All Payments Received in Connection with The Independent Foreclosure Review Payment Agreement May be Subject to Taxation as Income

IRS

TAX INFORMATION

On February 28, 2013, the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board released amendments to their enforcement actions against 13 mortgage servicers for deficient practices in mortgage loan servicing and foreclosure processing.1 The amendments require the servicers to provide cash payments to borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010 and whose mortgages were serviced by one of the 13 servicers or their affiliates.2 Regulators have published the payment amounts on their websites.3

All payments received in connection with the IFR Payment Agreement may be subject to taxation depending on the borrower’s individual circumstances. This webpage provides general information regarding potential U.S. federal income tax consequences of these payments if you are a citizen or resident of the United States.4

The Independent Foreclosure Review Payment Qualified Settlement Fund (QSF) is required to comply with IRS information reporting requirements with respect to any payments made. The information the Paying Agent must report to the IRS varies depending on such things as the nature of the payment, the residence status of the recipient and whether the Paying Agent is required by law to automatically withhold an amount of the payment. As a result, borrowers may receive a letter from the Paying Agent requesting additional tax-related information to process their payment. Borrowers may also receive one of the tax documents described below.

This webpage is intended solely for informational purposes. It does not suggest a particular tax treatment or address possible state, local, or foreign tax or any other possible tax considerations based on a borrower’s individual circumstances.

Please note that the Paying Agent cannot provide tax guidance to borrowers in connection with cash payments. The information below is general in nature and should not be viewed by borrowers receiving a payment as tax advice. For more information, consult a qualified professional tax advisor.

In most cases, borrowers will receive a check that represents only a lump sum “Base payment” that does not represent reimbursement of any particular amounts. For these borrowers, only Section A of the discussion below applies.

A limited number of borrowers will receive a check that includes the lump sum “Base payment” and additional amounts. For these borrowers, the letter enclosed with the check will include a section called “Breakdown of your payment” that corresponds to Sections A through E of the discussion below, which explain what amounts this payment represents.

SECTION A: “Base payment, which may be reportable as income”
This is a lump sum payment that does not represent reimbursement of any particular amounts. The entire “Base payment” may be subject to taxation as income depending on the borrower’s individual circumstances. For checks in an amount of $600 or greater, the Paying Agent will report such payments as income to the IRS and appropriate state agencies and to borrowers on a Form 1099 MISC. The Paying Agent will mail this form to borrowers in the first quarter of 2014, according to the deadlines for mailing required by the IRS. The Paying Agent will not report a “Base payment” of less than $600 to the IRS or to the borrower, but the amount may still be subject to taxation depending on the borrower’s individual circumstances.

SECTION B: “Return of mortgage interest you paid”
This payment represents a return of mortgage interest previously paid by the borrower. The tax treatment of this amount may depend on the borrower’s individual circumstances. If the borrower previously deducted mortgage interest on the loan that is the subject of the payment, then the payment may be taxable in the amount of the tax benefit the borrower received from a mortgage interest deduction in a prior year. If the return of mortgage interest is in an amount of $600 or greater, the Paying Agent will report such payments to the IRS and appropriate state agencies and to borrowers on a Form 1098. The Paying Agent will mail this form to borrowers in the first quarter of 2014, according to the deadlines for mailing required by the IRS. If the return of mortgage interest is in an amount less than $600, the Paying Agent will not report the amount to the IRS or to the borrower, but the amount may still be subject to taxation depending on the borrower’s individual circumstances.

SECTION C: “Return of equity on your home”
This payment represents a return of the amount of the borrower’s lost equity in their home. The tax treatment of this amount may depend on the borrower’s individual circumstances. The Paying Agent is not reporting this amount to the IRS or state agencies, so the borrower will not receive a tax document related to this portion of the payment, but the amount may still be subject to taxation depending on the borrower’s individual circumstances.

SECTION D: “Interest on other payment components”
This payment represents a payment of interest due to the borrower on the amounts specified in Sections A, B, and C above and/or Section E below. The tax treatment of this amount may depend on the borrower’s individual circumstances. If the interest payment is in an amount of $600 or greater, the Paying Agent will report such payments as interest income to the IRS and appropriate state agencies and to borrowers on a Form 1099 INT. The Paying Agent will mail this form to borrowers in the first quarter of 2014, according to the deadlines for mailing required by the IRS. The Paying Agent will not report an “Interest on other payment components” amount of less than $600 to the IRS or to the borrower, but the amount is still subject to taxation as income.

SECTION E: “Return of fees you paid”
This payment represents a reimbursement of fees paid by the borrower related to their loan. The tax treatment of this amount may depend on the borrower’s individual circumstances and the types of fees the borrower paid. The Paying Agent is not reporting this amount to the IRS or state agencies, so the borrower will not receive a tax document related to this portion of the payment, but the amount may still be subject to taxation depending on the borrower’s individual circumstances.

