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Tax Attorney Roni Deutch Discusses Tax Consequences of Foreclosures...

In the latest featured blog entry (http://ronideutch.blogspot.com/).

"As everyone in the country knows, the real estate and mortgage industry has been in trouble over the past few years. Thousands of families find themselves in financial trouble due to drastic rate increases in adjustable rate or interest only mortgages. Most people failed to consider the possibility of the huge increases upon entering the agreements. Only now, they find themselves with mortgage payments that they cannot afford to pay. Often, foreclosure is the only option available to these struggling families. However, there is one important aspect of a foreclosure that people forget -- the resulting tax liability."

"Foreclosure is always the last resort for someone struggling to make mortgage payments. People usually think it will be the end of their problems. However, the IRS considers debt canceled through foreclosure to be part of a taxpayer's income. The IRS feels that it is entitled to the appropriate income taxes on that money. It also has access to every taxpayer's financial information so it can ensure the appropriate taxes are paid. And as most of the country already knows, the IRS is very aggressive in collecting taxes that they know are outstanding and feel they deserve."

"Foreclosures are not the only way to end up with this type of tax liability though. The other is when a homeowner sells his or her house for less than the value of the mortgage and the bank forgives the difference. In those situations, the homeowner is required to report that amount as income. This is known as a '1099 shortfall' which is an IRS policy that treats forgiven debts as income, even if a taxpayer has nothing to show for it."

Additionally, Roni goes on to say in her blog, "thousands of taxpayers across the country are facing massive IRS tax liabilities with little chance of relief. With all the attention this issue is getting, Congress is finally beginning to consider legislation to help lower the burden on these people who are facing such huge financial problems. Senator Debbie Stabenow and Senator George Voinovich sponsored a bill to eliminate the federal rule that considers mortgage relief taxable income. The White House has already indicated support for Stabenow's bill and President Bush claimed he hopes to include Stabenow's ideas in his home ownership relief initiative. However, before a bill can go to the White House, Congress must approve it. Currently, no progress has been made on Stabenow's bill, which has been sitting in Congress since May."

About Roni Lynn Deutch

Roni Deutch is the founder and owner of Roni Lynn Deutch, A Professional Tax Corporation, a tax resolution law firm, and Roni Deutch Tax Center. Her law firm has been helping clients find solutions to their back tax liabilities for over sixteen years. To learn more about tax attorney Roni Deutch you can visit her Avvo profile (http://www.youtube.com/ronilynndeutch), or Blue Dot page (http://www.ronideutch.com

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