Garnish wages on full settlement with mortgage company

[Advice]

We purchased a house through a mortgage company that was thought to be legit (unfortunately the property was foreclosed upon) but found out otherwise when we received a class action suit againt the mortgage company. We settled for a little over 50 percent of the original mortgage amount. Now the IRS is stating that we owe the whole amount in taxes. How can that be? They are now going to attach wages. What can we do? The state is West Virginia not Wyoming.

 

[jharris352]

The IRS is wrong. Compensatory damages from a lawsuit are NOT taxable income. You need to fight this in tax court. Whether you like it or not you will need to hire an attorney. Go to a recognized tax attorney in your state and get a free consultation. You have a good case if you have told me everything.

 

[Advice]

Garnished wages on full settlement with mortgage company

There is one thing that I forget to post. We turned the house in on our bankruptcy (that is why it was foreclosed upon), this was approximately 6 years before the lawsuit. Does that make any difference?

 

[jharris352]

I'm not a tax lawyer so I don't know, but I can tell you that compensatory damages from a lawsuit are not taxable income.