I received 1099-c form for a house that went on foreclosure in 2008. On the form under “Amount Debt cancelled” it has $187.294.48. Under “fair market value of property” it has $ 184,000.00. This house went on foreclosure because my loan was 2year fix on the 3year my interest increased and my house value decreased so I was not able to refinance or do anything about it. I tried contacting my lender several time to help me and they kept saying that they couldn’t do anything to help me because I was upside down my loan (Chase home loan). I received this 1099-C form from them. When we bought this home we got the 80/20 loan. I was told that out 20% loan was charged off.(what ever that means). Should I be concern on line 6 they have us as bankruptcy. I called them to let them know we didn’t go on bankrupt. I was told that this was not reported to the IRS as bankruptcy that this was the closes option they had on they drop box that they didn’t have a foreclosure option. What I don't understand is that the same form I got was sent to IRS. How are they saying that is was not reported that way. Something doesn't look right, this doesn't make sense. I was told to tell the IRS to call them and confirm that this foreclosure was not because of bankruptcy. Please help. What should I do? What do I need to with this form? I wasn’t aware of this 1099-C until a friend of mine told me about it. I barely received this form yesterday 03/10/10 and that was because I called them to ask for it. This house went on foreclosure on 2008.

The good news is that thanks to the Mortgage Forgiveness Debt Releif Act of 2007, if this debt forgiveness was for a mortgage on your principal home it may not be taxable, even though you didn't declare bankruptcy. You will need to file form 982 to document this: http://www.irs.gov/pub/irs-pdf/f982.pdf
Also, see: The Mortgage Forgiveness Debt Relief Act and Debt Cancellation (http://www.irs.gov/individuals/article/0,,id=179414,00.html)

Don't worry about the bankruptcy note on the form - if in fact the foreclosure had been a result of bankruptcy they never not have sent you a 1099-C as debt forgiveness under bankruptcy is not taxable. Just complete the above form and be done with it.

Great! Is this form 982 something I can fill out myself or would it be better if I pay a professional to do it for me? I appreciate your help.

The form looks complicated, but it's pretty simple. Read the directions, and you'll see that if this is a qualified principal residence then all you need do is check line 1e and enter the amount of the debt forgiveness on line 2. Done.

One more thing is house was in California. We now live in Kansas would that make any difference at all? On your above message by saying "not be taxable". Does that mean that I don't owe anythign to the IRS? Thanks.

Location of the house doesn't matter. All that matters is that the house was your principal residence.

Yes - "not taxable" means no taxes are due on it. So you do not include the $187,294 as income on your 1040. But you do have to include the form 982 with your return so that the IRS knows you're not trying to hide income from them.

If this house was under my husbands name but we file our taxes joint. Would I only put his name on the form as it appears on the 1099-c form or my name too? Also on line 2. I would enter the "amount of debt canceled" that's on the 1099 form, right? Then just sign and mail to IRS ?We've already filed our taxes for 2009. This 1099-c is tax year 2008.

That's a relief to know this. I was clueless and stressing over it. Thank you again for all the information you’re providing me. I will do as you said.

For all forms that go with your 1040 you put both tax payer's name at the top, and the "primary" SSN.

However, since this is a 2008 1099-C form, and since you owe no additional taxes for 2008, I think you may as well just ignore the whole thing for now. If you do ignore it, in a year or so it's possible that the IRS could contact you for an explanation. If that happens you would respond with a letter explaining that you did not receive the 1099-C until 2010, and that you are exempt from taxes on the debt forgiveness as this was for your principal residence.

If you're uncomfortable just leting this hang unresolved, you could file a 1040-x (amended return) for 2008, and include the form 982. But since no additional tax is due this seems to me to be over-kill.

If I do decide on sending the 1040-x form for 2008 just to be on the safe side would I send a copy of the 1099-C with it?

It wouldn't hurt to include a copy, but it's not actually required. Keep the original.