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Understanding Forms You Might Need for Your US Tax Return. Form 1099-A - Acquisition Or Abandonment Of Secured Property

Ines Zemelman, EASep-15-2016

There is most likely a tax form tower sitting on the desk, or probably just thrown on your kitchen counter - forms from banks, lenders, employers, stockbrokers, and many others. For some people, the forms will just be handed over to your tax preparer; for others, you will take the information from the forms and input it into your favorite tax software - perhaps even uttering a few four-letter words as you go. Regardless of how you intend to complete your taxes, you probably don’t know all the details about what the many letters, numbers, and other data printed on the forms mean. This is one of several posts that will change that, and help you start to understand the multitude of tax forms.

Form 1099-A, Acquisition Or Abandonment Of Secured Property

A lender issues Form 1099-A, Acquisition or Abandonment of Secured Property, when they get interest in a property meant to satisfy a debt, either fully or partially, or when they have reason to believe the property was abandoned.

For Form 1099-A purposes, property is real property (like a personal home), intangible property, or tangible property. But, this form is not for reporting property, such as a car, that is held with the intention of personal use. Note that if the property is for business, trade, or investment, even partially, then the form is required. Also, when the property in question is outside the US, and the borrower furnishes a statement to the lender that they are an exempt foreign person, reporting is not required.

Abandonment happens when the borrower intentionally and permanently abandons the property. This is determined based on the particular facts & circumstances that the lender is aware of.

This form is important because in certain circumstances, the property may need to be treated as if it was sold. Because the consequences are significant, you will want to double check the information the form reports to ensure it is reported correctly. If corrections are required, you will want to get in touch with the lender so that the corrections can be made.

Here is what a Form 1099-A usually looks like:

The Form in More Detail

The left, top, side of the form has the payer’s information, and your information is on the left, lower side of Form 1099-A. Either your full Social Security Number (SSN), or perhaps only the last couple digits, is likely to be printed there as well. Although your full SSN is required for some other forms, such as the W-2, on the 1099-A the first few digits may be eliminated to help protect your privacy. Regardless of what is printed on the form, the lender sends your complete Social Security Number with Copy A when it is sent to the IRS.

Frequently, account numbers are optional for tax forms. But, on a 1099-A they are pretty common - lenders are encouraged by the IRS to enter them in the form.

Box 1

Box 1 contains the date the lender considered the property to be abandoned, or when the property was acquired by the lender.

Box 2

Box 2 reports any amount that is owed on the date entered in the first box. Only principal is included, not foreclosure costs or accrued interest.

Box 3

Nothing will be entered in this box (Box 3) since the IRS considers it “reserved”.

Box 4

For sales (e.g., foreclosure, execution, etc.), the fair market value is entered into Box 4.

Box 5

Box 5 will be checked if you are personally liable to repay the debt. Usually, if this is the case, the lender is able to collect the debt in the future, even after they take the collateral (such as a home, for example).

Box 6

As the box says, Box 6 contains a property description. It will simply be the address for any real property. For personal property, it will be a general description such as “2012 Honda Accord”.

In Summary

If the property securing the loan is foreclosed or abandoned, and the loan is canceled, you will not get a 1099-A - you will only get a 1099-C. But, were you to get both forms, Box 4, Box 5, & Box 7 will be empty on the 1099-C. You may want to read more about 1099-C in the related article.

For information on other relevant tax forms, look for other articles in this series.

Zemelman
Ines Zemelman, EA is the founder of Taxes for Expats
She may be reached at: +1-646-397-2887