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2011 1040ez Instructions

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2011 1040ez Instructions

2011 1040ez instructions Publication 80 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Future Developments For the latest information about developments related to Publication 80 (Circular SS), such as legislation enacted after it was published, go to www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/pub80. 2011 1040ez instructions What's New Social security and Medicare tax for 2014. 2011 1040ez instructions  The social security tax rate is 6. 2011 1040ez instructions 2% each for the employee and employer, unchanged from 2013. 2011 1040ez instructions The social security wage base limit is $117,000. 2011 1040ez instructions The Medicare tax rate is 1. 2011 1040ez instructions 45% each for the employee and employer, unchanged from 2013. 2011 1040ez instructions There is no wage base limit for Medicare tax. 2011 1040ez instructions Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. 2011 1040ez instructions Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. 2011 1040ez instructions Change of responsible party. 2011 1040ez instructions . 2011 1040ez instructions  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. 2011 1040ez instructions Form 8822-B must be filed within 60 days of the change. 2011 1040ez instructions If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. 2011 1040ez instructions For a definition of “responsible party”, see the Form 8822-B instructions. 2011 1040ez instructions Same-sex marriage. 2011 1040ez instructions  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 2011 1040ez instructions For more information, see Revenue Ruling 2013-17, 2013-38 I. 2011 1040ez instructions R. 2011 1040ez instructions B. 2011 1040ez instructions 201, available at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/irb/2013-38_IRB/ar07. 2011 1040ez instructions html. 2011 1040ez instructions Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. 2011 1040ez instructions Notice 2013-61, 2013-44 I. 2011 1040ez instructions R. 2011 1040ez instructions B. 2011 1040ez instructions 432, is available at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/irb/2013-44_IRB/ar10. 2011 1040ez instructions html. 2011 1040ez instructions Reminders Additional Medicare Tax withholding. 2011 1040ez instructions  In addition to withholding Medicare tax at 1. 2011 1040ez instructions 45%, you must withhold a 0. 2011 1040ez instructions 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2011 1040ez instructions You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2011 1040ez instructions Additional Medicare Tax is only imposed on the employee. 2011 1040ez instructions There is no employer share of Additional Medicare Tax. 2011 1040ez instructions All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 2011 1040ez instructions For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Employment and Payments , in section 12. 2011 1040ez instructions For more information on Additional Medicare Tax, visit IRS. 2011 1040ez instructions gov and enter “Additional Medicare Tax” in the search box. 2011 1040ez instructions Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. 2011 1040ez instructions  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. 2011 1040ez instructions Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. 2011 1040ez instructions For more information, visit IRS. 2011 1040ez instructions gov and enter “work opportunity tax credit” in the search box. 2011 1040ez instructions Outsourcing payroll duties. 2011 1040ez instructions  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. 2011 1040ez instructions The employer remains responsible if the third party fails to perform any required action. 2011 1040ez instructions If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. 2011 1040ez instructions gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. 2011 1040ez instructions Residents of the Philippines working in the Commonwealth of the Northern Mariana Islands (CNMI). 2011 1040ez instructions  The IRS will not assert that an employer has understated liability for social security and Medicare taxes because they failed to treat services performed before January 1, 2015, in the CNMI by a resident of the Philippines as employment as defined under Internal Revenue Code section 3121(b). 2011 1040ez instructions For more information, see Announcement 2012-43, 2012-51 I. 2011 1040ez instructions R. 2011 1040ez instructions B. 2011 1040ez instructions 723, available at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/irb/2012-51_IRB/ar15. 2011 1040ez instructions html. 2011 1040ez instructions CNMI government employees now subject to social security and Medicare taxes. 2011 1040ez instructions  Beginning in the fourth calendar quarter of 2012, CNMI government employees are subject to social security and Medicare taxes. 2011 1040ez instructions COBRA premium assistance credit. 2011 1040ez instructions  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008 and May 31, 2010, and to premiums paid for up to 15 months. 2011 1040ez instructions See COBRA premium assistance credit in Publication 15 (Circular E), Employer's Tax Guide. 2011 1040ez instructions You can get Publication 15 (Circular E) at IRS. 2011 1040ez instructions gov. 2011 1040ez instructions You must receive written notice from the IRS to file Form 944. 2011 1040ez instructions  If you have been filing Forms 941-SS and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941-SS, you must contact the IRS to request to file Form 944. 2011 1040ez instructions You must receive written notice from the IRS to file Form 944 instead of Forms 941-SS before you may file this form. 2011 1040ez instructions For more information on requesting to file Form 944 visit IRS. 2011 1040ez instructions gov and enter “file employment taxes annually” in the search box. 2011 1040ez instructions Federal employers in the CNMI. 2011 1040ez instructions  The U. 2011 1040ez instructions S. 2011 1040ez instructions Treasury Department and the CNMI Division of Revenue and Taxation entered into an agreement under 5 USC 5517 in December 2006. 2011 1040ez instructions Under this agreement, all federal employers (including the Department of Defense) are required to withhold CNMI income taxes (rather than federal income taxes) and deposit the CNMI taxes with the CNMI Treasury for employees who are subject to CNMI taxes and whose regular place of federal employment is in the CNMI. 2011 1040ez instructions Federal employers are also required to file quarterly and annual reports with the CNMI Division of Revenue and Taxation. 2011 1040ez instructions For questions, contact the CNMI Division of Revenue and Taxation. 2011 1040ez instructions Change of address. 2011 1040ez instructions  Use Form 8822-B to notify the IRS of an address change. 2011 1040ez instructions Do not mail Form 8822-B with your employment tax return. 2011 1040ez instructions Federal tax deposits must be made by electronic funds transfer. 2011 1040ez instructions  You must use electronic funds transfer to make all federal tax deposits. 2011 1040ez instructions Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2011 1040ez instructions If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2011 1040ez instructions Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2011 1040ez instructions EFTPS is a free service provided by the Department of Treasury. 2011 1040ez instructions Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2011 1040ez instructions For more information on making federal tax deposits, see How To Deposit in section 8. 2011 1040ez instructions For more information about EFTPS or to enroll in EFTPS, visit the EFTPS website at www. 2011 1040ez instructions eftps. 2011 1040ez instructions gov or call 1-800-555-4477 (U. 2011 1040ez instructions S. 2011 1040ez instructions Virgin Islands only) or 303-967-5916 (toll call) or 1-800-733-4829 (TDD). 2011 1040ez instructions Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 2011 1040ez instructions Electronic filing and payment. 2011 1040ez instructions  Using electronic options can make filing a return and paying your federal tax easier. 2011 1040ez instructions Use the Electronic Federal Tax Payment System (EFTPS) to make deposits or pay in full, whether you rely on a tax professional or prepare your own taxes. 2011 1040ez instructions You can use IRS e-file to file certain returns. 2011 1040ez instructions If there is a balance due on the return, you can e-file and e-pay in a single step by authorizing an electronic funds withdrawal (EFW) from your bank account while e-filing. 2011 1040ez instructions Do not use EFW to pay taxes that are required to be deposited. 2011 1040ez instructions Visit the IRS website at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/efile for more information on filing electronically. 2011 1040ez instructions For more information on paying your taxes using EFW, visit the IRS website at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/e-pay. 2011 1040ez instructions A fee may be charged to file electronically. 2011 1040ez instructions For EFTPS, visit www. 2011 1040ez instructions eftps. 2011 1040ez instructions gov or call EFTPS Customer Service at 1-800-555-4477 (U. 2011 1040ez instructions S. 2011 1040ez instructions Virgin Islands only) or 303-967-5916 (toll call). 