The craziness that is tax-filing season 2008 continues with yet another deadline.
Mark March 3 on your calendar. That date will be important to some taxpayers able to take advantage of the Mortgage Forgiveness Debt Relief Act of 2007.
That's the new law that allows certain homeowners to exclude debt forgiven on their principal residence in cases of loan renegotiation or foreclosure. Details on the law can be found in this story (the #1 new tax statute of 2007), as well as in this previous blog entry, Tax relief for homeowners struggling to pay PI and PMI.
The bottom line is that for affected homeowners, their 2007 tax bills won't be as onerous. And now the IRS has the document such filers need to claim the tax relief.
Another new form: The IRS has issued Form 982, which you'll need to report nontaxable forgiven home loan debt.
Its official title is "Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)," and you can download a copy (instructions included) here.
In most cases, says the IRS, eligible homeowners will have to fill out just a few Form 982 lines: 1e, 2 and 10b.
The info that goes go on those lines will come from Form 1099-C, the year-end statement you should have received by now from your lender if you had any mortgage debt forgiven. By law, lenders were required to provide 1099-Cs to affected borrowers by Jan. 31.
And another filing deadline: OK, you've got your 1099-C and you're ready to sit down at your computer and crank out your tax return, taking full advantage of the new mortgage debt forgiveness law.
Whoa up there, cowboy.
Tax software users first need to make sure their program does indeed have Form 982. If you purchased the software package a while back, it won't. So make sure you get the update that contains it.
And here's a second "whoa" to consider.
The IRS isn't quite ready to handle e-filed Form 982s.
Hmmm. Sound familiar all you folks who had to wait weeks to file several AMT-affected forms?
The IRS says it is updating its systems and expects to begin accepting electronically-filed returns that include Form 982 by March 3. If that's you, you have to chillax for a bit longer.
You old-fashioned filers, though, are good to go. The IRS is now processing snail mail filed paper Form 982s.