There are two types of debts: recourse and nonrecourse. A recourse debt holds the borrower personally liable. All other debt is considered nonrecourse.
In general, recourse debt (loans) allows lenders to collect what is owed for the debt even after they've taken collateral (home, credit cards). Lenders have the right to garnish wages or levy accounts in order to collect what is owed.
A nonrecourse debt (loan) does not allow the lender to pursue anything other than the collateral. For example, if a borrower defaults on a nonrecourse home loan, the bank can only foreclose on the home. The bank generally cannot take further legal action to collect the money owed on the debt. Whether a debt is recourse or nonrecourse may vary from state to state, depending on state law.
If a lender cancels a debt and issues Form 1099-C, the lender will indicate on the form if the borrower was personally liable (recourse) for repayment of the debt. The tax impact depends on the type of debt - recourse or nonrecourse.
| Recourse Debt | Nonrecourse Debt |
Borrower is… | Personally liable | Not personally liable |
If property securing the debt was foreclosed on or abandoned, the taxpayer may need to report the disposition (sale) on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D, Capital Gains and Losses. This is covered in detail in this course.
Generally, if taxpayers abandon property that secures debt for which they are personally liable, they do not have a gain or loss until the foreclosure is completed.
If taxpayers abandon property that secures debt for which they are not personally liable, the abandonment is treated as a sale or exchange.
For more information on abandonments, see Publication 4681.
FAQs
To become a CTEC registered tax preparer, you must: Take a 60-hour qualifying education course from a CTEC approved provider within the past 18 months. Purchase a $5,000 tax preparer bond from an insurance/surety agent. Get a Preparer Tax Identification Number (PTIN) from the IRS.
Can I get IRS tax transcript online? ›
Just go to IRS.gov and use the Get Transcript tool.
Does the IRS have a training program? ›
The IRS provides free tax law training and materials.
Volunteers receive training materials at no charge. The tax law training covers how to prepare basic federal tax returns electronically. The training also covers tax topics, such as deductions and credits.
What is the difference between basic and advanced IRS certification? ›
The Basic path will prepare you for the Basic IRS Certification exam. At this level, you will be able to complete most simple returns. The Advanced path will prepare you for the Advanced IRS Certification exam. At this level, you will be able to complete all returns within the scope of the IRS VITA/TCE program.
Do I need to renew my PTIN every year? ›
All PTINs expire on December 31 of each year and are required to be renewed to be current and active. PTIN renewal open season begins mid-October each year for the following year.
What is the difference between PTIN and EFIN? ›
Preparer Tax Identification Numbers are issued to individuals. Electronic Filing Identification Numbers are issued to individuals or firms. Most preparers need both.
Can you work for the IRS without a degree? ›
The degree requirement was dropped because IRS skills and college degrees are unrelated and because it has more openings than applicants. Conversely, if you want a position in criminal investigation or in field examination, you are expected to have related degrees or experience.
How long is IRS Academy? ›
The training curriculum spans approximately 6.5 months and comprises three segments.
What degree do you need for the IRS? ›
General requirements include US citizenship, plus a four-year degree or legal or tax accounting experience that required knowledge of federal tax laws and regulations. You could also be eligible for higher grades if you possess a JD or LLM.
How hard is it to become an IRS enrolled agent? ›
EA certification follows a straightforward process. Applicants do not need to hold a particular degree or meet experience requirements. EA candidates must apply for a preparer tax identification number (PTIN), sign up for the certification exam, and pass all parts of the exam.
Although a bachelor's degree is typically sufficient for most entry-level positions with the IRS, a master's degree, such as a Master of Science in Accounting or Master of Business Administration, might give you a professional edge.
Does PTIN mean you are enrolled agent? ›
An IRS Preparer Tax Identification Number (PTIN) is a number issued by the IRS to professional tax preparers, such as Certified Public Accountants (CPAs) and Enrolled Agents (EAs), who are paid for federal tax preparation services.
What education do you need to work for the IRS? ›
Although a bachelor's degree is typically sufficient for most entry-level positions with the IRS, a master's degree, such as a Master of Science in Accounting or Master of Business Administration, might give you a professional edge.
What are IRS qualified education expenses? ›
Qualified education expenses
Tuition and fees required to enroll at or attend an eligible educational institution. Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution.
What is the IRS education limit? ›
You can get a maximum annual credit of $2,500 per eligible student.
What are two common credentials for tax preparers? ›
Individuals looking to work as tax professionals can either become a CPA or an enrolled agent. EAs only need to pass the SEE, while CPAs need to pass the Uniform CPA Examination and complete educational and professional requirements set by their state.
