All these 1099 questions have me wondering..

[aces67]

I know that since we filed BK and were discharged that we have no tax responsibilities on those debts but I see that some people are receiving 1099's anyway.

My question is dh's W-2 will be here on Tuesday and we were wanting to file our income taxes right away. We haven't received any 1099's as of right now so is it okay to go ahead and file or what?

[OhioFiler]

Of course you can file now. If you receive a 1099 later, you can file an amended return which will not affect your refund at all. I say file away!

[BCA2009]

I agree with Ohio that you don't need to wait. Per IRS rules, all 1099's have to be mailed out by January 31. That doesn't mean you won't get one later, but if you are concerned about receiveing one, and don't want risk having to file an amended return (not hard to do), you could wait one more week. Most likely any 1099 you are going to receive will be mailed by today (Last business day of January).

[CCsAreEvil]

I'm a weirdo. Since I received a single 1099-C (out of about 10 possible), I'm putting off filing for another week. I do not want to deal with amending returns. Besides, I need to send off copies to the trustee. I don't want any further complications than is necessary

[LJoutWest]

This is what we found out as of right now. Yes, the debt is discharged in bankruptcy BUT in our case, our 1099-A was for them taking back the home we surrendered. Thus in terms of the IRS they treat it as a sale and you have to file a Schedule D with it. Under Schedule D if you meet two tests (it has been your primary residence for 2 out of the last 5 years AND you haven't filed a claim in last 5 years to exempt you from the sale of another home) then you have $250K or $500 if married that is exempt from counting as income and from taxes. However, you MUST file a schedule D for a 1099-A or fill out form 982 for a 1099-C. My wife is an accountant (not tax) and she has an appointment at 2:00p.m. to confirm this with a tax accountant/lawyer friend who just wants to review our situation to confirm. The IRS gets a copy of the 1099-A or 1099-C and thus you have to account for it on your taxes. Same if it is a credit card. All the chapter 7 or 13 does is discharge you from responsibility for the debt with the company; it doesn't exclude anyone from paying taxes on the sale or forgiveness of debt from the IRS. If it changes I'll post what the tax attorney/accountant states.

[aces67]

This is what we found out as of right now. Yes, the debt is discharged in bankruptcy BUT in our case, our 1099-A was for them taking back the home we surrendered. Thus in terms of the IRS they treat it as a sale and you have to file a Schedule D with it. Under Schedule D if you meet two tests (it has been your primary residence for 2 out of the last 5 years AND you haven't filed a claim in last 5 years to exempt you from the sale of another home) then you have $250K or $500 if married that is exempt from counting as income and from taxes. However, you MUST file a schedule D for a 1099-A or fill out form 982 for a 1099-C. My wife is an accountant (not tax) and she has an appointment at 2:00p.m. to confirm this with a tax accountant/lawyer friend who just wants to review our situation to confirm. The IRS gets a copy of the 1099-A or 1099-C and thus you have to account for it on your taxes. Same if it is a credit card. All the chapter 7 or 13 does is discharge you from responsibility for the debt with the company; it doesn't exclude anyone from paying taxes on the sale or forgiveness of debt from the IRS. If it changes I'll post what the tax attorney/accountant states.

That confused me. Per the paperwork our lawyer gave us filing a BK and having it discharged DOES exclude you from paying taxes to the IRS for that debt. The paperwork he gave us says you ONLY Pay taxes on debts that are forgiven..IE Written off BUT NOT DISCHARGED through a BK. Which is why he recommends people file BK.

