Northern Virginia Short Sale Sellers Need to Know the Definition of a 1099

Short sale sellers often hear the term 1099. So what exactly is a 1099?

A 1099 is a form that reports income other than wages and salary to the IRS. As a short sale seller, what can be reported to the IRS on a 1099 is the amount of forgiven debt by a lien holder. In other words, the amount not repaid, but forgiven by your mortgage holder(s) in a short sale.

When this income is reported to the IRS, you are expected to pay income tax on the money. However, many short sale sellers find tax relief in the Mortgage Debt Relief Act of 2007, that has been extended to 2012.

When considering a short sale, please consult your tax professional for information on how a 1099 can affect you.