i sold my house in 2006,i had a goverment loan from rhs..i still ended up around 10 thousand short?

Question

so when i do my taxes,how will it effect me?And what forms do i turn in when i do my taxes. Will this be used as income against me even though i didnt pay my loan off by 10 thousand dollars. I had to sell before foreclosure this was best deal.Plus i fell short in my payments to the governement so i owe them around 800 they will garnishment from my return.I worked alot of over time this year it pushed me in a higher tax brackets scared i will owe for once,i do have a son that i claim. I know i can ask my tax person tomorrow , but i want to know right now,,thanks

Answer 1

If you currently owe taxes from a previous year, then any refund you get for 2006 will be offset by the amount you owe, plus penalties and interest.

If you sold your house in 2006 and a debt was cancelled because the proceeds of the house did not cover your mortgage, you have a cancelled debt. You will receive a 1099C from the lender and the amount of cancelled debt is taxable income to you. You need this form to do your return but it is not included with your return.

If you owned and lived in the house for two of the past five years, the money received from the sale is not taxable. Show the closing documents to your tax preparer, but there will probably not be additional tax forms involved.