If you haven’t already done your taxes time is running out, but before you submit your return you should consider whether you will face any additional liabilities. In general, there are two very important questions to ask before filing your return.
Do I owe taxes on a foreclosure or short sale?
If you are one of many unfortunate homeowners that suffered from overwhelming mortgage debt this past year, you have already had endured the stress of fighting off a foreclosure. Even if you were able to avoid foreclosure through a short sale or deed in lieu of foreclosure, you may owe the IRS money for the amount of debt forgiven by the lender. Any cancellation of debt must be reported to the IRS as income, but most of these debt cancellations on mortgage loans are eligible to be waived through the end of the tax season.
Will I owe the IRS money this tax season?
Most people never stop to think about the possibility of owing the IRS money until they see it on their return. There are several small changes that can occur throughout the year that can significantly affect your tax calculations, leaving you in tax debt. If you haven’t been planning for the worst case scenario of owing the IRS, you can still get help with your unpaid tax liabilities. The IRS offers a payment installment plan and an Offer In Compromise program to help taxpayers resolve their tax debts in a manner they can afford.