Information on Tax Form 1099-A

A 1099-A could affect your income tax return.

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If your house or other property was foreclosed or repossessed by the mortgage holder or lender, you'll get a Form 1099-A. The IRS requires this from lenders to report acquisition or abandonment of secured property. It is simply to notify the IRS the property was foreclosed or reacquired. The tax implications will depend on the circumstances.

1099-A Is Informational

A 1099-A does not mean your debt was canceled, only that property has been foreclosed or repossessed. Box 2 of 1099-A will show the outstanding loan balance, and Box 4 shows the fair market value at the time of foreclosure. One of these figures will determine any tax liability. If you get a 1099-A, you have to report it when you file your income tax.

Debt Cancellation

If the foreclosure resulted in a cancellation of your debt or mortgage on the property, you should also get a 1099-C, Cancellation of Debt. That's the key document, because it will tell you and the IRS how much debt was canceled, which will be treated as income to you. You may owe taxes on forgiveness of any debt over $600. If you get a 1099-C, you report only that and not the 1099-A.

Debt Forgiveness

You may be able to exclude part or all of the 1099-A and 1099-C amount on your principal residence under the Mortgage Forgiveness Debt Relief Act of 2007. You'll have to review specific rules in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonment and Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. A debt cancellation due to bankruptcy or insolvency will not be taxable.

Other 1099-A Uses

You also could get a 1099-A for disposal of business or investment property, such as a rental house or a company car. You'll have to follow instructions and use worksheets in Publication 4681 to calculate any tax liability in these cases. A 1099-A in farm situations also comes under special regulations dealt with in that publication. Often much of the debt in these situations can be excluded from income for tax purposes.