I owe $13,000 in taxes....help!!?

Question

My husband and I received a letter from IRS stating that we are now responsible for $13,000 taxes on an income of $64,000. We were part of a mortgage scam 6 years ago and the home was foreclosed on. The mortgage company sent the IRS a form stating that they 'forgave' our loan and now the IRS is treating it as an income. We have contacted IRS and were told to talk to someone at the mortgage company and get a corrected form that shows it was foreclosed on -not forgiven. We tried that and they told us all our records were purged from their records. They were very rude and asked us" well what do expect us to do?" What do we do now? We can't afford to pay this,and were hoping to get taxes back this year. If anyone can help us please do. Oh and if you have nothing intelligent to say please don't answer. I don't need sarcasm.

Frank A- Please contact me by e-mail. I can answer a few more questions and would love to ask more. The mortgage company NEVER sent me anything. We didn't find out anything until we had to do our taxes last year. We thought maybe it may have been a mistake,but it wasn't.

Answer 1

I might be able to help,
First of all did you recieve a 1099-A from the mortgage company or a 1099-C,
There is also a possibility that you did not recieve anything from the mortgage company at all, they just put it in as a what happened to me. .
Just as I did this past year, I filed and in December I got a letter for that the 2nd mtg co sent as a cancellation of debt and there was no way that I knew of it. they never sent it out to me otherwise it would of been included when filed, so I had to pay the interest on top of the tax owed..
If you reiceved a 1099 A the debt could of been wiped out thorugh the forclosure, if the debt was less that the Fair Market Value of the Home. and it was reported in the year it was completed. if the debt was incurred prior to 2003 your stuck., Unless you can get the information from the mortgage company still have the forclosure papers that the sheriff put on you door at the house.

If you recieved a 1099-C this is a cancellation of Debt owed,
Mortgage companys, Credit card and other companies use this as a way of writing off the debt owed and it is taken as a loss on there part,

Question 1 when was the forclosure in what year,
Question 2 when was the forgiven debt form sent to you

If the debt was incurred on a 1099 A and you can and must show proof that it was a forclosure then the $13,000 will probably be withdrawn and you will not owe any monies if the forclosure If the amount was less than the fair market value of the home. it the forclosure was the opposite you will have to pay the difference between what the mortgage company sold the home for and the balance of what you owed.. but they will not tell you that. but again it is your responsibility to prove it

if you had the papers for the forgiven debt how come it was not put and figured in the tax return for that year, I am going to guess why, You went to one of the National Tax Chains, like Block, Jackson,Hewitt, Lberty, Webb, Nationvide or someone like it. and they said to you don't worry about it, that is because theyydid not know what to do, they are really not tax preparer, they only know basics and do not get into more complicated items like a 1099C, or 1099A so they put it aside and dont use it and pow, its your responsability,
Trying to get items from mortgage companies if very difficult, they have them due to they are required to keep records for a miinumin of 3 years.but there on file for 7-10 it just that they do not want to take the time to research it and correct it. you might have to get a lawyer. for it to be served. if you cannot get satisfaction

Here is what is going to happen, that $13000 could turn out to be double or triple at the interest rate and penalties that they charge for non payment.
the interest for the last quarter of 06 and the first quarter this year to March 31, 2007 is 8%. plus 1/2 of 1% compounded daily on both.. The interest rate will definitely change com April 1, for the 2 quarter depending on the Prime., If it stays at 8% per quarter you are talking 32% compounded daily for the year.on the unpaid balance. you can set up an installment plan with the IRS but I would suggest paying $200 or more per month if you can.
but the interest and penalty will stll accrue.
If you can get a personal loan or borrow from family it would be a lot less in interest alone. 8% to 10% for the whole year. instead of each quarter.

I will check back on this next week to see your answer

Answer 2

Contact legal aide in your area for FREE legal advice. They're in the phone book. If you can't find them look up the American Bar Association office near you and call them. They can direct you to one.

Agencies are required to maintain documents for 7 years, with few exceptions. The mortgage company you are dealing with doesn't sound like they WANT to cooperate and will need to be MADE to cooperate. Legal aide can help with that. If the mortgage company has the documentation to tell the IRS your loan was forgiven they HAVE to have the paperwork to support it. File a legal claim (and suit) against the company subpeonaing all documentation (SDT) regarding the loan including the documents supporting their claim to the IRS that the loan was forgiven, not foreclosed on.

Call the mortgage company and make an appointment to see the manager. Don't deal with some schlub clerk. When they ask what it is regarding simply tell them it concerns a foreclosure and that you'll wait for the manager, then wait.

