Author Starts Forgive Our Taxes Organization After Being Unable to Pay Tax Bill After Being Forced to Sell Her Home in Default – from Gini Graham Scott

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Author Gini Graham Scott has launched a new Forgive Our Taxes organization for those who similarly can't pay their taxes after selling a home in foreclosure or losing a job or business, and then are unable to start over, because a tax debt can’t be discharged for three years in a bankruptcy. In creating this organization, Scott expresses the plight of millions of homeowners and other once successful people hurt by the Great Recession, who face a hurdle to starting again, because of high taxes based on their past success, though they are struggling now.

Letter to IRS and Franchise Tax Board

"People forced to sell their homes or those who have lost their job or business and are now struggling should be forgiven their taxes to help them get back on their feet."

Gini Graham Scott has just founded the Forgive Our Taxes organization to work towards a bill to forgive the taxes of former homeowners struggling to get back on their feet after selling their homes under threat of foreclosure. The bill is also designed to help others who have high taxes based on past successes but now they are struggling too, becuase they have lost their jobs or businesses. The Forgive Our Taxes website is and there is a Facebook page for causes and community:

Scott was inspired to create the organization after sending a letter to the IRS and the Franchise Tax Board in California describing the devastating consequences of being hit by a federal and state tax bill after thinking she could start again with the small proceeds from selling her house. Then in April, she discovered the big tax bill, since taxes are not based on the proceeds from a sale, but on the difference between a home’s sales price and the original purchase price, less the cost of the sale. Thus, any long-term homeowner is likely to face this problem because of the increased value of the house, even if it was underwater when sold. As Scott wrote in her letter to the IRS and Franchise Tax Board:

“Currently, my tax returns show me owing $1799 to the IRS and $6306 to the State of California. However, I am not in a position to pay either tax.

“The high tax is because I sold my house, though I paid no taxes before due to high expenses for my business as a writer. I sold my house, because I was forced into defaulting on my mortgage, since three credit card companies – the Bank of America, Wells Fargo, and CitiCards – reduced my credit line by $40,000, though I had been paying my credit card charges regularly for nearly 20 years. They reduced my credit line because they judged the loan to value ratio too high, since I had been borrowing on these cards to supplement the lower income I experienced for a few years due to the Great Recession. Then, just as I was starting to get back on my feet, I lost this access to credit and sold my house as an alternative to letting it go into foreclosure and filing for bankruptcy, while staying there as long as I could.

“But now, just as I was getting ready to start over, I got a tax bill for $8000, which could wipe me out and put me out on the street, since I am in a business that is very unpredictable. I work primarily as a writer, mostly of books, and the publishing industry has gone through a great upheaval. I had been planning to file for bankruptcy, since the mortgage meltdown resulted in my not being able to pay about $90,000 in credit card debts. But now with the tax bill, I can’t file for bankruptcy, since taxes can’t be discharged for three years. And I can’t afford to pay you now, since I am between clients and am earning less than the cost of my rent and other basic monthly expenses.

“It may be that once I have my tax returns corrected by another tax preparer, I will not owe you anything. But otherwise, I can’t afford an $8000 payment for taxes now, since I am too close to the edge and need that money as a safety net to keep from falling off, until my business increases again to where it was before I lost my house.”

As Scott observed in sending this letter, placing such taxes on homeowners already forced to sell their homes due to the foreclosure mess is like sticking a knife into an already open wound, since such homeowners are already in a financial bind due to the economic upheaval. Then, the following year, they are hit with a big tax bill – and they can’t use a bankruptcy to clear their debts, since the taxes can’t be discharged for three years. So for anyone struggling to survive after the economic meltdown, the taxes owed to the IRS and state can be what pushes them under.

The big problem occurs for anyone who sells a house worth substantially more than the original purchase price, even though the house is in default or underwater, since the taxable amount is based on the difference between the current and original sales price, less allowable deductions, such as $250,000 for an individual or $500,000 for a couple. The taxes aren’t based on what one clears from the sale after the mortgage and equity line are deducted. Likewise, once successful individuals who have lost their job or their business due to the economic upheaval may be haunted by taxes on past earnings they can’t discharge in a bankruptcy for three years, making it hard for them to get back on their feet and start again.

In response to this situation, Scott has started a new organization: “Forgive Our Taxes” or (FOT) to advocate for new federal and state legislation to help former homeowners and others who are now struggling due to a job or business loss. The legislation is designed to discharge their taxes like any other debts in a bankruptcy or through a qualifying petition describing their situation. This way, they can start again, without the specter of a huge bill haunting them for the rest of their life.

Since starting the organization, Scott has begun meeting with government officials in the State Assembly, State Senate, and Congressmen, beginning with Walt Donner in the office of 19th Distrct Assemblymember Phil Ting. The plan is to use the website, Facebook page, and media to gain support for the passage of bills to be introduced later this year.

Scott’s experience in dealing with the mortgage mess is described in her book: Living in Limbo: From the End to New Beginnings. Now she is considering another book dealing with taxes and bankruptcy, and the millions of homeowners facing this problem. The crisis also inspired a series of short documentaries: Middle Class Homeless: Families in Trouble and Middle Class Homeless: The Crisis as well as two music videos: Bad, Bad Banks and Credit Card Rap.

Gini Graham Scott is the founder of Changemakers Publishing and Writing

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