Brett issue is not if the bank can qualify them but if someone who is basically receiving government assistance (Section 8) is entitled to receive it or would want to receive it. They will get a 1099 which may put them at a income level that could have an affect on their Section 8 eligibility Just as it would if they got a pay raise.
I received an incentive from the short sale lender? Do I have to pay taxes on the incentive?
According to the Internal Revenue Service, “Cash for Keys Program income, which is taxable, is income from a financial institution, offered to taxpayers to expedite the foreclosure process. Report this as ‘other income’ on Form 1040, line 21. The taxpayer should receive Form 1099-MISC with the income in box 3.”
I received an incentive from the short sale lender, but I did not receive a 1099-MISC. How should I proceed?
I’d bet dollars to doughnuts that short sale sellers often don’t receive the 1099-MISC because the short sale lender doesn’t have a record of the taxpayer’s new address. Speak with an accountant about how to proceed in this situation.
The IRS has yet to rule on the tax treatment of relocation payments under the Home Affordable Foreclosure Alternatives (HAFA) program, and some people in your situation have received a Form 1099-A or C. However, there is a good argument to be made that the payment is tax free. Government payments made to promote the general welfare are not taxed. However, if you use the payment for moving expenses, you can’t exclude the income and take a moving expense deduction. Talk to your tax advisor.
i'd have them speak to an accountant.