2011 1040ez instructions For electronic filing of Forms W-2AS, W-2CM, W-2GU, W-2VI, Wage and Tax Statements; W-3SS, Transmittal of Wage and Tax Statements; and W-2c, Corrected Wage and Tax Statement, visit www. 2011 1040ez instructions socialsecurity. 2011 1040ez instructions gov/employer. 2011 1040ez instructions If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. 2011 1040ez instructions If a valid EIN is not provided, the return or payment will not be processed. 2011 1040ez instructions This may result in penalties and delays in processing your return or payment. 2011 1040ez instructions Electronic option for filing Forms W-2AS, W-2CM, W-2GU, or W-2VI. 2011 1040ez instructions  Employers in American Samoa, the CNMI, Guam, and the U. 2011 1040ez instructions S. 2011 1040ez instructions Virgin Islands can now use the Social Security Administration's W-2 Online service to create, save, print, and submit up to 50 Forms W-2AS, W-2CM, W-2GU, or W-2VI at a time over the Internet. 2011 1040ez instructions Form W-3SS will be generated automatically based on your Forms W-2AS, W-2CM, W-2GU, or W-2VI. 2011 1040ez instructions For more information, visit Social Security Administration's SSA website at www. 2011 1040ez instructions ssa. 2011 1040ez instructions gov/bso/bsowelcome. 2011 1040ez instructions htm. 2011 1040ez instructions Credit or debit card payments. 2011 1040ez instructions  For information on paying your taxes with a credit or debit card, visit the IRS website at www. 2011 1040ez instructions irs. 2011 1040ez instructions gov/e-pay. 2011 1040ez instructions However, do not use credit or debit cards to make federal tax deposits. 2011 1040ez instructions Hiring new employees. 2011 1040ez instructions  Record the number and name from each new employee's social security card. 2011 1040ez instructions An employee who does not have a social security card should apply for one on Form SS-5, Application for a Social Security Card. 2011 1040ez instructions See section 3. 2011 1040ez instructions Reporting discrepancies between Forms 941-SS (or Form 944) and Forms W-2. 2011 1040ez instructions  File Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, to explain certain wage, tax, and payment discrepancies between Forms 941-SS (or Form 944), and Forms W-2 that were caused by acquisitions, statutory mergers, or consolidations. 2011 1040ez instructions For more information, see the Instructions for Schedule D (Form 941). 2011 1040ez instructions Apply for an employer identification number (EIN) online. 2011 1040ez instructions  You can apply for an EIN online by visiting IRS. 2011 1040ez instructions gov and clicking on the Apply for an EIN Online link under Tools. 2011 1040ez instructions Dishonored payments. 2011 1040ez instructions  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. 2011 1040ez instructions The penalty is $25 or 2% of the payment, whichever is more. 2011 1040ez instructions However, the penalty on dishonored payments of $24. 2011 1040ez instructions 99 or less is an amount equal to the payment. 2011 1040ez instructions For example, a dishonored payment of $18 is charged a penalty of $18. 2011 1040ez instructions Private delivery services. 2011 1040ez instructions  You can use certain private delivery services designated by the IRS to send tax returns or payments. 2011 1040ez instructions The list includes only the following: DHL Express (DHL): DHL Same Day Service. 2011 1040ez instructions Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 2011 1040ez instructions United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 2011 1040ez instructions M. 2011 1040ez instructions , UPS Worldwide Express Plus, and UPS Worldwide Express. 2011 1040ez instructions For the IRS mailing address to use if you are using a private delivery service, go to IRS. 2011 1040ez instructions gov and enter “private delivery service” in the search box. 2011 1040ez instructions Your private delivery service can tell you how to get written proof of the mailing date. 2011 1040ez instructions Private delivery services cannot deliver items to P. 2011 1040ez instructions O. 2011 1040ez instructions boxes. 2011 1040ez instructions You must use the U. 2011 1040ez instructions S. 2011 1040ez instructions Postal Service to mail any item to an IRS P. 2011 1040ez instructions O. 2011 1040ez instructions box address. 2011 1040ez instructions Recordkeeping. 2011 1040ez instructions  Keep all records of employment taxes for 4 years. 2011 1040ez instructions These should be available for IRS review. 2011 1040ez instructions There is no required format for such records, but they should include your EIN; the amounts and dates of all wage payments (including fringe benefits) and tips reported; the names, addresses, and occupations of employees receiving such payments and their social security numbers; copies of returns filed; dates of employment; and the dates and amounts of deposits made. 2011 1040ez instructions Farm employers must keep a record of the name, permanent address, and EIN of each crew leader. 2011 1040ez instructions See Farm Crew Leaders in section 2. 2011 1040ez instructions Disregarded entities and qualified subchapter S subsidiaries (QSubs). 2011 1040ez instructions  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. 2011 1040ez instructions Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. 2011 1040ez instructions See Regulations sections 1. 2011 1040ez instructions 1361-4(a)(7) and 301. 2011 1040ez instructions 7701-2(c)(2)(iv). 2011 1040ez instructions Photographs of missing children. 2011 1040ez instructions  The IRS is a proud partner with the National Center for Missing and Exploited Children. 2011 1040ez instructions Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2011 1040ez instructions You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2011 1040ez instructions Calendar   If any date for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. 2011 1040ez instructions A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. 2011 1040ez instructions However, a statewide legal holiday does not delay the due date of federal tax deposits. 2011 1040ez instructions See Deposits on Business Days Only in section 8. 2011 1040ez instructions For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 2011 1040ez instructions S. 2011 1040ez instructions Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. 2011 1040ez instructions See Private delivery services under Reminders. 2011 1040ez instructions The following are important dates and responsibilities. 2011 1040ez instructions Also see Publication 509, Tax Calendars. 2011 1040ez instructions By January 31. 2011 1040ez instructions   Furnish wage and tax statements to employees. 2011 1040ez instructions Give each employee a completed Form W-2AS, W-2CM, W-2GU, or W-2VI. 2011 1040ez instructions See section 10 for more information. 2011 1040ez instructions File Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, with the IRS. 2011 1040ez instructions If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. 2011 1040ez instructions U. 2011 1040ez instructions S. 2011 1040ez instructions Virgin Islands employers only must file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. 2011 1040ez instructions Pay or deposit (if more than $500) any balance of the tax due. 2011 1040ez instructions If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. 2011 1040ez instructions File Form 944 with the IRS if you were notified by the IRS to file Form 944 instead of quarterly Forms 941-SS. 2011 1040ez instructions If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. 2011 1040ez instructions By February 28. 2011 1040ez instructions  File paper wage and tax statements with the Social Security Administration (SSA). 2011 1040ez instructions File Copy A of Forms W-2AS, W-2CM, W-2GU, or W-2VI, and Form W-3SS with the Social Security Administration (SSA). 2011 1040ez instructions For electronically filed returns, see By March 31 next. 2011 1040ez instructions By March 31. 2011 1040ez instructions  File electronic Forms W-2AS, W-2CM, W-2GU, or W-2VI with the SSA. 2011 1040ez instructions Visit the SSA's Reporting Instructions & Information webpage at www. 2011 1040ez instructions socialsecurity. 2011 1040ez instructions gov/employer for more information. 2011 1040ez instructions By April 30, July 31, October 31, and January 31. 2011 1040ez instructions  File Form 941-SS with the IRS. 2011 1040ez instructions If you deposited the full amount of taxes when due, you have 10 additional calendar days to file. 2011 1040ez instructions Do not file Forms 941-SS for these quarters if you have been notified to file Form 944 and you did not request to file quarterly Forms 941-SS. 2011 1040ez instructions Deposit FUTA tax for the quarter (including any amount carried over from other quarters) if over $500. 2011 1040ez instructions If $500 or less, carry it over to the next quarter. 2011 1040ez instructions See section 11 for more information. 2011 1040ez instructions Prev  Up  Next   Home   More Online Publications
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Federal Housing Administration (FHA)

FHA provides mortgage insurance on single-family, multifamily, manufactured home, and hospital loans made by FHA-approved lenders throughout the United States and its territories.

