Will I pay Taxes On My Short Sale Deficiency ?

By
Real Estate Agent with Keller Williams 414-525-0563

    A question we often get from our Short Sale Sellers is: What are the tax consequences of doing a short sale?  We come from the school of "know what you don't know and refer to someone who does"....and don't hand out legal advice...suggest tax or accounting methods...however.....what we do suggest is that sellers who have done a short sale use a professional to do their tax returns if they have not done that in the past.
   form 982 Sometimes...not always....our sellers get a 1099 form from the lender or lenders who approved their short sale in the amount of the deficiency that they were not charged when the sale closed.  We give our short sale sellers as much information as we can when we list the home inclusive of handouts, web links, resources from other sources.  It is, at best, a confusing time of life with lots of activity, decisions to make, a move to prepare for....and sometimes what we said, what we gave them and links we mailed, get lost in the fray of the experience.  Months later...the 1099 arrives and we get emails and calls....how do I prepare taxes or what do I do with this 1099...I don't remember that you said we would pay taxes...
   First.....we have a list of accounting experts throughout the counties that we cover that we suggest our sellers use to prepare their return and offer any other advice that may be needed concerning their tax situation.  Next....we have learned that many accounting people...because short sales are not as common here as they are other places, are not aware of the federal government's 982 form.  This form basically is a verification that, at the time the short sale was closed, the seller was insolvent.  As a result, for the time that the government deems this form can be included with tax returns, it relieves the tax payer/short sale seller from paying tax on the amount of the deficiency.calculator

    Know what you don't know...we don't do taxes and hope accountants don't do short sales...we do recommend that the sellers/taxpayers take a copy of this form with them to their tax preparer....just in case....they don't know.
 
u  If you know anyone, anywhere, who is unable to pay their mortgage..please have them give us a call....we are happy to refer them to a professional from our nationwide network who can help them make an informed decision on how best to handle their situation.
     

Posted by

Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS

Sally K. & David L. Hanson  

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Show All Comments
Rainmaker
1,353,856
Kristin Johnston, Waukesha Realtor 414-254-6647
RE/MAX Realty Center - Waukesha, WI
Waukesha County Realtor, RE/MAX Buyer Agent

Great advice as always guys!  I actually need some from you and will email you shortly.....thanks!

January 16, 2011 10:18 AM #1
Rainmaker
449,587
Patty Da Silva, Davie, Southwest Ranches Cooper City, Plantation, Weston, REALTOR
BROKER of Green Realty Properties® - 954-667-7253 - Davie, FL
Top Listing Broker

Sally - Form 982 can be a friend to a short sale seller... so can a CPA... I too advise my sellers to speak with a CPA or a tax attorney.

January 18, 2011 09:52 AM #2
Rainmaker
431,885
Richard Yates
Mission Viejo, CA
Broker and Realtor Orange County, California

Sally and David, Your entire blog is just the perfect follow-up to your exceptional profile.  I see lots of great articles which appear to be all from YOU.  I have featured you on my recent post and hope that everyone will CHECK YOU OUT.  Best wishes, Richard

January 18, 2011 02:56 PM #3
Rainmaker
1,362,149
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Short Sale - CDPE, REDS

thank you Richard....whenever I need a kick in the ego...i will call u !

January 18, 2011 04:40 PM #4
Anonymous
Anonymous
Anonymous

Sound advise.

January 18, 2011 05:17 PM #5
Rainmaker
1,362,149
Sally K. & David L. Hanson
Keller Williams 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Short Sale - CDPE, REDS

thank u !

January 18, 2011 07:29 PM #6
Rainmaker
591,694
Laura Giannotta
Keller Williams Realty - Atlantic Shore - Little Egg Harbor, NJ
Your Realtor Down the Shore!

You nailed it Hanson's!  Great information, and I love your saying we know what we know, and what we don't know!  

January 19, 2011 09:20 AM #7
Anonymous
Anonymous
Anonymous

Now you’ve done gone and reminded me that it’s a new year for taxes. Seems like I just finished last year’s. Oh, wait. I did. Maybe I won’t postpone them to October 15 this year. That might work. J

January 21, 2011 12:41 AM #8
Rainmaker
1,623,489
Dorie Dillard
Coldwell Banker United Realtors - Austin, TX
Realtor-Canyon Creek- NW, Austin TX Homes For Sale

Good morning,

I like your statement "Know what you don't know and refer it to the professional! Good post!

January 22, 2011 06:59 AM #9
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Rainmaker
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Sally K. & David L. Hanson

WI Realtors - Luxury - Short Sale - CDPE, REDS
For All Things Wisconsin Real Estate...Call the Hansons
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