We all know how tough the financial and job worlds have been since 2008. Fortunately, for some, there have been some benefits to help weather the storm. Unemployment compensation has been extended several times to provide a minimum lifeline to people who have lost their jobs and are having a really hard time finding a new one.
Some have had some or all of their credit card debt cancelled by the card provider. Some have received adjustments to their mortgage, reducing the principal and/or interest rates. For some, the only way to get out from under the burden of a mortgage was to have their home foreclosed by the lender.
What many, maybe most, of these people may not realize is that are income tax implications in all the above situations. Unemployment compensation is considered taxable income when you file your Federal return. It is also treated as income on most state returns - definitely in Georgia. Debt cancelled by a credit card provider is also considered income when you file your tax return.
Special treatment for mortgages and foreclosures are not as clear. Congress passed the Mortgage Forgiveness Debt Relief Act of 2007 to give taxpayers some relief from taxes when they received special reduced mortgage benefits or when their home was foreclosed. If you fall into this category, you may need professional help when you prepare your tax return.
For free assistance in preparing your taxes, consider the AARP Tax-Aide Program. Volunteers around the country are available to prepare and electronically file tax returns for free. Try them first. Later this month, you can find a site near you on this page - AARP Foundation Tax-Aide Program.