Contact the Agency or Department

Website: Federal Housing Administration (FHA)

E-mail:

Address: 451 7th St., SW
Washington, DC 20410

Toll-free: 1-800-225-5342

TTY: 1-877-833-2483

The 2011 1040ez Instructions

2011 1040ez instructions Internal Revenue Bulletin:  2013-7  February 11, 2013  Rev. 2011 1040ez instructions Proc. 2011 1040ez instructions 2013-16 Table of Contents SECTION 1. 2011 1040ez instructions PURPOSE SECTION 2. 2011 1040ez instructions BACKGROUND—HAMP AND THE HAMP PRINCIPAL REDUCTION ALTERNATIVE SECTION 3. 2011 1040ez instructions BACKGROUND—APPLICABLE PROVISIONS OF LAW SECTION 4. 2011 1040ez instructions FEDERAL INCOME TAX TREATMENT SECTION 5. 2011 1040ez instructions INFORMATION-REPORTING OBLIGATIONS SECTION 6. 2011 1040ez instructions HAMP-PRA BORROWERS’ REPORTING OF DISCHARGES OF INDEBTEDNESS UNDER HAMP-PRA SECTION 7. 2011 1040ez instructions PENALTY RELIEF FOR 2012 SECTION 8. 2011 1040ez instructions SCOPE AND EFFECTIVE DATE SECTION 9. 2011 1040ez instructions DRAFTING INFORMATION SECTION 1. 2011 1040ez instructions PURPOSE This revenue procedure provides guidance to mortgage loan holders, loan servicers, and borrowers who are participating in the Department of the Treasury’s (Treasury) and Department of Housing and Urban Development’s (HUD) Home Affordable Modification Program® (HAMP®). 2011 1040ez instructions Under HAMP, a borrower may be eligible for principal reduction of the outstanding balance of a qualifying mortgage pursuant to the program’s Principal Reduction AlternativeSM (PRA). 2011 1040ez instructions In appropriate cases, HAMP has been offering the PRA as part of a HAMP loan modification since the last quarter of 2010. 2011 1040ez instructions Current plans call for HAMP to continue accepting new borrowers through the end of 2013. 2011 1040ez instructions The Internal Revenue Service (Service) is providing this guidance to address the tax consequences for borrowers (HAMP-PRA borrowers) who are participating in the PRA and the reporting obligations for participating mortgage loan holders and servicers. 2011 1040ez instructions SECTION 2. 2011 1040ez instructions BACKGROUND—HAMP AND THE HAMP PRINCIPAL REDUCTION ALTERNATIVE . 2011 1040ez instructions 01 To help distressed borrowers lower their monthly mortgage payments, Treasury and HUD established HAMP for mortgage loans that are not owned or guaranteed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). 2011 1040ez instructions A description of the program can be found at www. 2011 1040ez instructions makinghomeaffordable. 2011 1040ez instructions gov. 2011 1040ez instructions . 2011 1040ez instructions 02 Under HAMP, a participating loan servicer, acting on behalf of the mortgage loan holder, must consider a sequence of modification steps for each eligible borrower’s mortgage loan until the borrower’s monthly payment is reduced to a monthly payment amount determined under the HAMP guidelines. 2011 1040ez instructions These steps include a reduction in the mortgage loan’s interest rate, an extension of the mortgage loan’s term, and a reduction in the mortgage loan’s principal balance. 2011 1040ez instructions . 2011 1040ez instructions 03 In some cases, the unpaid principal balance of the modified mortgage loan is divided into (1) an amount that bears stated interest and that is used to calculate the borrower’s new monthly mortgage payment (the “Non-forbearance Portion”), and (2) a forbearance amount, which does not bear stated interest and on which periodic payments of stated principal are not required. 2011 1040ez instructions The stated principal of the forbearance amount is due upon the earliest of the borrower’s transfer of the property, payoff of the balance on the Non-forbearance Portion of the mortgage loan, or maturity of the mortgage loan. 2011 1040ez instructions However, as noted in section 2. 2011 1040ez instructions 06 of this revenue procedure, a HAMP-PRA borrower sometimes may not have to pay all or a portion of the forbearance amount. 2011 1040ez instructions (The forbearance amount associated with a HAMP-PRA principal reduction is called the “PRA Forbearance Amount. 2011 1040ez instructions ”) . 2011 1040ez instructions 04 If a mortgage loan is being considered for a HAMP modification and the amount owed on the mortgage loan is greater than 115 percent of the value of the property, then the servicer must consider whether principal reduction under PRA should be used as part of the HAMP modification. 2011 1040ez instructions . 2011 1040ez instructions 05 The first step toward a HAMP modification is a trial period plan, in which the borrower’s monthly mortgage payment is set at a monthly payment amount determined under the HAMP guidelines. 2011 1040ez instructions The trial period plan effective date is the due date for the first of the reduced payments that are to be made under the trial period plan. 2011 1040ez instructions (It is the first day of either the first or the second month after the servicer transmits the trial period notice to the borrower. 2011 1040ez instructions ) In general, the trial period is three months, and, during this period, the borrower must satisfy certain conditions before the changes to the terms of the mortgage loan become permanent (the “Trial Period Conditions”). 2011 1040ez instructions Specifically, depending on the borrower’s trial period payment history, the borrower’s compliance with HAMP and servicer guidelines, and his or her satisfaction of all other Trial Period Conditions, the borrower will be offered a permanent modification of the terms of the mortgage loan, including monthly mortgage payments that are lower than those under the old mortgage loan. 2011 1040ez instructions Until the effective date of a permanent modification, the terms of the existing mortgage loan continue to apply. 2011 1040ez instructions . 2011 1040ez instructions 06 After the mortgage loan is permanently modified under HAMP, if the modified mortgage loan is in good standing on the first, second, or third annual anniversary of the trial period plan effective date (the “Three-year Period”), the servicer must reduce the unpaid principal balance of the mortgage loan on the respective anniversary date by one-third of the initial PRA Forbearance Amount. 2011 1040ez instructions (The servicer allocates the entire reduction to the remaining PRA Forbearance Amount. 2011 1040ez instructions ) In general, if a HAMP-PRA borrower’s mortgage loan is in good standing and if the HAMP-PRA borrower pays in full the Non-forbearance Portion of the mortgage loan prior to the reduction of the entire PRA Forbearance Amount, the servicer must reduce the remaining outstanding principal balance of the mortgage loan by the remaining PRA Forbearance Amount. 2011 1040ez instructions . 2011 1040ez instructions 07 In connection with every HAMP loan modification, the HAMP program administrator (acting on behalf of the federal government) provides incentives to the borrower, the servicer, and the investor (that is, the holder of the mortgage loan). 2011 1040ez instructions If a HAMP loan modification includes a PRA principal reduction, the HAMP program administrator makes additional incentive payments to the investor. 2011 1040ez instructions These additional incentives are called “PRA Investor Incentive Payments” and are generally spread over three years. 