New Monkey Wrench in the Deal ?

In the exchange portal, there is a "Life Change Event" button that allows you to inform the exchange of a "life change" for a particular client. Things like job loss, raises, lottery winnings, change of residence, birth, death, marriage, etc.

As part of those "Terms and Agreements" you consent to during enrollment, you said you'd inform the exchange if anything changes mid-year to ensure accurate APTC's (instead of just reconciling at tax time).

Thanks Ray....

But the issue is how is the 1099-c handled?

Its an issue that is really FAKE INCOME (not real) because the banks are forcing someone to take a 1099, when they don't want it. Its not INCOME...its a write off for the Banks. BUT they are forcing borrowers to pay tax on it...(not fair in my opinion).

Kinda of like when you refinance your home, and take cash back...That's not taxable income.

Anyway, maybe i'll give the Center a call to see how they might handle this.

Hmmm....?
 
Thanks Ray....

But the issue is how is the 1099-c handled?

Its an issue that is really FAKE INCOME (not real) because the banks are forcing someone to take a 1099, when they don't want it. Its not INCOME...its a write off for the Banks. BUT they are forcing borrowers to pay tax on it...(not fair in my opinion).

Kinda of like when you refinance your home, and take cash back...That's not taxable income.

Anyway, maybe i'll give the Center a call to see how they might handle this.

Hmmm....?

I see why you sell insurance and aren't a CPA. ;)

Forgiven debt is definitely income. It may not be earned income or even income as we think of it, but it is definitely income. This is no different than if the bank cut the borrower a check for the difference and then asked for it back to retire the debt. Debt going away or being forgiven is technically income to the recipient. Also, the fact the bank will write it off as a bad debt actually further shows it is income. The bank lost money, someone else gained.

As to your example, that is different. You are borrowing money when you take cash back at closing. It creates a debt that must be repaid. Completely different situation.

Now, whether or not it should be taxed is a question I leave for others.
 
I see why you sell insurance and aren't a CPA. ;)

Forgiven debt is definitely income. It may not be earned income or even income as we think of it, but it is definitely income. This is no different than if the bank cut the borrower a check for the difference and then asked for it back to retire the debt. Debt going away or being forgiven is technically income to the recipient. Also, the fact the bank will write it off as a bad debt actually further shows it is income. The bank lost money, someone else gained.

As to your example, that is different. You are borrowing money when you take cash back at closing. It creates a debt that must be repaid. Completely different situation.

Now, whether or not it should be taxed is a question I leave for others.

YEAH BUT (don 't you just love it when ppl say "Yeah But...")

INCOME is NOT net income (for self employed). Net Income is what counts for Obama Care.

I see why YOUR not a CPA
;)
 
I'm no CPA, so I'm just going to provide you with some of the most cut and dry IRS guidance I've ever seen:

"In general, if you are liable for a debt that is canceled, forgiven, or discharged, you will receive a Form 1099-C (PDF), Cancellation of Debt, and must include the canceled amount in gross income unless you meet an exclusion or exception...

You must report any taxable amount of a canceled debt for which you are personally liable, as ordinary income from the cancellation of debt,"

Tax Topics - Topic 431 Canceled Debt – Is It Taxable or Not? (Of course, the link has all the exclusions and exceptions listed out).

Hope this clears things up for you.
 
I'm no CPA, so I'm just going to provide you with some of the most cut and dry IRS guidance I've ever seen:

"In general, if you are liable for a debt that is canceled, forgiven, or discharged, you will receive a Form 1099-C (PDF), Cancellation of Debt, and must include the canceled amount in gross income unless you meet an exclusion or exception...

You must report any taxable amount of a canceled debt for which you are personally liable, as ordinary income from the cancellation of debt,"

Tax Topics - Topic 431 Canceled Debt – Is It Taxable or Not? (Of course, the link has all the exclusions and exceptions listed out).

Hope this clears things up for you.


Thanks Ray,....yes, i've seen that page.

It comes under the second bullet point paragraph 2.
  • Cancellation of qualified principal residence indebtedness

Like i said at the beginning of my Thread, this debt has been cancelled (if that is the right word), through 2014.

2015 is the question that congress, the house, the senate and OBAMA are working on as we speak.

Guess this is a question for the CPA's to figure out WHEN the administration gives their final stamp of approval. Its been extended by Congress, but held up by Obama. According to what i've read, its an elaborate bill that has loopholes for Big Biz too and Obama wants to make sure the middle class gets their break too.

Guess we'll just have to wait and see...

Thank you!
 
Tony,

I presume you're referring to H.R. 3856, the bill that's supposed to extend that exclusion (which died in 2013) by 2 years, through 2015.

https://www.govtrack.us/congress/bills/113/hr3856 for the bill/info.

I wouldn't hold my breath...It's been in committee for 12 months already, and the window for enacting this for the 2014 tax year is fast closing. Expect your client to be claiming that income.
 
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