Becoming a homeowner provides one with a stable home that they can continually invest in. But there are many other benefits that come with homeownership.
These include many tax breaks that accompany buying a home, selling a home, and filing yearly tax returns. Those who already own a home may already be eligible for many tax benefits and for those that aren't homeowners, they may find that by looking into purchasing a home, they may find that it could save them some money.
For homeowners that are in jeopardy of losing their homes to foreclosure, there are many special provisions that can be made to eliminate them being taxed even further for losing their homes. The Internal Revenue Service has just recently made changes on their website to include a section on foreclosure proceedings. This section has a worksheet that one can use to determine if they are eligible for any of the special provisions. Also within this section is a form that can be filled out for those that are required to pay taxes. This form is a request to the IRS to work out a payment agreement. If a payment agreement cannot be made due to special circumstances and the individual cannot pay the taxes in one payment, the individual can then submit an OIC.
In the OIC (Offer in Compromise) package, there is a form that will help the individual determine if they will qualify for an OIC. The OIC policy is also fully explained in the IRS Policy Statement P-5-100. Normally, if the amount of money that is owed is taken through the foreclosure of a home, the income on that money is usually taxed.
But these special provisions will allow for individuals that are in debt to compensate for that income when their liabilities are more than their assets.
However, these special provisions may not be available in all situations. Two of these situations may include a home that was partially used for a business or it was rented out. For homeowners that have paid back debt with the foreclosure of a home, they must provide a statement from their lender proving so.
This form is Form 1099-C. Through this form, the individual will be able to show the IRS the amount of debt that was forgiven, as well as the fair market value of the property that was obtained through foreclosure.
Lenders are required by law to send this form on to the IRS once it is completed. For this reason, the individual who has been foreclosed on must carefully examine the form and inform the lender immediately if there is any incorrect information showing on the form.
