One redeemable quality about humans is that we tend to be more willing to loan money than borrowing it. No one really likes to borrow money, but if a friend is in need, many of us help as much as our financial means allow. When this occurs, it is important to understand that there are income tax consequences for both lenders and borrowers when interest is earned, paid or forgiven on a loan. This blog will address the tax consequences of unpaid loans.
I’m Retired And I Have Tax Debt, What Now? Part 1: Retirement Assets
Taxpayers that retire with unpaid tax debt seemingly face a grim retirement because of the thought that assets reserved and necessary for retirement will be taken by the IRS. Here is the first part of our blog on what retired taxpayers may expect in dealing with the IRS regarding certain assets such as retirement accounts.
Part 2 – What If: Debt Related Life Events And Struggling Taxpayers
If you have any type of financial difficulty, keep in mind that there’s a tax impact to events such as job loss or foreclosure. Such consequences may not necessarily be predominantly negative. For example, if your income decreased, you may be newly eligible for the Earned Income Tax Credit or other tax credits, which is a good thing.
Of the utmost importance when facing some financial obstacle is to contact the IRS immediately if you believe that you may have trouble paying your tax bill. Please see our blog You Can’t Pay Your Tax Bill in Full You Have Options…An experienced and knowledgeable tax attorney may help ease any financial burden. Remember that to avoid additional penalties, you also should always file a tax return even if you are unable to pay.
Part 1 – What If: Job Related Life Events And Struggling Taxpayers
If you have any type of financial difficulty, keep in mind that there’s a tax impact to events such as job loss or foreclosure. Such consequences may not necessarily be predominantly negative. For example, if your income decreased, you may be newly eligible for the Earned Income Tax Credit or other tax credits, which is a good thing.
Of the utmost importance when facing some financial obstacle is to contact the IRS immediately if you believe that you may have trouble paying your tax bill. Please see our blog You Can’t Pay Your Tax Bill in Full You Have Options…An experienced and knowledgeable tax attorney may help ease any financial burden. Remember that to avoid additional penalties, you also should always file a tax return even if you are unable to pay.
Marvel Entertainment And Cancellation Of Indebtedness Income
Issue
Under the tax code, when cancellation of indebtedness income excluded from gross income results in a reduction of combined net operating losses, and a business entity can carry forward this reduction to offset income in following tax years, must this net operating loss be reduced at the combined entity level or at the individual entity level?
Related Tax Rules And Regulations
Internal Revenue Code Section 108
Facts
Debt Forgiveness and the Fiscal Cliff
According to New York Tax Attorney Shamsey Oloko, if the country goes over the fiscal cliff, the average taxpayer, and the real estate industry, may feel the pain in yet another way – debt forgiveness.
Normally, if a lender forgives a portion of a loan, the beneficiary is required to pay taxes on the forgiven portion of the loan, as it would on an income.
However, in 2007, Congress passed a law, the Mortgage Forgiveness Debt Relief Act of 2007, which allowed taxpayers to avoid paying such taxes. Thus, if a lender agrees to a short sale or agrees to take less than you owe on your mortgage, you would not have to pay taxes on the unpaid balance of the loan.