A long time ago (10 years?) I took a huge tax hit on a foreclosure. I recently found out I may not have had to pay that tax bill. It was raw land and they took the property back. Is it even possible to go back (without a copy of the return. My copy was paper and got lost in a move) and have them correct that and get the money back?
Looks like it says in below link that you have until “the later of three years from the date you file the original tax return, or two years from the time you pay the tax for that year.” Sorry, looks like you’re out of luck (if it really would have worked out in your favor).
You have 7 years if it involves a bad debt or worthless security. That, of course, doesn’t apply to the OP, but it’s kind of irresponsible for TT not to mention this.
Sorry Saint Cad, it’s too late for federal. Some states have a longer Statute of Limitations, but I don’t think any is 10 years.
I assume you just discovered the insolvency exemption. It’s a shame you didn’t learn about it earlier. This year I’m seeing a lot of internet chatter from broke kids whose creditors have finally given up on collecting student loan debt and sent them 1099-C forms. The information that comes with the forms makes the kids believe they have to pay taxes on the forgiven loans. No one tells them about insolvency, apparently not even TurboTax. (That’s what they say, I don’t know).
And don’t get me started about TurboTax. A whole generation believes that TurboTax Brand tax software is the only way to file taxes, while TT convinces them that they need to buy the $90 super-ultra-premium version plus pay extra for e-filing state returns. And nobody knows nothing about taxes except “Hey, TT told me I’m getting a $500 return [sic].”
Thanks for listening.
No as best as I can explain it it’s because they took the land back therefore the foreclosure was not a gain as in wiping out a debt it. At the time all I knew was I got a 1098 form and the only rules I saw was “you were foreclosed on so you owe taxes”. Didn’t make sense to me at the time but I couldn’t find anything that indicated I didn’t have a tax liability.
If I’m guessing correctly, you were told (or you thought) that you owed taxes on the full amount of the debt that was cancelled, but now you’re thinking that you only owed taxes on the amount of the cancelled debt minus the value of the property that you lost? Here is an IRS publication on the topic, and it’s complicated.
I don’t know about the deadline involved, but it might be worth meeting with an accountant to see if there’s any hope here.