[Patch]

This is what we found out as of right now. Yes, the debt is discharged in bankruptcy BUT in our case, our 1099-A was for them taking back the home we surrendered. Thus in terms of the IRS they treat it as a sale and you have to file a Schedule D with it. Under Schedule D if you meet two tests (it has been your primary residence for 2 out of the last 5 years AND you haven't filed a claim in last 5 years to exempt you from the sale of another home) then you have $250K or $500 if married that is exempt from counting as income and from taxes. However, you MUST file a schedule D for a 1099-A or fill out form 982 for a 1099-C. My wife is an accountant (not tax) and she has an appointment at 2:00p.m. to confirm this with a tax accountant/lawyer friend who just wants to review our situation to confirm. The IRS gets a copy of the 1099-A or 1099-C and thus you have to account for it on your taxes. Same if it is a credit card. All the chapter 7 or 13 does is discharge you from responsibility for the debt with the company; it doesn't exclude anyone from paying taxes on the sale or forgiveness of debt from the IRS. If it changes I'll post what the tax attorney/accountant states.

strange.
I am going thru turbotax,hr block etc ,and there is no way to put the 1099 A in there.and it says that we do not have to pay any taxes on a 1099 A.a 1099 C ,yes and no,just need to file a 982 form.
I haven't filed ,yet...

[BCA2009]

This is what we found out as of right now. Yes, the debt is discharged in bankruptcy BUT in our case, our 1099-A was for them taking back the home we surrendered. Thus in terms of the IRS they treat it as a sale and you have to file a Schedule D with it. Under Schedule D if you meet two tests (it has been your primary residence for 2 out of the last 5 years AND you haven't filed a claim in last 5 years to exempt you from the sale of another home) then you have $250K or $500 if married that is exempt from counting as income and from taxes. However, you MUST file a schedule D for a 1099-A or fill out form 982 for a 1099-C. My wife is an accountant (not tax) and she has an appointment at 2:00p.m. to confirm this with a tax accountant/lawyer friend who just wants to review our situation to confirm. The IRS gets a copy of the 1099-A or 1099-C and thus you have to account for it on your taxes. Same if it is a credit card. All the chapter 7 or 13 does is discharge you from responsibility for the debt with the company; it doesn't exclude anyone from paying taxes on the sale or forgiveness of debt from the IRS. If it changes I'll post what the tax attorney/accountant states.

(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm indebtedness,
(D) in the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness, or
(E) the indebtedness discharged is qualified principal residence indebtedness which is discharged before January 1, 2013.

[BCA2009]

This is what we found out as of right now. Yes, the debt is discharged in bankruptcy BUT in our case, our 1099-A was for them taking back the home we surrendered. Thus in terms of the IRS they treat it as a sale and you have to file a Schedule D with it. Under Schedule D if you meet two tests (it has been your primary residence for 2 out of the last 5 years AND you haven't filed a claim in last 5 years to exempt you from the sale of another home) then you have $250K or $500 if married that is exempt from counting as income and from taxes. However, you MUST file a schedule D for a 1099-A or fill out form 982 for a 1099-C. My wife is an accountant (not tax) and she has an appointment at 2:00p.m. to confirm this with a tax accountant/lawyer friend who just wants to review our situation to confirm. The IRS gets a copy of the 1099-A or 1099-C and thus you have to account for it on your taxes. Same if it is a credit card. All the chapter 7 or 13 does is discharge you from responsibility for the debt with the company; it doesn't exclude anyone from paying taxes on the sale or forgiveness of debt from the IRS. If it changes I'll post what the tax attorney/accountant states.

And FYI, You can exclude up to 500K (married), every two years. You don't have to wait five. You have to have owned the home for at least 2 years (730 days) and lived in it two of the last five years.

[bulletproof77]

This is exactly the question I have been trying to get a proper answer to. House surrendered in BK (not re-affirmed) Chapter 7 filed/discharged. If the first and second 1099 us, do we report as taxable income to the IRS even though both mortgages discharged in Chapter 7 ? Or does it wipe out those 1099's..? Thanks, saw the "Chapter 11" part above and it kind of confused me.

[aces67]

This is exactly the question I have been trying to get a proper answer to. House surrendered in BK (not re-affirmed) Chapter 7 filed/discharged. If the first and second 1099 us, do we report as taxable income to the IRS even though both mortgages discharged in Chapter 7 ? Or does it wipe out those 1099's..? Thanks, saw the "Chapter 11" part above and it kind of confused me.

Go to IRS.gov and look up 1099. It has some info there that may help you.

[LJoutWest]

No argument, we are dealing with an office that handles my wife's companies taxes and they have a CPA and a Tax Lawyer on hand. What I wrote is what I said we were told at the time but here is a partial clarification.

