HOW TO REPORT A FORM 1099-A ON YOUR TAX RETURN IF YOU’RE FACING FORECLOSURE FTR TAX TIP OF THE MONTH
FESTIVE APPLE CIDER
We’ve made it through the most tumultuous year in my lifetime, but COVID-19 will have long-term effects on people’s finances. This is especially true for small-business owners, who were forced to close their shops temporarily and limit the number of customers they could serve. I hate to say it, but foreclosures are coming. If you’re facing one, the transaction must be handled properly on your tax return. For most of my clients in this situation, the biggest hurdle is the Form 1099-A (Acquisition or Abandonment of Secured Property). I recently filed 2017 federal and state tax returns for a client whose home was foreclosed on by their lending institution that year. Around the same time, they also took a substantial distribution from their 401(k). The home foreclosure triggered the bank to send my client a Form 1099-A. This form can seem overwhelming, but reporting it is fairly simple if you know the right steps to take. There are two important numbers on a Form 1099-A that need to be reconciled properly on your tax return to determine if you’ll be taxed on the acquisition or abandonment of your property. These are Box 2 (Balance of Principal Outstanding) and Box 4 (Fair Market Value of Property). Typically, they will both contain dollar amounts and the number in Box 2 will be higher than the number in Box 4. If that’s the case on your form, then you’re considered “upside-down” on your mortgage in relation to the property’s fair market value. There’s also a third and even more important number, which isn’t shown on the form. That is your “Basis in the Property” — the original purchase price plus any improvements made to the property over the years. If the basis is higher than the amount in Box 2 (which is usually the case), then you don’t owe any tax on the transaction. In the rare circumstance that the basis is less than the amount in Box 2, then a further calculation is needed to determine how much tax you owe. If you receive a Form 1099-A this year and are unsure about whether you owe tax because of it (or if you have a loved one in this situation), call my office. I can help perform the necessary calculations and file your tax return correctly.
Inspired by BoulderLocavore.com
If you’re cutting back on calories, skip the eggnog and buttered rum this year and fill up your mug with this delicious mulled cider!
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2 tsp allspice berries
1 gallon pure apple cider
1 inch fresh ginger, thinly sliced
1 large orange, thinly sliced crosswise
2 tbsp honey
3 cinnamon sticks
2 tsp whole cloves
1. Using a paring knife, shave the lemon peel off in curls. Reserve the curls and save the lemon for use in a different recipe.
2. In a large slow cooker, combine the lemon peel with all other ingredients. Cook on low for 3–4 hours.
3. If desired, use a sieve to strain the spices. Serve and enjoy!
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