2011 1040ez instructions The size of the PRA Investor Incentive Payments depends on the amount of principal reduced, the loan-to-value ratio at the time of the HAMP modification, and the loan’s payment history before the modification. 2011 1040ez instructions The PRA Investor Incentive Payments range from 18 to 63 percent of the principal amounts reduced. 2011 1040ez instructions For purposes of this revenue procedure, the excess of the initial PRA Forbearance Amount of a mortgage loan over the aggregate PRA Investor Incentive Payments scheduled to be paid with respect to that loan is called the “PRA Adjusted Forbearance Amount. 2011 1040ez instructions ” . 2011 1040ez instructions 08 A PRA Investor Incentive Payment is earned by the investor on each date on which the servicer reduces the unpaid principal balance of the mortgage loan by a portion of the PRA Forbearance Amount (generally, on the first three annual anniversaries of the trial period plan effective date). 2011 1040ez instructions . 2011 1040ez instructions 09 If a HAMP-PRA borrower’s early payment in full of the Non-forbearance Portion of the mortgage loan accelerates the reduction of the remaining PRA Forbearance Amount (described above in section 2. 2011 1040ez instructions 06 of this revenue procedure), the remaining PRA Investor Incentive Payments from the HAMP program administrator are also accelerated. 2011 1040ez instructions . 2011 1040ez instructions 10 If, prior to completion of the Three-year Period, a mortgage loan ceases to be in good standing because of the HAMP-PRA borrower’s payment history, then the remaining PRA Forbearance Amount is not further reduced and is due when the HAMP-PRA borrower transfers the property, the HAMP-PRA borrower refinances, or otherwise pays off the Non-forbearance Portion of the mortgage loan, or the mortgage loan matures. 2011 1040ez instructions SECTION 3. 2011 1040ez instructions BACKGROUND—APPLICABLE PROVISIONS OF LAW . 2011 1040ez instructions 01 Under § 61 of the Internal Revenue Code, except as otherwise provided in subtitle A, gross income means all income from whatever source derived, including income from discharge of indebtedness. 2011 1040ez instructions See § 61(a)(12). 2011 1040ez instructions . 2011 1040ez instructions 02 Under § 1. 2011 1040ez instructions 1001-3 of the Income Tax Regulations, if a debt instrument undergoes a significant modification, then the modification results in an exchange of the original debt instrument for the modified debt instrument. 2011 1040ez instructions In general, an agreement to change a term of a debt instrument is a modification at the time the borrower and holder enter into the agreement, even if the change in term is not immediately effective. 2011 1040ez instructions However, if the change is conditioned on reasonable closing conditions, a modification occurs on the closing date of the agreement. 2011 1040ez instructions See § 1. 2011 1040ez instructions 1001-3(c)(6). 2011 1040ez instructions . 2011 1040ez instructions 03 Under § 108(e)(10), in the case of a debt-for-debt exchange (including a deemed exchange under § 1. 2011 1040ez instructions 1001-3), the borrower is treated as having satisfied the original debt instrument with an amount of money equal to the issue price of the new debt instrument. 2011 1040ez instructions If the amount of debt satisfied in this manner exceeds that issue price, the borrower realizes discharge of indebtedness income on the exchange. 2011 1040ez instructions See also § 1. 2011 1040ez instructions 61-12(c). 2011 1040ez instructions . 2011 1040ez instructions 04 The issue price of a non-publicly traded debt instrument issued for non-publicly traded property generally reflects the amount of principal that the borrower is required to pay to the holder of the instrument. 2011 1040ez instructions If a borrower has the ability to avoid paying certain amounts (including principal) without violating the terms of the instrument, the payment schedule for the instrument is generally determined based on an assumption that the borrower will avoid any requirement to make those payments. 2011 1040ez instructions See, e. 2011 1040ez instructions g. 2011 1040ez instructions , §§ 1. 2011 1040ez instructions 1272-1(c)(5) and 1. 2011 1040ez instructions 1274-2(d). 2011 1040ez instructions . 2011 1040ez instructions 05 Under § 108(a), gross income does not include any amount that but for § 108(a) would be includible in gross income by reason of the discharge (in whole or in part) of a taxpayer’s indebtedness if (1) the indebtedness discharged is qualified principal residence indebtedness that is discharged before January 1, 2014, or (2) the discharge occurs when the taxpayer is insolvent. 2011 1040ez instructions Section 108(a)(1)(E) and 108(a)(1)(B). 2011 1040ez instructions (Although § 108 contains other exclusions as well, this revenue procedure focuses on these two exclusions because they are the most likely to apply to the greatest number of HAMP-PRA borrowers. 2011 1040ez instructions ) . 2011 1040ez instructions 06 Under §§ 108(h) and 163(h)(3)(B), qualified principal residence indebtedness is any indebtedness that is incurred by a borrower to buy, build, or substantially improve the borrower’s principal residence and is secured by that residence. 2011 1040ez instructions . 2011 1040ez instructions 07 Qualified principal residence indebtedness also includes a loan secured by the borrower’s principal residence that refinances qualified principal residence indebtedness, but only to the extent of the amount of the refinanced indebtedness. 2011 1040ez instructions See §§ 108(h) and 163(h)(3)(B)(i). 2011 1040ez instructions . 2011 1040ez instructions 08 The maximum amount of discharged indebtedness that a borrower may exclude from gross income under the qualified principal residence indebtedness exclusion is $2,000,000 ($1,000,000 for a married individual filing a separate return). 2011 1040ez instructions Under § 108(h)(4), if only part of the discharged indebtedness is qualified principal residence indebtedness, then the exclusion applies only to the amount of the discharged indebtedness that exceeds the amount of the loan (determined immediately before the discharge) that is not qualified principal residence indebtedness. 2011 1040ez instructions . 2011 1040ez instructions 09 Under § 108(a)(3), the insolvency exclusion applies to the lesser of the amount of the debt discharged or the amount by which the taxpayer is insolvent immediately before the discharge. 2011 1040ez instructions . 2011 1040ez instructions 10 Section 108(d)(3) provides that, for purposes of the insolvency exclusion, a taxpayer is insolvent to the extent that the taxpayer’s total liabilities exceed the fair market value of all of the taxpayer’s assets immediately before the discharge of indebtedness. 2011 1040ez instructions Under § 108(a)(2)(C), the qualified principal residence indebtedness exclusion takes precedence over the insolvency exclusion when both exclusions apply to discharged indebtedness, unless the taxpayer elects to apply the insolvency exclusion. 2011 1040ez instructions . 2011 1040ez instructions 11 If an amount is excluded from gross income as a discharge of qualified principal residence indebtedness, the taxpayer must reduce the basis of the taxpayer’s principal residence. 2011 1040ez instructions See § 108(h)(1). 2011 1040ez instructions If a discharged amount is excluded from gross income because the taxpayer was insolvent when the discharge occurred, the taxpayer must reduce certain tax attributes (possibly including basis). 