I Taught An Accountant Something...Tax Tip If You Had A 2011 Short Sale
"Hi Dawn,
Thanks again! Thought I would update you,,,,, it might give you a chuckle. So my accountant said that he would challenge any real estate agent to teach him about taxes.... Well I guess he owes you a continuing ed fee or something because he had no clue about the form and then he emailed me back and said no because it wasn't a primary residence. So I asked him about the insolvency and I got three emails back, probably not, maybe, and I think we can. Needless to say I think I am just going to call H&R Block. Over the past few years I have been amazed at how many people claim to be professionals and have no idea about the field they represent.
Thanks again for taking the time to help me out. You have really done a lot and you always have my referral."
This is the email I received today after helping my client whose short sale was closed in 2011.
She called me earlier in the day about the 1099C form she received after her short sale last year. Her accountant was upset with her and her agent (yours truly) for not looking into this more, thanks to the tax liability she was now facing, according to him. He told her he had never heard of such a thing, and he dismissed a few other agents who had previously mentioned it.
I'm not an accountant, and I advise clients to speak to their CPA about tax liabilities after a short 
sale BEFORE we embark on the long journey to closing. There are times when a short sale is not the best option, even though often it is a great opportunity - it just depends on each person’s situation.
I also direct them to this IRS website: http://www.irs.gov/newsroom/article/0,,id=205004,00.html
There they will find directions on how to handle their tax liability after their Ohio short sale. Usually their accountant already knows all about this...but obviously not in every case!
If you need to do a short sale on your primary residence, you are covered (with some exceptions) by the Mortgage Debt Forgiveness Act of 2007, which was extended to December 2012. Again, I'm not an accountant, but it is pretty clear who qualifies and who doesn't.
I don't know if this protection will be extended after December 2012, but it is in force now. The tax relief has been a huge blessing for many of my clients.
If you are not short selling your primary residence, and you are experiencing financial difficulties, you may qualify for tax relief if you are insolvent. Again, see the link and speak to a knowledgable tax professional.
It's not everyday that I get to teach an accountant something – I’m just glad I know the current rules for my clients!
I Taught An Accountant Something...Tax Tip If You Had A 2011 Short Sale
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