I lost my home. Now I received a 1099 from my mortgage lender

People who lose their homes in foreclosure, abandon them or give them back to their lenders will receive a Form 1099-C Cancellation of Debt because the lender has forgiven a portion of the debt.

The forgiven amount is the difference between the amount owed on the mortgage and the value of the home. Prior to 2007, consumers had to pay federal taxes on the forgiven amount.

Self-Employment Income this year? Here's how to report it.

Schedule C is the form to use when reporting Self-Employment and business income.

All income pertaining to the business is reported. Expenses are subtracted from income to determine if there is a gain (profit) or loss. The net profit or loss is entered on line 12 of Form 1040. If a taxpayer owns and operates more than one business activity, file a separate Schedule C for each business. Combine the profits and losses on Form 1040 line 12 if there is more than one Schedule C.

If net earnings from self-employment are $400 or more, the taxpayer must file an income tax return. If net earnings from are less than $400, the taxpayer may still have to file a return and would still report the net earnings.

We're selling our house. What taxes do we owe?

Taxpayers can exclude gains from the sale of your personal residence up to $250,000 ($500,000 married filing jointly) if all the following are true:

• You meet the ownership test – owned the home for at least 2 years
• You meet the use test - lived in the home as your main home for at least 2 years
• During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

Report the gain from the sale on line 8 of Schedule D (use Form 1099-S if you received one). Then on line 9 of Schedule D, write "Section 121 exclusion" in column (a) of that line and show the amount of the exclusion in column (f) as a loss in parentheses.
For more information please see IRS Publication 523, Selling Your Home (.pdf).

What to bring to your tax interview

Make sure you bring the following items to your interview:

Personal Information for each family member:

• Date of Birth
• Social Security Card (SSN) or Individual Tax ID Number (ITIN) card
• Last Year's Tax Return
• Valid Driver's License or State ID
• Proof of Bank routing and account numbers for Direct Deposit any refunds

Income and Tax Information

• W-2's
• Interest (1099-INT or substitute)
• Dividend Slips (1099-DIV or substitute)
• Stock Sales (1099-B or Broker Statement) - don't forget to bring the receipt detailing what you paid for the stock.
• Self-Employment Income and Expenses

Get organized

The sooner you get organized, the sooner you may receive your refund. Take time today to gather all of your receipts, credit card and bank statements and anything you have spent money out of pocket. Put these documents in a folder or box so you can keep track for tax purposes. You can organize your files in the following categories:

• Income – pay stubs, bank and investment statements
• Medical – expenses and out of pocket premiums
• Donations – cash and non-cash
• Real Estate – Mortgage statements, property tax payments, settlement statement if you're a first-time home buyer in 2010 and have not yet claimed the credit.
  
• Child Care – receipts, provider's address and EIN
• Tax Correspondences – Ohio and Local Estimated statements
• Student Loans – tracks loan interest
• Payments – receipts for tax deductions
• Mileage Log - needed if you use your personal vehicle for work

During January you will receive the following documents in the mail and you'll be able to file these into their respective categories:

• W-2's
• 1099's
• Mortgage interest statements
• Bank interest statements
• Real estate tax statements
• Investment statements
• Receipts for charitable donations

Taking time now will have it easier to prepare this year's return. Here are the IRS record keeping guidelines.

Today is the first day to e-file

The Internal Revenue Service will begin accepting 2010 electronically filed tax returns today. Taxpayers who wish to apply for Refund Anticipation Loans can receive a check as early as Monday January 17.

If you're ready to make an appointment, make sure you bring the following items to your interview:

• Valid photo ID
• Social Security Number (SSN) or Individual Tax ID Number (ITIN) cards for everyone shown on the tax return including dependents.
• Birth dates of all dependents
• Bank information to Direct Deposit any refunds
• Any tax-related papers: W-2's, 1099's, mortgage interest statements (Form 1098), bank interest statements, real estate tax statements, investment statements, and receipts for charitable donations and child care
  

Debt relief = Taxable Income

Have you negotiated with a creditor to pay less than you owe on a debt such as a credit card? The IRS considers forgiven or canceled debt as taxable income.

You hear the commercials all the time: Companies that negotiate on behalf of consumers with debt collectors to pay off a portion of their outstanding debts. Several months later, these consumers receive a Form 1099-C. Creditors who accept at least $600 less than the original balance are required by law to issue this form to the debtor and the IRS.

If you're negotiating with a collector to settle a debt, clarify if a Form 1099-C will be issued and the exact amount that will be reported to the IRS. Make sure you bring the Form 1099-C along with W-2s and other forms when you visit your tax preparer. If the 1099-C is incorrect, contact the debt collector immediately and ask for a corrected 1099-C form.

In most cases, Form 1099-C is reported on line 21 of the Form 1040 long form and is included as ordinary income.

So what did happen to my Capital Gains Tax Cuts?

Investors who enjoyed a huge increase in their portfolio in 2010 will see some relief at income tax time.

Due to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on December 17, 2010, several of the Bush era tax cuts were extended two more years including the Capital Gains Tax cuts.

For tax years 2010-2012 the rate on capital gains is 0% on capital gains if you find yourself in the 10% or 15% tax bracket. This will allow you sell assets for a profit tax-free. Your 2010 taxable income – gross income minus exemptions and deductions – can't exceed $34,000 for individuals or $68,000 for married couples filing jointly.

If your taxable income is above these amounts, your capital gains tax rate is 15%. The tax rate is figured after including the capital gains in your income. The tax rate on capital gains and the tax rate on other ordinary income is figured separately.

Tax break for the unemployed

Unemployment compensation includes benefits to unemployed taxpayers that a state paid from the Federal Unemployment Trust fund. These benefits are reported on Form 1099-G (pdf.) and must be included on line 19 of Form 1040.

For 2009, taxpayers are able to exclude the first $2,400 of these benefits when they file their tax return. For a married couple, the exclusion applies to each spouse separately. If both received unemployment income in 2009, each would be able to exclude the first $2,400 of their income.

Those who are currently receiving benefits can use Form W-4V (.pdf) to have federal taxes withheld.

Sell your stock and pay zero taxes

For tax year 2009 the rate on capital gains is 0% on capital gains if you find yourself in the 10% or 15% tax bracket. This will allow you sell assets for a profit tax-free. Your 2009 taxable income – gross income minus exemptions and deductions – can't exceed $33,950 for individuals or $67,900 for married couples filing jointly.
If your taxable income is above these amounts, your capital gains tax rate is 15%. The tax rate is figured after including the capital gains in your income. The tax rate on capital gains and the tax rate on other ordinary income is figured separately.