiness with the change in the way of life that they learned to use a financial advisory service. If you use Christian principles then you will observe discipline in your spending and pay down its obligations, and you will never need professional advice if you are a Christian or not. The willingness of companies to help consumers with monetary counseling will offer clients advice on how to go about building, including the introduction of measures such as customer support to create a budget that works for your needs, offering advice on how to use extensions credit wisely, giving clients tips on keeping track of your accounts and ideas for better money management.

There is a financial advice service which advises clients with respect to multiple forms of debt relief that are legally available and then proceeded to pursue the course the best option for your individual situation. The way to go when it comes to building the temporary suspension of a shortfall of punishment is to seek an advisory company with a solid background with established organizations and past clients. Each Christian consumer advice agency has its specific programs of liability forgiveness by allowing customers to select what is convenient for him.

I have seen websites with hundreds of pages, books and more, all devoted to help people find a way to win the monetary and financial freedom. Another solution for the management of money, which is also quite popular as an option to help the deficit, is a consolidation loan. The ultimate solution to debt relief should be considering bankruptcy, and there are several bankruptcy alternatives that should be considered first. While the consolidation loans are not a solution for poor spending habits that can lead to short-term relief from the burden of your deficit. Although less option available for bad credit debtors, help options are still available. If you are bottle necked with its obligation to the bankcard, these management companies to resolve a relief program to negotiate with your creditors. Credit Counselors advertise consulting business through local newspapers, the Internet, telephone calling and Yellow Pages.

When the balance of the bankcard becomes out of control, the consumer starts the search for the best debt relief. Besides, it can also provide additional advantages: The payments of interest reduce the resignation late in overtime and financial assistance under the shares of the fees as an improvement of credit in a shorter time than more money in the long term. You also need to know that there are really two major types of consolidation of credit card. Following the review it became known that people owing money are trying credit-counseling programs to find financial freedom. In that situation, you look for a consolidation loan and then consolidate your bank card is like a big break for you.

Talk to a consultant for the cancellation of debt to find solutions that are preferable to a main loan small business credit, which is, after all, like most other financial obligations of adding to the problems that are already in place. Its mission is to help people with the trauma brought on by financial setbacks, extended charges, bankruptcy, etc. And provide the resources for the financing of home mortgages, money management and responsibility of having your debt canceled. Given the two options above, the establishment of the deficit is the best advantage for financial freedom while completely eliminating all money owed rather than extending it for a long period like the majority of credit counseling programs do.

Bill Naugle Th. M. Credit counselor, Information Technology Certifications. Microsoft (MCDST) and CIW Server Administrator. Home Internet Business Entrepreneur. Writer of many articles, books and ebooks.
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