We are not discharged at this time (if any has followed our case we are awaiting a response form the UST to a response we filed on the UST motion to dismiss or convert). We surrendered our house and so this is what the CPA said BUT she has to do some research.
As she understands it, and the IRS confirmed, we have to account for the 1099-A on our taxes on a schedule D. We may simply fill out the form and then attach a letter explaining our situation. If we receive a discharge this we should also receive a 1099-C this year that cancels the 1099-A. 1099-C is handled by IRS Form 982 (the tax accountant is confirming that, but the IRS on the phone told me that). IF we go into a Chapter 13 then no discharge will have occurred and we simply have to explain this in an addendum on our taxes. In terms of taxes that is up in the air. She has t conduct research as it could go several ways; one being we are charge the tax increase for 2009 and for 2010 receive a 1009-C canceling the A and that would write it off.
IF we were discharged she would simply have us send a copy of the discharge in with our taxes, removing liability. This could change based on what she finds. She also said the lender may have been wrong to issue it (she doesn't believe so) and a correction would then be made.

However, to clarify, the 1099 A or C has to be accounted for on the tax return and explained to the IRS. Simply ignoring it will not make the IRS go away. If explaining means we include it on the Schedule D, take the $500k exemption with an explanation attached, so be it, but we have then accounted for it. If it is a 1099-C then Form 982 is used with an explanation or copy of the discharge attached. You have then been responsible to the IRS for your tax (or the accounting thereof). It is complex and I would recommend if someone has questions to see a tax specialist. Our Tax Accountant told us she will do research and confirm what she thinks (file the schedule D in our situation since no discharge we are just in a stay, attach and addendum/explanation, claim the $500k and be done).

Also BCA2009 in your quoting the IRS Code, the Chapter 11 pertains to that, Chapter 11. We will either receive a chapter 7 discharge or go into a chapter 13 so the Chapter 11 does not pertain to us. That is what we have been told by the IRS (we called) and someone who specializes in Tax Accounting with a Masters and a CPA. I'll trust that. Also to clarify, IF and both our attorney and the CPA has had this happen, a company comes back in 2 years and issues a 1099-C and lets say you've moved and you don't respond, and you cannot provide documentation of the discharge of the debt, both the IRS and your State Tax Agency will come after you for that debt with interest. Thus my point in trying to communicate is that you have to follow the IRS rules and file; simply ignoring this will not make it go away. The best counsel I got from someone here, from our lawyer AND from our Trustee was to see a tax specialist. Our bankruptcy is different and complex right now so we need a specialist. Usually my wife does our taxes just fine but this is complicated. Our taxes our due to the Trustee by Monday but that has been waived as long as we keep him informed of what we are doing and finding out. Got a 1099 A or C, find a tax specialist who can tell you what to do, you may spend a few dollars but it saves a lot more in the end.

[mtbc]

It sounds like you're raising an interesting specter of what happens to taxes when you have surrendered your house as part of the bankruptcy case in one tax year, and they send you a 1099 because of that, but the actual discharge doesn't come until the next tax year.

[aces67]

Well I never meant to say that we would ignore a 1099 I was just asking if I should go ahead and file or wait.

I know we aren't legally liable for the taxes so it's not a big deal I just need our refund back by mid February.

[BCA2009]

LJoutwest, the very first sentence of your post (post #5) says that your debt has been discharged. Since that is not the case, I agree that it makes your situtation more complex. I would file an extension and wait out the result of your discharge. I'm sure you know that you can extend until Oct 15.

As far as Form 982 goes, the exemption is under Title 11, Not Chapter 11. All of the Bankruptcy Code is under this Title.

Full disclosure: I have been a CPA for almost 15 years, and also have a masters degree. I haven't practiced tax in several years, but I have a pretty good understanding of it.

I am not giving you advice. Anything I have posted is just informational. Please do your own due diligence. The CPA that signs your tax return is the one responsibe. BUT, if that person told you form 982 only applies to Chapter 11 Bankrutcy, you need to talk to someone else.