North Charleston, SC (PRWEB) March 14, 2008 -
The Mortgage Forgiveness Debt Relief Act of 2007 has been termed "a lifesaver for taxpayers" according to David Bauman, an Enrolled Agent and Licensed Taxpayer Representative, for JK Harris and Company, the nation's largest tax resolution firm. The troubled mortgage industry and the homeowners affected by it have been in the news almost daily for the past six months. The number of homes that have been foreclosed on in the last quarter is at an all time high. Congress acted upon this trend in late December with the enactment of the Mortgage Forgiveness Debt Relief Act of 2007.
"Normally, forgiveness of debt results in taxable income. This act allows taxpayers to exclude "Qualified Mortgage" debt forgiven on their principal residence from being taxed when it comes time to file their income tax return," added Bauman.
Taxpayers can claim this special tax relief by filling out the newly revised Form 982 [Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)] and attaching it to their 2007 federal income tax return. Details regarding how to claim this relief are on Form 982 and its instructions are currently available on the IRS' website at http://www.irs.gov.
The new law enacted by Congress applies to qualified mortgage debt forgiven in 2007, and through 2009. It may apply to debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure. According to the IRS, the debt must have been used to buy, build or to substantially improve the taxpayer's principal residence. In addition, debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing. This special relief is not available for credit cards, car loans, second homes, rental property or business property.
"Homeowners whose debt is reduced or eliminated will receive a Form 1099-C from their lender," said Bauman. "The law states that Form 1099-C must show the amount of debt forgiven and the fair market value of any property given up through foreclosure. One caveat to be aware of is that, in addition to claiming the relief and the amount of debt forgiven on Form 982, you must also show the amount of relief as a reduction to your cost basis (line 10b) as well."
For more information on the Mortgage Forgiveness Debt Relief Act, visit the IRS' website at
About JK Harris:
JK Harris & Company, LLC, (http://www.jkharris.com) based in North Charleston, S.C., is the nation's largest tax resolution firm and has served over 200,000 customers since its founding in 1997 by John K. Harris. JK Harris consultants are available to meet with consumers in over 425 locations nationwide by appointment only. The company also provides services for student loan debt, fee-based financial planning, tax return preparation, and audit representation.