This year we clearly need a good CPA. We have no idea how to handle the “loss” or loan forgiveness 1099’s on these short sale agreements. It looks like the 2nd is trying to collect already (saw that coming… still scared out of my pajamas).
1) Keep your pajamas on — please
2) Loan loss forgiveness 1099s are not taxable up to 2012. http://www.irs.gov/newsroom/article/0,,id=174034,00.html Also see “SK in CV”‘s comment above.
3) Did the second 1099 you as well? You seemed to hint that there is more than one 1099. Is there a difference between what you owed on the second and the amount on the 1099? I am wondering if the note was sold off to a debt collector and the bank listed the delta as a loss/1099. A debt collector might go away if you pay them what they paid to buy a note plus a profit. I would strongly suggest an attorney when dealing with debt collectors. They are notoriously shady characters. I would suggest an attorney with experience in bankruptcies and debt collection. Unfortunately, I can’t recommend one.
I would also list each contact with them in a log: time/date and the gist of the discussion. If the debt collectors are getting abusive, this log becomes a useful tool in negotiating with them through an attorney.
