Tax Consequences of Foreclosures

As we all know by watching the news, the real estate market is pulling back hard from the days of glory earlier this decade. In fact, many people are losing their homes to foreclosure. Few realize the tax consequences of losing one's home.

The Internal Revenue Service looks at things in a strange manner. What you may see as a loss, it sees as a gain. How could this possibly be? Well, the agency takes the view that any loss that relieves you of a financial obligation is actually a monetary gain. Let’s look at an example.

Assume I own a house. I am carrying a $200,000 mortgage on the home. I run into problems making the payments and the home goes into foreclosure. I eventually am evicted and the bank takes back the home. I have lost the house and my credit is a disaster, but I am off the hook for the $200,000. Life could be worse, right? Well, it is about to get much worse.

The IRS is very interested in that $200,000 mortgage debt. The agency takes the view that the relief from that debt can actually be considered income to me. Yes, the IRS views the foreclosure as though I have received a $200,000 salary for the year. You can guess what comes next. The agency wants me to pay taxes on it!

As foreclosures go up around the nation, more and more people are getting very surprising letters from the IRS. It isn’t bad enough that you have lost your home, you now have a monstrous tax bill. This also applies to situations where a short sale is undertaken.

So, is there anything you can do? Yes. The key is to get an appraisal of the home before you are foreclosed on. This forces the lender to value the home at an objective price, not some low figure it arbitrarily sets. This is important as you are taxed on the difference between the value of the home and what you owe.

In addition to the appraisal, you can make arguments to the IRS. There are different approaches, but the basic idea is to suggest you received no gain and are insolvent. The IRS can then waive the tax liability.

If all else fails, there is always the bankruptcy route. Although taxes generally are not terminated through bankruptcy, the “gain” you are perceived to have received is. Since there is no gain, there can be no tax and you are off the hook. Of course, this approach shreds whatever small amount of positive credit you had left, but it beats a big tax bill.

Get professional help dealing with back taxes at BusinessTaxRecovery.com

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A DIY Guide For Free Online Tax Preparation Services

You Are Eligible For Filling Tax Online Yourself:

You do not have to be a specialized to do your taxes however if you have a knotty income structure or are just not quite sure, there are services to help you get ready taxes for physically or your commerce. Like Christmas, tax time seems to come faster and faster every year. But unlike Christmas, tax time, is the most dreaded time of year.

The online working computers have served up many new options for you to decide, when preparing your taxes. These services include but are not limited to the following: Bookkeeping, Direct Deposit, Electronic Filing, Income Taxes. Tax preparation can be legally performed by lawyers and non-lawyers, alike. The fee for tax return preparation is based on the complexity of the return.

Advantages of Free Online Tax Preparations Services:

It is among world's wide accepted services. Uncomplicated to use, swift, easy and cost efficient Tax Preparation services to prepare and e file your federal and state Income Tax Return Online. Deduct the cost of your tax return from your Income Tax Refund; get a faster refund with Find Tax Refund. Review your tax return before you e-file from our Tax Professionals to avoid post filing rejections. Hassle free simple, fast & secure Tax Preparation Software. Tax Preparation made easy with Find Tax Refund.

Tax preparation guide is one of the great ways for taxpayers to learn valuable tax information. The majority of tax preparation courses begin in September; however, they can start as late as December. Taking a tax preparation course is likely to cost a small fee; however, many taxpayers feel it is a wise investment. Many tax preparation courses teach individuals how to accurately prepare their own taxes; however, they also offer advice on maximizing tax deductions and other tax credits.

How to Get Ready:

If you prefer to file your taxes with an accountant or tax specialist, online filling will come in handy when it comes to receiving withholdings or paying taxes that are due. To use online service, just tell your tax professional that you'd like to file your taxes yourself this year. When you file your taxes online, you have the choice of receiving your refund by direct deposit. Simply fill in your routing number and checking account number when asked. The best part is that your money will arrive in about half the time it normally takes. Plus, you can skip the line at the bank.

Preparing your taxes is much like getting your teeth pulled. The reality is much less worse than the anticipation. Contrary to popular belief, tax return preparation is more of a creative art than an exact science. If you feel a bit overwhelmed trying to prepare your taxes, seek help. The small amount it will cost you to pay for expert advice could end up saving you hundreds in the long run.

You can also find more info on Tax Resolution and Tax Return. filetaxhelp.com is a comprehensive resource to get information about Tax.

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My process of forgiveness & A view from the other side by Bernard

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Taxes on Short Sale, Loan Modification & Mortgage Foreclosure 4 Nov08 Interest Rate & Payment

from radio broadcasts who asked questions about loan modification process as part of a financial strategy, help me with some of the tax ramifications. Let's say that I have a loan and I know the best thing for me is a loan modification, am I going to be faced with a 1099? A tax bill at the end of a loan modification? Yes, the first of the two tax implications will apply which will be the debt forgiveness part. I didn't mean to interrupt you Mike, well I said there are several different types ...



