Because of the foreclosure crisis, the Internal Revenue Services have decided to
give some relief to home owners that are facing foreclosure to make it easier and
possible to refinance or sell their primary residences.
The Internal Revenue Service is now expediting the “subordination” process for
federal tax liens, now what this means is basically allowing the new mortgage
holder to be in first position and the tax lien would move to second position.
Otherwise, especially in refinance transactions the Tax Lien would have to be
paid in full and released before the home owner would actually refinance. This
move by the internal revenue service is much needed in today’s market, as real
estate values plummet and there is little if any equity left for home owners to
refinance or do a traditional real estate sale.
This new approach by the internal revenue service can sometimes mean the
difference between the home owner and their family losing their home to
foreclosure or refinancing to lower their payments, where the home is now
affordable and they can continue to live there.
Now for home owners that are deciding to sell and move on, can also benefit
from this new IRS program. If a home owner has little or no equity, the tax lien
could be a road block in the selling process, but in this case the internal revenue
service will discharge the tax lien so the sale can be completed.
Now it is important to note that the IRS is not forgiving these back taxes that are
owed by the home owner, but instead they are no longer requiring that these
federal tax liens be paid off before the property is refinanced or sold. The IRS
now understands the concept that bad things happen to good people, as this
program was developed to help home owners that have a history of paying their
taxes on time and in full, but have found themselves in a predicament because of
the current economy.
Another great program from the Internal Revenue Service is the Mortgage
Forgiveness Debt Relief Act, which was enacted in 2007. This act only applied
to primary residences, but it makes home owners exempt from paying taxes on
“forgiven debt.” Now this is especially important as most home owners that need
to sell in today’s market will have to do a short sale and if they cant sell, then
they will end up in foreclosure. Either one of these cases will present the home
owner with a significant amount of forgiven debt, in excess of $100,000. Most
home owners that are in this situation are not even use to paying taxes on
anywhere near this amount, but more closer to 30,000 – 40,000. So a short sale
or foreclosure could create significant debt for home owners, but not anymore,
thanks to the Mortgage Forgiveness Debt Relief Act. I do recommend that you
speak to your tax advisor, as everyone situation is different.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in Florida FHA Mortgage Loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Florida Loss Mitigation. If you would like a Free Copy Article Source:http://www.articlesbase.com/mortgage-articles/uncle-sam-gives-a-break-to-distressed-home-owners-1006660.html
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