Utlizing The IRS Debt Relief Solutions

For the past two years, millions of Americans found help with their mortgages through the IRS tax debt relief. With the current economic crisis hitting the housing market really hard, many home owners are threatened with losing their homes due to financial hardships. Lenders were also losing money at a devastating 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 industry, 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, and it made accountants jostle to understand the new law and also to acquire the necessary paperwork to help their clients obtain the IRS tax debt relief provided under the new laws.

Help for the Helpless

Traditionally, if a homeowner was provided help from their lender, getting some payments forgiven or the home refinanced at a lower rate, the government would in turn tax the money that was saved in the deal as additional income for that person. Posing a higher tax bracket due to the extended help would tend to be impractical since the person is already suffering from financial difficulties. 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.

However, 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 in an electronic version until March of 2008, and at that time accountants had a hard time 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 the forgiven debt may not qualify for the IRS tax debt relief, but if the individual is insolvent, meaning he or she is bankrupt, 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.