Democrat and Independent Thinker..."The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself." -Nietzsche

Commenting on many things, including..."A government more dangerous to our liberty, than is the enemy it claims to protect us from." - Keith Olbermann

Monday, August 20, 2007

IRS Piles On

For those who struggle to pay their bills, who watch their housing payments rise out of reach with their adjustable-rate mortgages, who lose a job or who fall victim to illness, losing one’s home can feel like hitting bottom. But one more financial indignity may await as the fallout from the great housing boom ripples across the United States.[...]

Notices of unpaid taxes, unanticipated and little understood, will probably multiply as more people fall behind on their mortgages, said Ellen Harnick, senior policy counsel at the Center for Responsible Lending, a nonpartisan research and policy center in Durham, N.C.

Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

8 comments:

Anonymous said...

Hey BlueKat, Foreclosure essentially hurts homeowners who are not exactly aware of the intricacies of insurance.

Anonymous said...

one more financial indignity may await link is dead.

Unknown said...

They are so screwed (the ARM victims, I mean). We need a peasant revolution in this country. Have you heard of Dead Peasants Insurance? It is an insurance policy that your boss can take out on you, regardless of the industry you work in, wherein they collect on the policy if you die. You, or rather your family, do not get to collect.

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