Help

[karm43]

Got a 1099c in mail today original creditor citibank this is from a junk collector. Filing Feb. They were on my list. Am I gonna have to claim this on my taxes? its for 4234.00. It figures what happens now it says cancellation of debt. Date April 2011 heck they r still hounding me. Now I have to worry about owing taxes for this year.

[shark66]

Well...

If you *know* that you're filing

AND

the letter was received by regular and NOT certified mail...

I know what I would do...

That's all I'm about to say.

Good luck to us all.

[LadyInTheRed]

If you were insolvent immediately before the debt was cancelled, you do not have to pay income tax on the cancelled amount.

For information, see IRS publictation 4681: http://www.irs.gov/publications/p4681/index.html

[zeezee]

I have a similar situation but I am damn sure not putting that on my taxes! I filed 2 1/2 years ago and this company was the only one to not file a claim. Just last week I got a debt cancellation 1099c for $6k...I did not include it on my taxes.

[DSPatch]

I had a similar situation, filed a 13, which was dismissed 9 months later. I got a 1099 the other day for $3400.00 saying canceled debt. We are filing our 7 pro se any minute now (hopefully in the morning!) and so I called the IRS and asked them what I should do. The nice man on the phone seemed a bit perplexed, but finally told me that since we were insolvent it wouldn't be taxable, and further that since the 13 was dismissed that the debt wasn't really canceled, and the lender should have sent a corrected 1099 since now their taxes are skewed (sic 'em IRS!)

He also said since we are still insolvent and filing a 7 it should be irrelevant at this point. I just filed my return on 1/23 and am expecting a refund next week (100% exempted under Federal) - and that confusing 1099 did not make it onto my return.

Never be afraid to just call the IRS and ask them. I have walked into the Federal Building several times with utterly confusing paperwork concerning VA disability increases (non-taxable) and each time they have been patient, helpful and very willing to help me get it right. I used to just go there to get help on forms and file - much cheaper than the tax prep guys and 100% guaranteed to be done right.

Hopefully the trustee we get will be equally accommodating!

dspatch

[keepsmiling]

Definitions of insolvency are different when it comes to debt forgiveness vs. bankruptcy.
Retirement accounts are not counted as assets in a BK; they are, however, for debts forgiven thru other than BK. So, one might be technically bk but NOT insolvent.
Changes the pic a bit sometimes.
DSPatch, did the nice man at the IRS ask you about your retirement funds?
Will be curious to see where this goes.

[DSPatch]

DSPatch, did the nice man at the IRS ask you about your retirement funds?

He asked about other income, yes. A military retirement that is taxable, but does not amount to much thanks to USFSPA offset of 40% and VA disability. A small 401k (about 3400) that was cashed out to fund sons college in September. He did not say anything about these.

The reason may be that my case is a bit different in that we were dismissed? It was a confusing conversation on both sides and he went back and forth a couple times, ultimately he seemed to decide it all hinged on the outcome of the 13.

I think his primary point was that since the 13 was dismissed, the 1099 showing debt canceled was irrelevant. The lender reported it canceled by bk when it actually was not because the bk was dismissed. So I suppose at that point the question of insolvency was moot. Hmmm, had not thought that through.

In thinking about it now I wonder what the impact will be next year? Since this lender was included in the 13 and will be in the 7 I suppose it will be discharged and won't matter, but it certainly does complicate the deal when you have a dismissed 13 closely followed by a 7.

On a related note I actually fielded a call from a collections agency earlier. When I told them we are filing a chapter 7 he said "You cannot do that, your chapter 13 was dismissed and it is illegal for you to file again so soon." After I laughed out loud I asked him what country he is in?

He comes back with "If you do that we will bring charges, and you can go to jail!" and starts in on all sorts of legal scare tactics.

I politely told him I will take my chances and keep the coffee on for his process server. This time he hung up on me - usually that is my happy privilege.

dspatch

[LadyInTheRed]

I have a similar situation but I am damn sure not putting that on my taxes! I filed 2 1/2 years ago and this company was the only one to not file a claim. Just last week I got a debt cancellation 1099c for $6k...I did not include it on my taxes.

So, you got a 1099-C for a debt discharged in bankruptcy, right? You should have filled out Form 982 and attached it to your return. It is possible the fact that your return did not include the 1099-C income or a Form 982 will trigger an audit, or at least an administrative review that will require you to explain. If that happens, it should turn out fine in the end, but it'll be more hassle than attaching the Form 982 in the first place.

[zeezee]

So, you got a 1099-C for a debt discharged in bankruptcy, right? You should have filled out Form 982 and attached it to your return. It is possible the fact that your return did not include the 1099-C income or a Form 982 will trigger an audit, or at least an administrative review that will require you to explain. If that happens, it should turn out fine in the end, but it'll be more hassle than attaching the Form 982 in the first place.

No, I am still in an active BK (not due to discharge until 2014). But this company was the only one that did not file a claim...if that means anything.

[karm43]

Ok problem is i didn't file yet and i was hoping to get a small refund that i may have been able to keep. Was gonna file in April because i need my driveway fixed i have a busted pipe cause of tree roots growing underneath. Anyway I am worried now about owing, which means I have to start working on my taxes to find out... Do I have to file this? Anyone know? I'm thinking I do. Fri my hub gonna drop off more papers at attorney so im gonna make him a copy and see what he says. Its just bad timing for them to forgive this debt go figure, guess this means they can't put a judgement on me right.

[karm43]

What i mean filing bk feb. Tax in april

[LadyInTheRed]

Karm43, did you read publication 4681? That should help you determine whether you qualify to exclude the amount forgiven from income due to insovlency. You may simply need to complete form 982 and attach it to your return.

[karm43]

I will check