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Tax Relief - Checks For The Taxpayers

Tax relief can also be beneficial through checks mailed to taxpayers by the federal or state tax authorities to reduce the burden on taxes. These checks can also be in the form of refund checks received from tax authorities for taxes paid beforehand when there are found to be excess taxes paid by the taxpayer after calculating the tax assessment for the current or previous assessment year.

Recently it was noticed that tax relief checks assumed prominence because of a major tax relief program in the nation. The legislation aims to lighten the burden shouldered by taxpayers by distributing the relief checks in advance. These checks have signaled the replacement of the old 15% tax rate to the 10% tax bracket. The primary purpose of the timely distribution of the checks based on the families' income tax burden is to engage the highest priority to low- and moderate-income families.

The legislation for tax relief has also offered provisions to lessen the burden by permitting deductions for student loan interest, college tuition, and tax benefits from government bonds that are exclusively issued for the construction of public school buildings. While the disbursal of the checks has garnered acceptance and approval from the taxpayers, various segments of the population criticized this action as they believe that the money should have been utilized directly for education. Moreover, what people should understand about these tax relief checks is that they are not rebates or refunds from overpaid taxes in the past, but a refund in advance for the future taxes that are yet to be filed.

Do you also want to learn about getting rid of your IRS and/or state tax problems? Visit us at our website for money saving Tax Debt Tips and Strategies. http://www.LimonWhitaker.com

Over the past few years R. L. Daniel and partners have helped thousands of people with their IRS and state tax problems.

We'll Handle The IRS For You

If you have urgent questions or concerns about your tax debt, we are available to help you at 800.993.1249 Monday to Friday 6:00AM to 8:00PM Pacific Time.

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Tax Lawyers Answer Common Tax Questions About the IRS

Four Common Tax Questions and Answers: Help with the IRS, Audits, Liens, Levies, and Garnished Wages

Dealing with the IRS and related tax problems can be anyone's worst nightmare. Once the IRS has begun to go after you, it can seem that they won't stop even after you think they have gotten what they want. Tax lawyers work to solve such nightmares. Today two tax attorneys with extensive knowledge in tax law want to answer some of your common tax questions for free. Below you will find four answers to common tax and IRS related questions.

Why did the IRS file a tax lien against me?

A tax lien, usually filed with your county recorder, serves as notice to those who may loan you money (home or car loan, bank loan, credit card advances, etc.) that once the lien is filed, the IRS' claim against you for taxes will come before those of anyone loaning you money after the filing. With certain exceptions it attaches to all property, real and personal, tangible and intangible, in which you have an interest, wherever the property may be located. A lien does not result in the actual seizure of any property, real estate or other forms. Further, before the IRS can file a lien against your property, it should give you 30-day notification that it intends to do so. This may give you time to make a payment or other arrangements.

Can the IRS levy on my house? On my wages? On my bank accounts? What about retirement funds?

A levy usually means the property is actually seized by the IRS. In the case of real estate, it means the IRS can force a sale of the property and keep the proceeds up to the amount of taxes, penalties and interest owed.

A certain portion of wages and commissions are exempt from levy; the amount depends on a number of factors, including the number of dependents. All forms of bank accounts-savings, checking and CDs-are subject to a levy in full. In order to catch subsequent deposits, the IRS must serve a new levy on the bank. Once wages are levied upon, the same levy reaches all subsequent wages, commissions, bonuses, etc.

No forms of retirement funds are exempt from levy, including social security payments and other forms of government pensions. However, unemployment and workers' compensation benefits are exempt from levy, as are SSI and some forms of public assistance.

A small amount of household and personal effects, and tolls and equipment used in the taxpayer's trade or business, are exempt from levy.

The IRS is garnishing my wages. How can I stop them?

The IRS will garnish your wages after proper notice. All the IRS wants is payment or a good reason why you can't pay. This is when you can negotiate a payment plan or an Offer in Compromise or convince the agency you are worthy of uncollectible status. It is imperative after you receive a notice of "Intent to Levy" that you deal with it immediately. Intents to Levy are time-sensitive and if you miss your deadline to reply, i.e. make payment arrangements, your employer will be made aware of the situation and your wages may be garnished. If you're not sure how to go about this, consult a qualified tax attorney to assist you.

When is the right time to consult an attorney?

There are various reasons you would need to consult an attorney such as: fraud investigation, a long audit or one that involves legal issues, inadequate books/records, not filing returns for a number of years, if you don't actually owe taxes, if the statute of limitations has run out or if you would feel more comfortable dealing with the IRS through an attorney. Whatever the reason, don't hesitate to contact an experienced tax attorney to help you through your foray into the wide world of IRS red tape. Many law firms offer free initial consultations to better understand your situation and decide how they can help.

The Jones & Ryan Tax Attorney Website offers an extensive frequently asked tax questions and answers page. You will also find free tax articles as well as information about our lawyers, firm, initial free consultation, and how to get in contact with us.

Grey W. Jones, Esq., Attorney at Law, has handled over 220 tax files focused almost exclusively on "problem tax cases" such as liens, levies, audits, or enforcement action by the government and IRS.

Cheryl L. Ryan, Esq., Attorney at Law, concentrates her practice primarily in the areas of defense litigation and tax problem resolution.

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