Don't loose your cool when you're dealing with them either. You're on the loosing end. If you're not satisfied with the results of your face to face with the manager find out where the parent company is and call the manager there.
As for copies of the documents they sent to the IRS and the supporting documents showing that it was a "forgiven loan" and not a foreclosure. You may have to pay copying costs for those.

If they're not forthright and willing to help you call the parent company and speak with either the manager, or president if you can determine who that person is. If they're local make an appointment to see that manager or president. If they're not local conduct a phone interview with the manager or president. They HATE complaint calls and usually jump down someones throat at the offending office. Especially if they're wrong.

What happened to your records? Didn't you keep the purchase sale/foreclosure package?Were you the only ones involved? Do others have copies and do you know how to contact them?

If it was a "scam" did the local media report on it? What reporter wrote the story and what documentation do they have? Will they share YOUR information with you?

Were the police involved? Did they take a report? Were arrests made? Are you named in the report as victims? Do they have any evidence you can subpeona? The police purge documents starting at 5 years after the close of the investigation, so call them right away if you think they were involved. You'll have to pay for those reports too. If there was a criminal case then what court did it go to? The District Attorney's office has documents as well, including the disposition of the case. The police will have their case number (different than the police number) and the court keeps paperwork forEVer.

If you can't find any documentation to support your claim, and are forced to pay, often the IRS will negotiate a settlement. You will need help to do that but it's usually cheaper than paying the whole amount.

If you can't do that they will accept payments. Set up a payment schedule and pay them over the next few years. That's better than trying to pay it all at once.

The IRS doesn't go away. Ever. They're like a bad penny. Don't put it off. Be bold when you're dealing with them and ask questions, make requests, but don't be rude or get angry. If you think you are being railroaded after your audit tell them you want to go to court. They HATE going to tax court, especially for such a small amount. They'll deal. If they won't deal, get your facts together, a cronology of events, who, what, when, where you were contacted regarding the foreclosure, any documents you can locate and an attorney. You NEVER want to go to federal tax court without an attorney or at least a CPA. Federal judges are gods. Or at least they THINK they are and they have little tolerance for people not familiar with the system. The system is more important than the product.

Good luck. It's scarey, but don't let them intimidate you, especially if you're right.

Answer 3

Looks like you need to go back to the IRS for starters. A bit of advice, keep detailed documents of all things relating to this...conversations, visits, records,efforts to seek resolution, etc. I just got out of the IRS barrel when they tried to get 12K from me. I had a document history which resulted in them calling off their attempt at collection. Ultimately, last resort, there are companies which (for a fee) will negotiate a settlement with IRS for a reduced payment. By the way, if you were victim of a scam, was there any prosecutorial action taken? If so, you may want to contact the county attorney or whomever and seek their advice. Wish I had a silver bullet...but... Good luck.

Answer 4

Definitely contact an attorney. By reporting that they forgave your loan they said they lost that money. If in truth they foreclosed and so took ownership of it then that in turn became income to them and therefore they will owe income tax on the value of the property less what money you still owed at the time of foreclosure. No company would want to admit that to the IRS. It would open them up to an audit.

Answer 5

In your case this site can be very helpful MYLOANSRATES.NET- RE I owe about 13000 in credit card debt. I earn about 300 a week and my rent is 600. Should i declare bankruptcy Hi. I have owed my creditors money for 6 months. I owe about 13000 and my monthly rent is 600. I have a total of 9 creditors. Two of them, CHASE and Bank of America, have offered to forgive about 3000 of the debt. They are willing to do this if I pay them 4000 right now. I dont have that kind of money now. I just recently became employed again. Should I declare bakruptcy or seek a consolidation agency to help me negotiate further. My family says I should declare bankruptcy but my friends say I should seek credit advisors for help. Is there anyone who has ever been bankrupt or in a similar situation.

Answer 6

Have you tried getting at tax attorney? I know, they're expensive, but it sounds like you really need more professional help than you can get on Yahoo Answers. A tax atty can fight for you, subpeona people or records, and fight for you. My attorney once told me "Don't worry. That's what you pay me to for: to worry for you" Best thing an attorney ever said to me. Good luck.

Answer 7

It is almost difficult to fight IRS, you will need to contact an attorney that takes on cases dealing with the IRS.
Sorry about your trouble

Answer 8

see previous answers I have given re unpaid taxes. See the IRS about an Offer in Compromise if you really can not pay this.

Answer 9

Get an attorney. They cannot purge records. If they wrote that to you, save that letter, do not talk to them anymore. Talk to an attorney and then get ready to pay what you do owe.

Answer 10

get a lawyer.... Also contact RESPA

http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm