If one loses home to foreclosure, or sells it getting less money than was borrowed in a “short sale,” or if one had a car repossessed or had to return it to the lender due to inability to make further payments, one’s possible can get 1099-A and/or 1099-C form from the lender.
If you receive 1099-MISC, here we have instructions how to fill it out.
Why 1099-A tax form is needed?
Printable 1099 form is filed when someone loses some property, or repossessed car. Because the amounts of money involved in these transactions can be really large – tens or even hundreds of thousands dollars – this is the issue when none just is not afford to go wrong. As middle class of Americans faces the problem of losing their homes.
Losing some of the things described above an individual may get one or both of these tax forms:
- 1099-A Acquisition or Abandonment of Secured Property;
- 1099-C Cancellation of Indebtedness Income.
Transactions, such as a foreclosure – may result in getting these two blanks to the taxpayer. Both of these 2018 – 2019 docs provide the same information but in a different forms, and which one the person will get mostly depends on the lender.
If the foreclosure lead to the cancellation of one’s debt or mortgage on the property, person should get 1099-C blank, Cancellation of Debt. That’s the main document, because it will tell it’s filler and IRS agency the amount of debts that were canceled, which will be considered as interest income for filler. Person can owe taxes on forgiveness of debts more than $600. If someone gets 1099-C, he/she reports only this one without 1099-A. This blank is considered to be more informational while 1099-C is more actionable. There is a probability for no tax consequences with 1099-C, for example in the case of personal residences under a definite amount or in bankruptcy situation. However, certain income tax blanks may still be required to be filled for IRS.
If someone received 1099-A for property related to a business or investment, such as a rental object or a company vehicle, it is required to check IRS Publication 544 Sales and Other Disposition of Assets and IRS Publication 4681 Canceled Debts.
If payments on a secured loan are not made, the creditor has the right to redeem the mortgage or return the property. If the person who received the 1099-A, abandoned personal property, for example the car, there is no need to report this in case of return. This doc should be kept for records in case one will need to fill out 1099-C one day, which indicates that the debt was indeed forgiven. This is an important information, so it shouldn’t be missing.
The person can exclude some part or all amounts on basic residence under the Mortgage Forgiveness Debt Relief Act of 2007. Some specific rules has to be learned in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonment and Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. In case of bankruptcy or insolvency debt cancellation will not be taxable.