Irs Debt Relief Irs Debt Relief Act

Saving Grace: IRS Debt Relief Act

Many homeowners over the last two years have gotten caught in the spiral of the disintegrating economy, losing their jobs or encountering some other type of financial difficulty that has put them in trouble with their mortgage lender. This is one of the worst situations that a person can find himself in, not only losing a source of income which radically changes life as the individual knows it, but also starts the spiral of bill collectors calling and the possibility of losing certain possessions such as the house or car. These are very frightening eventualities that every homeowner wants to avoid, especially if he or she also has a family that is under the roof of the home.

The IRS Debt Relief Act (or Mortgage Forgiveness Debt Relief Act) of 2007 was designed to help homeowners who received financial help with their mortgages to also receive a tax break on the money that was forgiven during the course of the help. This IRS mortgage debt relief was a much needed piece of legislation, since previous to this time, if an individual was forgiven five to ten thousand dollars on their mortgage, that amount of money had to be shown on his income tax return, showing that he had that much additional money as income that year. This was not helpful to that individual who was already struggling with finances, to now have a further burden of paying more taxes just because he received help on his mortgage.

Help

The IRS Debt Relief Act allowed the amount of money that was forgiven on a mortgage to be reported to the government via Form 982, but the money was not usually counted against the individual unless it was from a second home. The IRS Debt Relief Act went into effect in 2007, but it covers the tax returns for the years 2007, 2008 and 2009 at present. With the current state of the economy, the act may need to be revisited and extended, depending on what happens in the next year under a new government.

When the IRS Debt Relief Act was passed it caused quite a stir in the accounting world that year since it was passed late in the season. That meant that the accountants had to learn just how the tax law applied so that they could pass on that help to their clients. In addition, the electronic Form 982 was not available until March of 2008 so all tax returns filed before that time had to include the form in paper rather than electronically.