Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many

Friday, 07 September 2007

WASHINGTON — The Internal Revenue Service unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure. The IRS also reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.

The new section of IRS.gov includes a variety of information, including a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.

The IRS urges struggling homeowners to consider their options carefully before giving up their homes through foreclosure.

Under the tax law, if the debt wiped out through foreclosure exceeds the value of the property, the difference is normally taxable income. But a special rule allows insolvent borrowers to offset that income to the extent their liabilities exceed their assets.

The IRS cautions that under the law, relief may be limited or unavailable in some situations where, for example, part or all of a home was ever used for business or rented out.

Borrowers whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from their lender. By law, this form must show the amount of debt forgiven and the fair market value of property given up through foreclosure. Though the winning bid at a foreclosure auction is normally a property’s fair market value, it may not necessarily reflect its true value in some cases.

The IRS urges borrowers to check the Form 1099-C carefully. They should notify the lender immediately if any of the information shown on their form is incorrect. Borrowers should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for their home (Box 7).

The IRS also reminds lenders of their obligation to provide accurate information on the Form 1099-C. By law, the lender must send a copy of this form to the IRS. IRS follow-up contacts with taxpayers involved in foreclosure are based largely on the information reported on this form, and whether it conflicts with information provided by the taxpayer on their federal income tax return.

The IRS normally initiates these follow-up contacts by sending the borrower a notice. The tax agency urges borrowers with questions to call the phone number shown on the notice. The IRS also urges borrowers who wind up owing additional tax and are unable to pay it in full to use the installment agreement form, normally included with the notice, to request a payment agreement with the agency.

Alabama foreclosures up 68 percent

RealtyTrac Inc. reported the number of properties in some form of foreclosure last month in the United States was the highest figure in a single month since the company began tracking them in early 2005.

The company said the country experienced a total of 243,947 properties in some form of foreclosure in August - a nearly 36 percent increase from the previous month and a more than 115 percent over August of last year. That's one foreclosure for every 510 households.

It was not quite as high in Alabama, but the numbers are still elevated for the month and year to rank it 40th in foreclosure filings in the country.

Alabama had a total of 636 properties in some form of foreclosure last month - a more than 27 percent increase over July and a nearly 68 percent over August 2006. That's one foreclosure for every 3,274 households.

"The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now," said James J. Saccacio, CEO of RealtyTrac.

Saccacio also said they've seen a "drastic" increase in bank repossessions, which means that a greater percentage of homes entering foreclosure are going back to the banks.

Nevada and California continued to have the highest rates of foreclosure in the country. Nevada had more than three times the national average in August with a total of 6,197 foreclosure filings or one for every 165 households. California had more than twice the national average with a total of 57,875, or one for every 224 households.

Other top 10 states included Florida, Georgia, Ohio, Michigan, Arizona, Colorado, Texas and Indiana, respectively.

Alabama Foreclosure Homes and Those Great Deals in Dixie

Make a choice between an urban or a rural setting for your proud purchase from among the jewels in Alabama Foreclosure Homes.

Alabama is blessed with economic growth, stable home prices, a low cost of living, and excellent value in very affordably priced homes. The rate of foreclosure filings, although up on last year, is well below the majority of other states, and finding the best of these discounted properties may take you a little time. Especially if you have a longing to move into one of those best cities to be-in the state according to some polls; Helena, Alabaster or Birmingham.

A dream home in Dixie is well within your reach. Average foreclosures sales price is around $67,000 right now, with best in the land savings recorded around 40%. Never has your first investment been so affordable, or so promising to profit!

The pre foreclosure period in Alabama is short, a foreclosure action through the courts rare, and will take between 2 to 3 months only until the sale at the courthouse. If you hanker for a property already under notice of auction sale, make sure your financing is in place before you talk to the seller, who at this stage is the borrower in default. If you don't have access to the cash, get the details of the default amount from the same excellent listings service that showed you the foreclosed property currently available in Alabama., check out other liens, and if there is some equity in that perfect place, consider assuming the loan in question.

Be aware of Alabama foreclosure law before you contemplate bidding at auction; the borrower has a right to redeem for up to 12 months.

Should you miss both opportunities by design or bad luck, cast your net a little further and seek out the big fish for southern frying in real estate owned Alabama foreclosed homes.

About the Author: Philip Smith is the writer of http://www.e-foreclosuresearch.com  Your Source of Alabama Foreclosure Homes online.

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