Northern Virginia Short Sale sellers often hear the term 1099. So what exactly is a 1099?
A 1099 is a form that reports income other than wages and salary to the IRS. As a Northern Virginia Short Sale seller, what can be reported to the IRS on a 1099 is the amount of forgiven debt by a lien holder. In other words, the amount not repaid, but forgiven by your mortgage holder(s) in a short sale.
When this income is reported to the IRS, you are expected to pay income tax on the money. However, many short sale sellers find tax relief in the Mortgage Debt Relief Act of 2007, that has been extended to 2012.
When considering a short sale, please consult your tax professional for information on how a 1099 can affect you.
Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155. To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com. Or you can visit her website: www.nvarealestate.net.
Header is a combination of photos from the Bristow, Gainesville & Haymarket areas, taken by Chris Ann Cleland.
Chris: This is a good explanation of a 1099, short sale and resource for debt relief. So many homeowners in distress do not know where to go for help. I feel that once a homeowner fully understands their options, many will decide to sell short and avoid foreclosure.
In Georgia, you really need to be a lawyer under state lw to advise a client of all the consequences of their actions.
Kathleen: Seems logical to me. The main difference between foreclosure and short sale that I can see is the longer term effects on credit that a foreclosure has.
Jim: Here we send them to tax professionals for tax advise, and lawyers for legal. Hence, the disclaimer to consult a tax professional at the end.
Chris Ann...
Advising a client to consult a tax professional is a great idea.
Richard: All I can do is to let them know what a 1099 is and the purpose of it. A tax professional can take it from there. But to get a 1099 on a short sale with forgiven debt and NOT consult a tax professional is very bad.
Hi Chris Ann: All short sale sellers should check with a CPA before committing to a short sale, but especially they need to understand state laws. Just because a home owner may be exempt from taxation on mortgage debt relief on a federal level doesn't mean the owner is also exempt on a state level.
I suspect many short sale "sellers" do not have tax professionals to consult or feel that the LAW does not apply to them which may get them in even MORE financial difficulties
Elizabeth: Yes, state taxes are another thing entirely.
Wallace: Ill informed short sale sellers call me and other short sale agents all the time after they have completed a transaction, only to find that they are in financial hot water...just the thing they were trying to avoid.
I wonder how many short sale agents actually know anything about 1099s? I bet the answer is not a good one.
Anne: In my discussions with agents about Short Sales, it never ceases to amaze me that most don't get that there exists the potential for real tax liability when doing one.