1099-c

[adamjlaw]

My home was foreclosed on 4-02-08. My chapter 7 filing was discharged 12-15-08 and the home was included in the filing because of the loans and the resulting unsecured debt. My understanding was that I wouldn't have to claim the difference between what I owed and value on my taxes. However, I recieved a 1099-C in the mail today. When I put that into my turbo tax, even with the bankruptcy box checked that changes my tax liability to me owing 7,000. What should I do? Do I have to claim this as income?

[HHM]

Don't use turbo tax. The BK completely protects you from having to pay income tax on that debt. You need to download form 982 from the IRS website.

[debtmonster]

Doesn't Turbo Tax have that form built-in? This has been one of my biggest fears when I turn my house in. I'm almost 90 days past due.

[Flamingo]

Turbo Tax is not a CPA. It doesn't contain everything and does miss a lot of stuff. I won't touch it for state taxes. As HHM states obtain Form 982. Form 982 states you are insolvent at the time of the foreclosure and resulting 1099. If you filed BK and included the home in the filing you should be fine. If one did not file BK and just let the home foreclose, in order to avoid the taxes on the 1099 you have to prove you were "insolvent" at that time. With the BK you should be fine; it's when one does not have BK protection and receives that 1099 and tries to get out of paying taxes by claiming insolvency. In that situation, it is best to get a CPA to do your taxes because the chances of getting audited are astronomical.

[StartingOver08]

OP, if you would like additional detail, read this IRS publication 4681. It explains about bankruptcy, insolvency, foreclosures, canceled debt etc. It is very comprehensive.

http://www.irs.gov/pub/irs-pdf/p4681.pdf

[magyar123]

And remember - Tim Geitner - Obama's Treasury Sec. appointee claims he used TurboTax when he failed to pay the right amount of taxes for 3 or 4 years.

[adamjlaw]

982

I found the form 982 on turbo tax and filled it out. It was easy. The only thing I had to do differently was make the 85000 for the house excluded from my income. Turbo tax doesn't automatically make it excluded when you check the bankruptcy box. They leave it as taxed income. It took about two hours of reading IRS publications to figure everything out but I did it.

[debtmonster]

I found the form 982 on turbo tax and filled it out. It was easy. The only thing I had to do differently was make the 85000 for the house excluded from my income. Turbo tax doesn't automatically make it excluded when you check the bankruptcy box. They leave it as taxed income. It took about two hours of reading IRS publications to figure everything out but I did it.

Excellent. Thanks for posting that. Many people on here will be using Turbo Tax.

[DivorceRuinedMe]

What if you haven't gotten form 1099-c? Do you just do your taxes business as usual?

I asked this question about a week ago and everyone said I didn't have to do anything special because the house was included in my bankrtuptcy. Now I'm confused.

[DivorceRuinedMe]

Bump - don't want my question at the end getting buried!

[BnkrptcyLwyr]

Forgiven debt is income.

However, there are two basic (important) ways that forgiven debt is NOT included in income. The other exceptions usually don't apply.

First, if the debt is forgiven at a time that you were INSOLVENT.

Second, if the debt is forgiven as a result of filing BANKRUPTCY.

See 26 USC 108

Also, there is a difference between a 1099-A and 1099-C. The former just tells them that the bank acquired the property (this is NOT forgiveness of debt). 1099-C is the one dealing with forgiveness of debt, and raises the issue of whether or not the income must be included in your gross income.

Usually though, the forgiveness of debt is NOT generally related to bankruptcy, but a subsequent foreclosure resulting in a deficiency which is later forgiven. This forgiveness of debt usually means that you were INSOLVENT at the time the debt is forgiven (else the house would not have been foreclosed).

Also, beware of a short sale ... this will result in forgiveness of debt income which would not be excludable.

[newimges]

I received a 1099-C today in the mail from Capital One which was one of my credit cards that was included in the bankruptcy. Item 6 (Bankruptcy) is checked.

This debt is in my business name but I am a sole propreitor and all business debts were included in my chapter 7 bankruptcy.

Do I still need to fill out 982 Form since they checked the bankruptcy box? I don't understand why Capital One even bothered to send this out.

I already filed my taxes 2 weeks ago as I didn't need to wait to receive any w2 forms. I'm wondering now if I need to file the 982 form if I will also have to file a 1040 x to amend my tax return.

Does anyone know?

Thanks.

[debtmonster]

So when we file bankruptcy, am I to expect a flood of 1099C's in 2010?!?!

[BKcrazy]

I just got a 1099-A in the mail today.

I included my condo in my BK...So am I still able to use that 982 form? Or do I have to do anything? ACK...

[uofaguy]

BnkrptcyLwyr - thanks for the quick clarification on 1099-A vs. 1099-C. Received a 1099-A yesterday in the mail & wasn't sure of what implications (if any) I may have.