“Tax Withholding (Subtracted from Payment)”
If a borrower does not return tax information on the Form W-9 as requested by the Paying Agent, then the Paying Agent is required by law to automatically withhold certain amounts. These amounts will be subtracted from the borrower’s payment and noted in the letter enclosed with the check. The Paying Agent will report such amounts to the IRS and to borrowers on a Form 1099 MISC and/or a Form 1099 INT. The Paying Agent will deposit the amounts withheld on the borrower’s behalf with the IRS or the appropriate state agency and mail the Form 1099 MISC and/or a Form 1099 INT to the borrower in the first quarter of 2014

SOURCE: https://independentforeclosurereview.com

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4closureFraud.org

Comments
10 Responses to “All Payments Received in Connection with The Independent Foreclosure Review Payment Agreement May be Subject to Taxation as Income”
  1. womackcpm says:

    In VA supposedly our state AG was to have reached a settlement, I will be awaiting to see if I am going to receive a “double slap in the face” for the fraud that has been committed on my loss of residence. This is sooooo wrong!!

  2. But the banks get a tax credit for the settlement funds paid and the banks are not payingout of their pockets. There is a disclosure that we can sue for more compensation. Should not have to and most of the wronged have no funds to pay an attorney. Need to vote out all the AG’s involved in this tragedy. and all politicians and judgesjthat are enabling this crime. Washington State people need to ” please”call governor Inslee and ask him to veto bill BS 1435. .

  3. Shelly T says:

    I called the IRS and according to the tax specialist advisor, under code 525 awarded settements, (Punative) 2012 tax law, the IFR checks are taxabe income. If the letter had stated for financial injury or harm, then it woud not be taxable income. If someone could please confirm this, it would be most appreciated.

    • Somewhere in one of the settlement articles this settlement was suppose to be for financial harm. So it would be nice if this is checked out. There should be no taxation of this outrageous financial harm. This is equity and property and our incomes harmed by the fraud economically financially harming the victims, enabled by the deregulators our own government, we bail out the banks and the taxes from this settlement to go back to the crooks ontop of a pitence of a refund for the damage would be another crime. The banks get a tax deduction for settlement by the criminals causing it. What justice is that? Every government official enabling this crime including bad judges should be brought up on felony charges 18USC4 and jailed.

    • Go back through all the Botched foreclosure articles and statements from the independent review consultants and I am sure you will find this was to find the financial harm done to us. I remember it in one of the articles. I added my income tax statements to prove the financal harm. Little good it did me, I knew this would be a farce penitence of a remedy. I was just waiting to see how bad of a slap in the face. So I could use it for admission of wrong doing. A freind of mine is military and she got $600.00 and burst out in tears of anguish. Her home taken unlawfully just months after her husband retired. Nothing left. What a crime. The bank suppressed the information on mine. obviously. I paid on n approved (no mention of a trial plan) for five months and then was told I was disqualified after doing everything asked. I was not in alleged (fraud ) default until I listened to Chase servicing, paying five payments before getting a disqualification letter putting the sixth payment into an attorneys trust fund for the house, the attorney is trying now to keep. I should steal it from me. She never filed a paper. It was not the retainer. I paid her a retainer for doing nothing also. Chase told me the modification payments were now partial payments and I was in foreclosure. I was told by three chase servicers to fall behing before I allowed one month as they had instructed me to do so. After the third party telling me to do this, I trusted the bank would not tell me to do it unless it was the truth. I have learned the hard way never to trust a bank. Millions of people had this same thing done to them. It is organized crime to grab property and wealth. Please Oh please watch your senate bills and speak out against bad bills in every state, if they pass the senate go to the governor and demand they are vetoed. And please send in request then subpeoneas for the files on your independent review.
      chase sent me a letter telling me they destroyed my mod paperwork. Asked me to send them another copy, WOW! This is a recent letter the mod was in 2010. .

  4. Wake Up America! says:

    What about the checks that won’t be cashed because the OCC/IFR/Rust sent them to the wrong address (most likely on purpose)? Will this phantom amount be subject to taxation? Can we send our payment to the IRS with this on it:

    THIS PAYMENT IS FINAL.THERE IS NO APPEAL.

    Because this is the bullshit on the communication from Rust Consulting.

    They should rename the IFR the “UFR.” Because every day this debacle becomes more UN – F*#@ing – REAL!

  5. bummedout says:

    Unbelievable. So manipulated. The settlement is only a fraction of losses, then checks bounce and now being taxes on the settlement. It never ends. IRS and Federal Reserve were created the same year: 1913. One puts money in the system and the other takes it out. In this case, there was so much fraud and being compensated (as little as it is) shouldn’t be taxed at all.

  6. daveleforge says:

    They can always do like they done to us. Report to the IRS that they paid us a settlement, then send us two seperate 1099 MICS, for double the amount. The whole problem with all of this is they never paid us a dime. DOES THE RIGHT HAND KNOWING WHAT THE LEFT HAND DOES RING A BELL???

  7. talktotennessee says:

    I thought awards from civil suit wrongs or losses were not subject to tax.

    • greywolf62 says:

      Seek advice from a tax lawyer or accountant. In 2001, my former company paid me six figures to be quiet but then failed to pay the taxes. I got hit with a huge tax bill and the tax judge agreed that the company was supposed to file the proper forms, but told me I had to pay the taxes and sue my former employer for the money, as if I was going to sue a large missile manufacturer over $20,000. [I should have, but then our country was attacked so I went back to work for the Navy.]

      Now I find myself once again fighting bad guys who are supposed to be good guys. They again gave me an out to join them, but this time I am fighting with the people so what do they do? They brand me as a threat.

      http://4closurefraud.org/2013/04/16/first-they-came-for-the-deadbeats-judge-orders-guns-taken-from-woman-facing-foreclosure/

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