Irs Debt Relief Irs Tax Debt Relief

Finding a Solution with IRS Tax Debt Relief

IRS tax debt relief has been a big help to millions of Americans who have needed help with their mortgages during the last two years. Since the economy has been on the decline, and the housing market was hit really hard, many home owners have found themselves in danger of losing their homes due to a financial hardship. Lenders were also losing money at a frightening rate since the home owners were not able to make their payments on time or not able to make payments at all. In order to provide some help in this area, the legislature passed the IRS Debt Relief Act (or Mortgage Forgiveness Debt Relief Act) of 2007. The legislation was passed very late in the year so that it made accountants scramble to understand the new law and also acquire the paperwork needed to help their clients obtain the IRS tax debt relief provided under the new laws.

Help for the Helpless

Historically, if a homeowner was provided help from their lender, getting some payments forgiven or the home refinanced at a lower rate, the government would tax the money that was saved in the deal as additional income for that person. This was not helpful at all to a person that was already having financial difficulty to have a higher tax bracket purely because they received help with their mortgage. In order to help with this problem, the IRS tax debt relief was created so that the money that was saved or forgiven through the help of the mortgage company was no longer counted in most cases as extra income.

This does not mean that the amount forgiven or refinanced is not reported to the government. There is a form called the Form 982 that is used to process this information. This form was not available to be used in an electronic version until March of 2008, which put accountants in a bind since they do most of the tax preparation online. There are some exceptions to the IRS tax debt relief, such as if the person obtained the debt forgiveness on a second home, or if the amount is above the price of the original debt, then the amount is not excluded. There are also some cases in which forgiven debt may not qualify for the IRS tax debt relief in most cases, but if the individual is insolvent, meaning he or she is upside down, having more liabilities than assets, then the IRS tax debt relief will still come into play for that person. Most software programs for tax preparation now have this included within it, but individuals who are in the situation should look for it so that they do not miss a tax break.