2011 1040ez instructions See § 108(b). 2011 1040ez instructions For further discussion of income from the discharge of indebtedness, the qualified principal residence indebtedness exclusion, the insolvency exclusion, and other exclusions from gross income that may apply, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). 2011 1040ez instructions . 2011 1040ez instructions 12 Taxpayers who exclude any discharged amounts from gross income report both the exclusion and the resulting reduction in basis or other tax attributes on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). 2011 1040ez instructions See Form 982 instructions and Publication 4681. 2011 1040ez instructions This form is to be filed with the tax return for the taxable year in which the amount is discharged but is excluded from gross income. 2011 1040ez instructions . 2011 1040ez instructions 13 Governmental payments made to or on behalf of individuals or other persons are included within the broad definition of gross income under § 61 unless an exception applies. 2011 1040ez instructions See Notice 2003-18, 2003-1 C. 2011 1040ez instructions B. 2011 1040ez instructions 699, and Rev. 2011 1040ez instructions Rul. 2011 1040ez instructions 79-356, 1979-2 C. 2011 1040ez instructions B. 2011 1040ez instructions 28. 2011 1040ez instructions However, if disbursements are made by a governmental unit to individuals in the interest of the general welfare (that is, are generally based on individual or family need) and the disbursements do not represent compensation for services, then the amounts disbursed are excluded from the income of the recipient (general welfare exclusion). 2011 1040ez instructions See Rev. 2011 1040ez instructions Rul. 2011 1040ez instructions 2005-46, 2005-2 C. 2011 1040ez instructions B. 2011 1040ez instructions 120, and Rev. 2011 1040ez instructions Rul. 2011 1040ez instructions 75-246, 1975-1 C. 2011 1040ez instructions B. 2011 1040ez instructions 24. 2011 1040ez instructions . 2011 1040ez instructions 14 Under § 451 and § 1. 2011 1040ez instructions 451-1(a), a taxpayer that uses the cash receipts and disbursements method of accounting includes income in gross income when the taxpayer actually or constructively receives the income. 2011 1040ez instructions . 2011 1040ez instructions 15 Section 6041 requires every person engaged in a trade or business (including the United States and its agencies) to (1) file an information return (Form 1099-MISC, Miscellaneous Income, is used for this purpose) for each calendar year in which the person makes, in the course of its trade or business, payments to another person of fixed or determinable income aggregating $600 or more, and (2) furnish a copy of the information return to that other person. 2011 1040ez instructions See § 6041(a) and (d) and § 1. 2011 1040ez instructions 6041-1(a)(1) and (b). 2011 1040ez instructions . 2011 1040ez instructions 16 Section 6050P requires applicable entities (including the United States and its agencies, financial entities, and any organization a significant trade or business of which is the lending of money) to (1) file an information return (Form 1099-C, Cancellation of Debt, is used for this purpose) for each calendar year in which it discharges indebtedness of another person of $600 or more, and (2) furnish a copy of the information return to that other person. 2011 1040ez instructions See § 6050P(a)-(c) and §§ 1. 2011 1040ez instructions 6050P-1(a) and 1. 2011 1040ez instructions 6050P-2(a) and (d). 2011 1040ez instructions . 2011 1040ez instructions 17 Section 6721 imposes penalties with respect to information returns required to be filed with the Service. 2011 1040ez instructions These penalties apply in the case of a failure to timely file an information return, a failure to include all required information on the return, or the inclusion of incorrect information on the return. 2011 1040ez instructions Section 6724(d)(1) includes Forms 1099-MISC and 1099-C in the term “information return. 2011 1040ez instructions ” . 2011 1040ez instructions 18 Section 6722 imposes penalties with respect to payee statements required to be furnished to payees. 2011 1040ez instructions These penalties apply in the case of a failure to timely furnish a payee statement, a failure to include all required information on the statement, or the inclusion of incorrect information on the payee statement. 2011 1040ez instructions Section 6724(d)(2) includes in the term “payee statement” copies of Forms 1099-MISC and 1099-C that are required to be furnished to taxpayers. 2011 1040ez instructions SECTION 4. 2011 1040ez instructions FEDERAL INCOME TAX TREATMENT . 2011 1040ez instructions 01 Because a HAMP modification with a PRA principal reduction is a significant modification, it results in a deemed debt-for-debt exchange in which the HAMP-PRA borrower satisfies the old mortgage loan by issuing a new one. 2011 1040ez instructions See § 1. 2011 1040ez instructions 1001-3. 2011 1040ez instructions At the time of the modification, therefore, under § 108 and this revenue procedure, the HAMP-PRA borrower realizes discharge of indebtedness income equal to any excess of the adjusted issue price of the old mortgage loan (which was satisfied in the deemed exchange) over the issue price of the new (post-modification) mortgage loan. 2011 1040ez instructions See also § 61(a)(12) and § 1. 2011 1040ez instructions 61-12(c). 2011 1040ez instructions . 2011 1040ez instructions 02 A HAMP-PRA borrower has the ability to avoid payment of the PRA Adjusted Forbearance Amount. 2011 1040ez instructions Because the HAMP-PRA borrower has this ability, that amount should not be taken into account in determining the issue price of the new mortgage loan. 2011 1040ez instructions Because the issue price of the new mortgage loan does not include the PRA Adjusted Forbearance Amount, the PRA Adjusted Forbearance Amount contributes to the excess of the adjusted issue price of the old mortgage loan (which was satisfied in the deemed exchange) over the issue price of the new mortgage loan. 2011 1040ez instructions . 2011 1040ez instructions 03 On the other hand, the investor has not given up its right to receive the remainder of the PRA Forbearance Amount, because the HAMP program administrator is expected to make those payments on the HAMP-PRA borrower’s behalf by making the PRA Investor Incentive Payments. 2011 1040ez instructions Because the remainder of the PRA Forbearance Amount is payable in this manner, that remainder is included in the issue price of the new mortgage loan. 2011 1040ez instructions . 2011 1040ez instructions 04 The Trial Period Conditions are reasonable closing conditions that must be satisfied before the changes to the terms of the mortgage loan become permanent. 2011 1040ez instructions Therefore, for purposes of § 1. 2011 1040ez instructions 1001-3, the date of the modification is the date of the permanent modification. 2011 1040ez instructions . 2011 1040ez instructions 05 Unless an exclusion applies, the HAMP-PRA borrower includes in gross income the discharge of indebtedness income described in section 4. 2011 1040ez instructions 01 of this revenue procedure for the taxable year in which the permanent modification occurs. 