IRS 1099 A Tax Form significance: Does your property have been transferred due to foreclosure? Then you need to inform the IRS whenever a property is sold or transferred. The seller receives 1099 A Form in the case of a foreclosure.
Form 1099 A is one of a series of 1099 Forms used by the IRS to report various non-wage payments and transactions. Form 1099 A is used typically when property has been transferred due to foreclosure. We’ll let you know about importance of 1099 A Form in 2020, filers of 1099 A Form, and when to file 1099 A Tax Form.
What is the importance of 1099 A Tax Form 2020?
Form 1099 A is important because in certain circumstances, the property may need to be treated as if it was sold. When the consequences are significant, you need to double check the information reported through the form to ensure that it is reported correctly or not.
A lender issues 1099 A Form, when they get interest in a property meant to satisfy debt. For Form 1099 A purposes, the property must be a real property, intangible property or tangible property. Don’t use this Form for reporting property such as a car, that is held with the intension of personal use. 1099 R Form is required to report property used for business, trade or investment.
What is an IRS 1099 A Tax Form?
IRS Form 1099 A reports the “Acquisition or Abandonment of Secured Property”. Form 1099 A is an information form that reports foreclosure on property. The IRS treats a foreclosure same as if you had sold the property. In this scenario, there is no selling price and you can calculate capital gain or losses. You might also report cancelled debt as income through 1099 A Form.
For example: If you borrowed $120,000 to purchase a property, and faced some financial difficulties through which you’re unable to make the mortgage payments. You still owed $110,000 at the time the lender foreclosed the payments and you’re no longer liable to repay it. Report the transaction to the IRS to repay the $110,000 in income to you.
1099 A Form filer details
Details of the lenders who file 1099 A Form are given below:
Multiple forms for a single property
If there are multiple forms for a single property, then file 1099 A Form on behalf of all the owners of beneficial interests. In this case, file a single form on behalf of all owners for each borrower with respect to the loan.
A government unit or any of its subsidiary agencies, that lends money secured by property must file 1099 A Form.
If more than one person lends money secured by single property and one lender forecloses and the sale terminates, the other lender must Form 1099 A for each of their loans.
Form 1099 A requirements
The requirements to file 1099 A Form are given below:
The left, top, side of the Form has the lender details. This includes name, address and telephone number of the lender.
The left, lower, side of the Form has the borrower details. This includes name, address and telephone number of the borrower.
Enter the 9-digit unique code in this box. The lender includes account number for multiple 1099 Forms with the payee.
Enter the lender and borrower TIN in the respective boxes. The TIN may be SSN or EIN respectively.
The right side of the Forms contains six boxes which are discussed below.
IRS 1099 A Form boxes information
Following are the boxes of 1099 A Tax Form:
This box contains the date the lender considered the property to be abandoned. The property may be abandoned or acquired by the lender.
Report the balance on your loan when the lender acquired the property in the box 2 of the Form. Include only principal amount. Don’t include foreclosure costs or accrued interest.
Keep the box 3 blank. Since the IRS considers it “reserved”.
Enter the fair market value of the property in the box 4. If the fair market value of the property is less than the principal amount and your debt is cancelled, then you may have cancellation of debt income. Then you should receive IRS Form 1099 C additionally.
This box shows if you were liable for the debt at the time it was created. Usually, if this is the case, the lender is able to collect the debt in future.
Enter the details of the property in box 6 of the Form. it will simply be the address for any real property.
When to file 1099 A Form?
The lenders file 1099 A Tax Form in the year following the calendar year in which you acquire interest in the property that it has be abandoned.
If you’re required to file 1099 A Form, you must provide a statement to the borrower. Furnish a copy of Form 1099 A or an acceptable substitute statement to each borrower. You’ll receive a 1099 A Tax Form when you have lost a home or other property to foreclosure. 1099 A Forms helps to determine if there is a gain or loss on the sale of the property. You may receive multiple 1099 A Forms if you have more than one mortgage or loan for a single property.1099 A Form lender calculate the gain or loss by subtracting the tax basis in the home from its fair market value.
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