If IRS has sent a notice for the 2008 tax period, you can be saved by mortgage forgiveness on that year. Generally, forgiven mortgage sum is to be added as income and the income in turn will be taxable. But, because this mortgage is a primary residence, we can apply a tax debt relief in this case. Taxpayer might apply for relief of a tax debt if mortgage forgiveness was granted that same year.
As IRS claims, any mortgage debt that was forgiven partially or entirely anytime within the years 2007-2012 might claim for tax relief. This is a one-time relief for a federal income tax return that same year mortgage debt was forgiven. If there has not been declaration and a tax debt was identified at that time, reporting this would be helpful. And this fact must be included in the amended tax returns for that year.
IRS has acknowledged the difficulties that homeowners experience when trying to save primary residence from foreclosure. If they succeed, money saved from mortgage forgiveness is not in fact liquid to be declared as income. That’s why, a tax debt relief will be justified. Moreover, the period of recession is as well a factor that must be recognized for giving such relief.
The amount of debt forgiven is limited up to $2 million for principal residence. If individuals that are married file for tax return independently they can split the amount up to $1 million. You can’t apply this claim to secondary homes, business property, credit card loans and car loans.