2011 1040ez instructions Under certain conditions, however, section 6 of this revenue procedure permits a borrower to report the discharge of indebtedness under HAMP-PRA over the Three-year Period. 2011 1040ez instructions The qualified principal residence indebtedness exclusion under § 108(a)(1)(E) and the insolvency exclusion under § 108(a)(1)(B) are two exclusions that may apply to the discharge. 2011 1040ez instructions . 2011 1040ez instructions 06 The PRA Investor Incentive Payment is treated as a payment on the mortgage loan by the HAMP program administrator on behalf of the HAMP-PRA borrower. 2011 1040ez instructions . 2011 1040ez instructions 07 To the extent that the HAMP-PRA borrower uses the property as the HAMP-PRA borrower’s principal residence or the property is occupied by the HAMP-PRA borrower’s legal dependent, parent, or grandparent without rent being charged or collected, the HAMP-PRA borrower excludes from his or her gross income under the general welfare exclusion the PRA Investor Incentive Payments that the HAMP program administrator makes to the investor in the mortgage loan. 2011 1040ez instructions This is consistent with Rev. 2011 1040ez instructions Rul. 2011 1040ez instructions 2009-19, 2009-28 I. 2011 1040ez instructions R. 2011 1040ez instructions B. 2011 1040ez instructions 111, which addressed the treatment of Pay-for-Performance Success Payments. 2011 1040ez instructions . 2011 1040ez instructions 08 To the extent that the HAMP-PRA borrower uses the property as a rental property or holds the property vacant and available for rent, the HAMP-PRA borrower includes PRA Investor Incentive Payments in gross income. 2011 1040ez instructions If the HAMP-PRA borrower uses the cash receipts and disbursements method of accounting, then the HAMP-PRA borrower includes a PRA Investor Incentive Payment in gross income in the taxable year in which it is applied as a payment on the HAMP-PRA borrower’s mortgage loan. 2011 1040ez instructions . 2011 1040ez instructions 09 As described in section 2. 2011 1040ez instructions 09 of this revenue procedure, if a HAMP-PRA borrower pays in full the Non-forbearance Portion of the mortgage loan while the loan is in good standing and prior to completion of the Three-year Period, that payment accelerates both the reduction in the remaining PRA Forbearance Amount and the PRA Investor Incentive Payments from the HAMP program administrator. 2011 1040ez instructions To the extent that the HAMP-PRA borrower is described in section 4. 2011 1040ez instructions 07 of this revenue procedure, the HAMP-PRA borrower excludes from his or her gross income under the general welfare exclusion the accelerated PRA Investor Incentive Payments. 2011 1040ez instructions To the extent that the HAMP-PRA borrower is described in section 4. 2011 1040ez instructions 08 of this revenue procedure, the HAMP-PRA borrower includes in income in the year of the acceleration the remaining amount of the PRA Investor Incentive Payment. 2011 1040ez instructions SECTION 5. 2011 1040ez instructions INFORMATION-REPORTING OBLIGATIONS . 2011 1040ez instructions 01 Under § 6050P, the investor is required to file a Form 1099-C with respect to a borrower who realizes discharge of indebtedness of $600 or more. 2011 1040ez instructions A copy of this form is required to be furnished to the borrower. 2011 1040ez instructions . 2011 1040ez instructions 02 As stated in sections 4. 2011 1040ez instructions 01 and 4. 2011 1040ez instructions 04 of this revenue procedure, the HAMP-PRA discharge of indebtedness is realized at the time of the permanent modification of the mortgage loan. 2011 1040ez instructions . 2011 1040ez instructions 03 An investor is an applicable entity that is required under § 1. 2011 1040ez instructions 6050P-1 and this revenue procedure to issue a Form 1099-C for discharge of indebtedness. 2011 1040ez instructions Under § 1. 2011 1040ez instructions 6050P-1(b)(2)(F), the permanent modification of a mortgage loan is an identifiable event. 2011 1040ez instructions Identifiable events determine when Forms 1099-C have to be issued. 2011 1040ez instructions Thus, the Form 1099-C is issued for the calendar year in which the permanent mortgage loan modification occurs. 2011 1040ez instructions This rule under § 1. 2011 1040ez instructions 6050P-1(b)(2)(F) applies even if, under section 6 of this revenue procedure, the HAMP-PRA borrower chooses to treat the HAMP-PRA discharge as being realized at the times when the unpaid principal balance of the new mortgage loan is reduced. 2011 1040ez instructions . 2011 1040ez instructions 04 The investor (or the loan servicer acting on behalf of the investor) reports the full amount of the discharge on the Form 1099-C regardless of whether some or all of the amount is excludible from income under the qualified principal residence indebtedness exclusion, the insolvency exclusion, or any other exclusion that may apply. 2011 1040ez instructions That discharged amount will generally be the PRA Adjusted Forbearance Amount (which does not include the amounts expected to be satisfied by PRA Investor Incentive Payments). 2011 1040ez instructions . 2011 1040ez instructions 05 To the extent that PRA Investor Incentive Payments are made on behalf of a HAMP-PRA borrower who is described in section 4. 2011 1040ez instructions 07 of this revenue procedure, the PRA Investor Incentive Payments are excluded from the gross income of the HAMP-PRA borrower, and thus they are not fixed or determinable income to the HAMP-PRA borrower. 2011 1040ez instructions Under § 6041, these payments are not subject to information reporting. 2011 1040ez instructions See Notice 2011-14, 2011-11 I. 2011 1040ez instructions R. 2011 1040ez instructions B. 2011 1040ez instructions 544, 546. 2011 1040ez instructions . 2011 1040ez instructions 06 To the extent that PRA Investor Incentive Payments are made on behalf of a HAMP-PRA borrower who is described in section 4. 2011 1040ez instructions 08 of this revenue procedure, the PRA Investor Incentive Payments are includible in gross income as fixed or determinable income in the taxable year required by the HAMP-PRA borrower’s method of accounting. 2011 1040ez instructions The payment is subject to the information reporting requirements of § 6041, as described in section 3. 2011 1040ez instructions 15 of this revenue procedure. 2011 1040ez instructions Accordingly, the HAMP program administrator is required to issue a Form 1099-MISC reporting the PRA Investor Incentive Payment. 2011 1040ez instructions SECTION 6. 2011 1040ez instructions HAMP-PRA BORROWERS’ REPORTING OF DISCHARGES OF INDEBTEDNESS UNDER HAMP-PRA . 2011 1040ez instructions 01 In general. 2011 1040ez instructions The HAMP-PRA program began in the last quarter of 2010, and since that time there has been uncertainty about whether the amount of the discharge of indebtedness should be reported in the year of the permanent modification or over the Three-year Period (when the unpaid principal balance on the new mortgage loan is reduced). 2011 1040ez instructions As a result, some HAMP-PRA borrowers have been reporting the discharge of indebtedness under HAMP-PRA over the Three-year Period. 2011 1040ez instructions Given the temporary nature of the program and the issuance of this guidance after participation in the program has begun, in the interests of equitable and sound tax administration, HAMP-PRA borrowers may report discharges of indebtedness under HAMP-PRA under the rules in this section 6. 