Received 1099-C from Capital One

[NewDawn]

Well, we just received our 1099-C from Capital One in today's mail. I can't say I'm really surprised because I had heard that Capital One and Bank of America will send out 1099-Cs on their discharged debts.

I do,however, have a couple of questions. The date of cancellation listed on the form is seven months AFTER our discharge date. Will this cause a problem upon filing? Also, do we also need to include our discharge order along with our tax return?

[JRScott]

First off debt discharged in a bankruptcy is not taxable. Otherwise you'd never get out from under it, shouldn't have been sent a 1099-C. Their clerk made an error I suppose. I'd let your lawyer know but really shouldn't need the 1099. A copy of the discharge letter would be handy if the IRS audits you as it would be proof the debt was discharged in bk.

[catleg]

There should be a checkbox on the form that says "Discharged in Bankruptcy". If it's checked you can probably ignore it.

[helpmeout]

When you file your taxes, include a form 982 for the discharged debt. That's a lot easier than trying to fight with Capital One, who I suspect sent it out knowing that they didn't have to.

[aces67]

If you go to IRS.gov and search for 1099-C it will give you the directions and forms you need to file.

[dakota112]

Lets face it, for most of us this beast is why we file bankruptcy. Once they start sending out 1099's on "forgiven debt" and if their is alot of this forgiveness you are going to go under. No amount of debt restructuring games will make these 1099's go away and without filing, you are screwed.

[ryan]

Lets face it, for most of us this beast is why we file bankruptcy. Once they start sending out 1099's on "forgiven debt" and if their is alot of this forgiveness you are going to go under. No amount of debt restructuring games will make these 1099's go away and without filing, you are screwed.

If someone has done 'debt settlement' with creditors and receives a 1099 can't they claim Insolvency if they were no net assets at the time of settling?

[Doomonic]

I received a 1099-C from Capital One as well. I contacted my lawyer and it's just as helpmeout said above. File a form 982, which points out to the IRS that the debt forgiveness (by virtue of the bankruptcy discharge) occurred in a bankruptcy proceeding and has no tax consequences.

[GoingDown]

If someone has done 'debt settlement' with creditors and receives a 1099 can't they claim Insolvency if they were no net assets at the time of settling?

There is a box to check on form 982 for insolvency if you did not file bankruptcy. There are even instructions regarding this matter on the form. If your debts or liabilities exceed your assets by more than the amount of debt forgiven, then you can exclude that amount from your income.

For anyone facing this situation, download the form from the IRS website for free and then read the instructions and follow them.

Now, however, if you were not insolvent (by their definition) at the time the 1099 C was issued, you will owe taxes on that discharged debt.

Then you might consider an offer in compromise or perhaps consult a tax attorney.

[Shakin]

This thread is very handy. I received on as well.
This forum is an absolute godsend.

Thanks again......