Underwater homeowners face a tax time bomb


IMPORTANT | Underwater homeowners face a tax time bomb

IMPORTANT | Underwater homeowners face a tax time bomb

Don’t light the cigarette and don’t bother putting on your clothes, the bankers and the government aren’t quite through with you yet!


On Dec. 31, underwater homeowners could be hit with a huge tax bill, unless Congress moves to help them

The letter from Bank of America Home Loans got right to the point. “We are pleased to inform you that we have approved your Home Equity Account for participation in a principal forgiveness program offered as a result of the Department of Justice and State Attorneys General global settlement with major mortgage servicers.” In the letter, which I obtained from an anti-foreclosure activist, Bank of America offered the homeowner full forgiveness of their entire home equity loan balance of over $177,000. But then Paragraph 5 came with an ominous warning: “Please be aware that we are required to report the amount of your cancelled principal debt to the Internal Revenue Service.”

Under current law, a principal reduction like this would be exempted from tax liability. However, that law, the Mortgage Forgiveness Debt Relief Act, expires at the end of the year, and after that, any mortgage debt forgiveness provided to a borrower will count as gross income for tax purposes, potentially costing millions of families several billion dollars. In the above case, the borrower would be required to pay taxes on the entire $177,000 amount forgiven by the bank, as if it were earned income. And that’s money that struggling homeowners simply don’t have.


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One Response to “IMPORTANT | Underwater homeowners face a tax time bomb”

  1. County Guard says:

    Simply tell the illegal, non-government agency… the IRS… to drop dead. Ignore this tax fraud on your so-called “income” which isn’t defined by the IRS, (It isn’t wages, salary or compensation for services) and ignore the bootleg 1040 form (according to the courts). Just stop playing “taxpayer” and voluntarily self-assessing yourselves. Write the IRS, and ask them for the law that makes you liable for the 1040 form, what “income” is, where their jurisdiction is provided in the law over state citizens (as compared to federal 14th Amendment fraud citizens), and tell them you rescind your signature on every 1040 form you’ve ever filed because you now know what the law states and that you now believe you are not liable for the “income” tax. Create a paper trail…


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