2011 1040ez instructions A HAMP-PRA borrower may choose to report discharges of indebtedness under HAMP-PRA pursuant to the rules in this section 6 only if the borrower applies the same borrower option under section 6. 2011 1040ez instructions 02 of this revenue procedure consistently to the taxable year of the permanent modification and to all subsequent taxable years. 2011 1040ez instructions Thus, a HAMP-PRA borrower may not choose a borrower option under section 6. 2011 1040ez instructions 02 of this revenue procedure if a statute of limitations has expired for any of the taxable years that are necessary for consistent application of that option. 2011 1040ez instructions . 2011 1040ez instructions 02 HAMP-PRA borrower options. 2011 1040ez instructions A HAMP-PRA borrower may treat the HAMP-PRA discharge as being realized in either of the following ways— (1) One hundred percent of the PRA Adjusted Forbearance Amount at the time of the permanent modification; or (2) One third of the PRA Adjusted Forbearance Amount on each of the first three annual anniversaries of the trial period plan effective date (described in section 2. 2011 1040ez instructions 06 of this revenue procedure), when, as required by the terms of the new mortgage loan, the servicer reduces the unpaid principal balance of the new mortgage loan. 2011 1040ez instructions If some or all of the reduction in the unpaid principal balance is accelerated (as described in section 2. 2011 1040ez instructions 06 of this revenue procedure) because the HAMP-PRA borrower prepays the Non-forbearance Portion of the mortgage loan, then the HAMP-PRA discharge represented by the amount of the reduction that was accelerated is treated as being realized at the time of the accelerated reduction. 2011 1040ez instructions . 2011 1040ez instructions 03 HAMP-PRA borrowers who choose to realize the HAMP-PRA discharge at the time of the permanent modification. 2011 1040ez instructions (1) If a HAMP-PRA borrower chooses to treat the HAMP-PRA discharge as being realized at the time of the permanent modification, then for the taxable year in which the permanent modification occurs, the HAMP-PRA borrower reports on Form 982 the amount, if any, of the discharge that is excluded from gross income and includes in gross income any remaining discharge. 2011 1040ez instructions (2) If a HAMP-PRA borrower’s mortgage loan was permanently modified under HAMP in 2010 or 2011, and if the borrower was reporting the discharge of indebtedness using the method described in section 6. 2011 1040ez instructions 02(2) of this revenue procedure, then the borrower may change to reporting the discharge of indebtedness using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure by filing a 2012 Form 982 with the borrower’s timely filed (with extensions) 2012 income tax return. 2011 1040ez instructions This section 6. 2011 1040ez instructions 03(2) applies only if the change to reporting the discharge using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure does not change the borrower’s federal income tax liability (including any change in federal income tax liability due to a change in basis or tax attributes (under § 108(h)(1) or § 108(b))) for any taxable year prior to the borrower’s 2012 taxable year. 2011 1040ez instructions To make this change, the borrower must— (i) Compute the amount of discharge of indebtedness that would be included in income under § 61(a)(12) or excluded from gross income under § 108, basing the computation of the discharge on the facts as of the year of the permanent modification; and (ii) Report on a 2012 Form 982 the reduction in basis or tax attributes (under § 108(h)(1) or § 108(b)) due to the permanent modification that the borrower would have reported on the Form 982 for the taxable year of the permanent modification, minus any reductions due to the permanent modification that the borrower actually reported on Forms 982 for taxable years prior to 2012. 2011 1040ez instructions (3) Example. 2011 1040ez instructions The following example illustrates the application of section 6. 2011 1040ez instructions 03(2) of this revenue procedure. 2011 1040ez instructions In 2010, B’s basis in B’s principal residence was $330,000. 2011 1040ez instructions In 2010, B’s mortgage loan on the principal residence is permanently modified under HAMP-PRA. 2011 1040ez instructions B realized $30,000 of cancellation of indebtedness from the permanent modification, all of which qualifies for the exclusion from income for qualified principal residence indebtedness under § 108(a)(1)(E). 2011 1040ez instructions The trial period plan effective date also fell in 2010. 2011 1040ez instructions B’s federal income tax return for 2010 was consistent with B’s reporting this discharge of indebtedness using the method described in section 6. 2011 1040ez instructions 02(2) of this revenue procedure. 2011 1040ez instructions That is, B’s 2010 return did not include income from discharge of indebtedness under HAMP-PRA, nor did the return contain a Form 982 reporting exclusion of any such discharge of indebtedness. 2011 1040ez instructions The next year, B reported on line 10(b) of the 2011 Form 982 that B filed with B’s 2011 federal income tax return a $10,000 reduction in basis in the principal residence. 2011 1040ez instructions For 2012, B chooses to change to reporting the discharge of indebtedness using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure. 2011 1040ez instructions Thus, B files a 2012 Form 982 with B’s timely filed (including extensions) 2012 federal income tax return, and on line 10(b) of that form, B reports a $20,000 basis reduction in the principal residence ($30,000 basis reduction that B would have excluded from income in 2010 using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure, minus the $10,000 basis reduction that B reported on B’s 2011 Form 982). 2011 1040ez instructions (4) If a HAMP-PRA borrower reports the entire HAMP-PRA discharge using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure, and if that HAMP-PRA borrower’s mortgage loan ceases to be in good standing during the Three-year Period as described in section 2. 2011 1040ez instructions 10 of this revenue procedure, then some or all of the anticipated reductions in the PRA Adjusted Forbearance Amount will not take place. 2011 1040ez instructions Because the amount of these anticipated reductions was not included in determining the issue price of the new mortgage loan that, pursuant to § 1. 2011 1040ez instructions 1001-3, the HAMP-PRA borrower is deemed to issue in satisfaction of the old mortgage loan, the issue price of the new mortgage loan was understated. 2011 1040ez instructions Under these circumstances, the discharge of indebtedness income determined as of the date of the permanent modification will have been overstated. 2011 1040ez instructions (5) The Service will not challenge a HAMP-PRA borrower who is described in section 6. 2011 1040ez instructions 03(4) of this revenue procedure and who takes the following corrective measures: (i) If a HAMP-PRA borrower included any of the discharge of indebtedness in gross income, the HAMP-PRA borrower may file an amended return that does not include the amount of the discharge of indebtedness that was previously reported as gross income but that, because of the HAMP-PRA borrower’s failure to keep the new mortgage loan in good standing, was not ultimately discharged. 