Loan Modification

Tax Fact 9-Make Sure Address Current With Mortgage Lender

By Kent Anderson, Oregon Bankruptcy Attorney

Most home lenders, banks and government agencies are required to notify you and the IRS if they cancel all or a part of your debt.  This is done by the issuance of  Form 1099-C or, at times, Form 1099-A.  By law, these forms must show the amount of debt forgiven and the fair market value of any property involved.  For this reason, Tax Fact 9 points out that it is important that you make sure your home lender has your current address, even after foreclosure.  If you have been foreclosed, it is likely you will have moved out of your home and have a new mailing address.  The post office will forward your mail, if you ask them to do so, for six or twelve months depending on the type of request you make.  However, the system is not perfect and you may not get the notice if it is sent to the wrong address.

If your home loan is foreclosed or you otherwise have debt that is cancelled, it is best if you notify the bank or home lender of your new address.  This way important tax information that has been sent to the IRS will also get to you and will not be subject to possible loss in the mail.

Even if you think your home was worth more than the amount you owed the lender at the time of the foreclosure sale, the lender may come to a different conclusion.  If your lender sends you a 1099-C that shows cancelled debt, this is the information that the IRS will receive.  If you fail to deal with it on your tax return, you may end up being assessed additional tax.

Related posts:

1. Tax Fact 7-IRS Form 982 is Important
2. Tax Fact 2-Mortgage Debt Forgiveness Exclusion Financial Limits
3. Tax Fact 8-Mortgage Debt Forgiveness for Property Not Principal Residence

Full post as published by Mortgage Law Network on March 18, 2010 (boomark / email).