2011 1040ez instructions The amended return should be for the taxable year in which the income was included (that is, the year of the permanent modification), provided the applicable statute of limitations remains open for that taxable year. 2011 1040ez instructions (ii) If the HAMP-PRA borrower did not include any of the discharge of indebtedness in gross income (that is, if the HAMP-PRA borrower excluded all of it), the HAMP-PRA borrower may file a new Form 982 that the Service will treat as superseding the earlier Form 982. 2011 1040ez instructions The new Form 982 will reflect the revised reduction in basis or in tax attributes (under § 108(h)(1) or § 108(b)). 2011 1040ez instructions The new Form 982 should be the Form 982 for the year of the permanent modification and should be filed with the return for the taxable year in which the HAMP-PRA borrower’s mortgage loan ceased to be in good standing. 2011 1040ez instructions . 2011 1040ez instructions 04 HAMP-PRA borrowers who choose to treat the HAMP-PRA discharge as being realized on the dates on which the unpaid principal balance of the mortgage loan is reduced. 2011 1040ez instructions (1) If a HAMP-PRA borrower chooses to realize the HAMP-PRA discharge at the times that the unpaid principal balance on the new mortgage loan is reduced, instead of at the time of the permanent modification, then the HAMP-PRA borrower’s federal income tax returns for the taxable year that contains the permanent modification and for the subsequent taxable years must not treat any of the discharge as being realized at the time of the permanent modification and must treat the entire HAMP-PRA discharge as being realized in the amounts—and at the times—of the reductions in the unpaid principal balance. 2011 1040ez instructions Except as described in the last sentence of this paragraph, therefore, the income tax return for the year of the permanent modification must include no gross income from—nor report on Form 982 an exclusion of—any amount of the HAMP-PRA discharge. 2011 1040ez instructions Instead, the HAMP-PRA discharge is included in gross income (or is reported on Form 982 as excluded from gross income) in the subsequent years in which the unpaid principal balance is reduced. 2011 1040ez instructions If the first such reduction occurs in the year of the permanent modification, however, then the amount of any such reduction is reflected as an inclusion or exclusion on the federal income tax return for that year. 2011 1040ez instructions (2) A HAMP-PRA borrower who has been using the method described in section 6. 2011 1040ez instructions 02(1) of this revenue procedure may change to the method described in section 6. 2011 1040ez instructions 02(2) but must comply with the consistency and open-year requirements described in section 6. 2011 1040ez instructions 01 of this revenue procedure. 2011 1040ez instructions SECTION 7. 2011 1040ez instructions PENALTY RELIEF FOR 2012 . 2011 1040ez instructions 01 The Service will not assert penalties under § 6721 or § 6722 against an investor for failing to timely file and furnish a 2012 Form 1099-C as required by section 5. 2011 1040ez instructions 03 through 5. 2011 1040ez instructions 04 and section 8. 2011 1040ez instructions 02 of this revenue procedure with respect to discharge of indebtedness resulting from HAMP-PRA permanent modifications that take place during calendar year 2012 if the following requirements are satisfied: (1) Not later than February 28, 2013, a statement is sent to the HAMP-PRA borrower containing the following: (a) The HAMP-PRA borrower’s name, address, and taxpayer identification number; and (b) The date and amount of the discharge of indebtedness (as described in sections 4. 2011 1040ez instructions 01 through 4. 2011 1040ez instructions 04 of this revenue procedure) that is required to be reported for 2012. 2011 1040ez instructions (2) Not later than March 28, 2013, a statement is sent to the Service. 2011 1040ez instructions It must be in the form of a single statement that separately lists for each HAMP-PRA borrower the information specified in section 7. 2011 1040ez instructions 01(1) of this revenue procedure. 2011 1040ez instructions The statement should be sent to the Service at the following address: Internal Revenue Service Center Stop 6728AUSC Austin, TX 73301 . 2011 1040ez instructions 02 The Service will not assert penalties under § 6721 or § 6722 with respect to any Forms 1099-MISC for 2012 that sections 5. 2011 1040ez instructions 06 and 8. 2011 1040ez instructions 02 of this revenue procedure require to be filed with the Service and furnished to taxpayers. 2011 1040ez instructions . 2011 1040ez instructions 03 Section 8. 2011 1040ez instructions 03 and 8. 2011 1040ez instructions 04 of this revenue procedure, below, describes penalty relief regarding Forms 1099-C and 1099-MISC for 2010 and 2011. 2011 1040ez instructions SECTION 8. 2011 1040ez instructions SCOPE AND EFFECTIVE DATE . 2011 1040ez instructions 01 This revenue procedure applies to all borrowers, investors, and servicers who participate, or have participated, in the HAMP-PRA, regardless of when the permanent modification occurs. 2011 1040ez instructions . 2011 1040ez instructions 02 Section 5 of this revenue procedure is effective for Forms 1099-C and 1099-MISC due or filed after January 24, 2013. 2011 1040ez instructions . 2011 1040ez instructions 03 Because of the effective date in section 8. 2011 1040ez instructions 02 of this revenue procedure, an investor is not subject to penalties under § 6721 or § 6722 on the grounds that the investor failed to timely file and furnish a 2010 or 2011 Form 1099-C as described in section 5. 2011 1040ez instructions 03 through 5. 2011 1040ez instructions 04 of this revenue procedure (or on the grounds that the investor filed or furnished a 2010 or 2011 Form 1099-C that is inconsistent with section 5. 2011 1040ez instructions 03 through 5. 2011 1040ez instructions 04 of this revenue procedure), provided that the investor demonstrates a good faith attempt to comply with the requirements of § 6050P and that the failure was not due to willful neglect. 2011 1040ez instructions . 2011 1040ez instructions 04 Because of the effective date in section 8. 2011 1040ez instructions 02 of this revenue procedure, the Service will not assert penalties under § 6721 or § 6722 on the grounds of a failure to timely file and furnish a 2010 or 2011 Form 1099-MISC, as described in section 5. 2011 1040ez instructions 06 of this revenue procedure. 2011 1040ez instructions SECTION 9. 2011 1040ez instructions DRAFTING INFORMATION The principal authors of this revenue procedure are Ronald J. 2011 1040ez instructions Goldstein of the Office of Chief Counsel (Procedure and Administration); Shareen S. 2011 1040ez instructions Pflanz and Sheldon A. 2011 1040ez instructions Iskow of the Office of Chief Counsel (Income Tax and Accounting); and Andrea M. 2011 1040ez instructions Hoffenson of the Office of Chief Counsel (Financial Institutions and Products). 2011 1040ez instructions For further information regarding this revenue procedure, contact Procedure and Administration branch 1 at (202) 622-4910, Income Tax and Accounting branch 4 at (202) 622-4920, or Financial Institutions and Products branch 1 at (202) 622-3920 (not toll-free calls). 2011 1040ez instructions 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