Okay, this is either really bad or really good...

[NSH]

Hey folks! Okay, I used to post here a while back and I am probably going to need to file Chapter 7. I was the one who posted about the Marshal's Notice of Execution and was worried they would break into my house to loot my posessions. The problem is that I cannot file BK yet.

Because I owe such an insane amount of money and back taxes that I am lookiing at between 5 and 7 grand for a good attorney, which I simply do not have.

Onto my problem...

I have received a bunch of 1099's from Bank Of America that total either $68,000.00 or about $100,000.00. THOSE rat bastiches cancelled my debt, at least some of it! The reason I am not sure is that it looks like two are from the same account and they are EQUAL amounts. So either they split the debt up into two exactly equal portions or sent me a duplicate 1099.

Anyway, from what I know, this is not INCOME!! Now obviously that is truly absurd! I made aout 18 grand in 2010, but now according to the IRS I actually made anywhere between 85K and 120K?

Can this really be how it works?

I read that there are some excemptions, such as insolvency whereby if you are settling your debts and you are "insolvent" at the time, that you are excempt from this so-called "virtual income," but I know nothing about this, not to mention that I am NOT trying to settle my debts at this time, mostly because I don't have two nickels to rub together with which to settle them with!

Anyone have any experience with dealin with this insanity? Because I really cannot afford to now become libel for income on 120 grand on top of the hundreds of thousands I already owe.

Can you say, "OUCH?!!"

[NSH]

Hey sorry to bump this, but I don't want it to get off the first page and descend into obscurity without getting any answers. Thanks and sorry again. ;)

[frogger]

Anyway, from what I know, this is not INCOME!! Now obviously that is truly absurd! I made aout 18 grand in 2010, but now according to the IRS I actually made anywhere between 85K and 120K?

Oh yes it is! You need to see a good accountant and a good bk attorney.

[NSH]

What about the sseeming stipulation on all the 1099's I received that said You may not be required to declare this as income if...

And they listed a bunch of reasons. One was obviously if the debt was discharged in a bankruptcy. Another was a little more amorphous. It said "Do not report the debt as income to the extent that you were insolvent immediately before the cancellation of the debt..." and then it went on to say that I would have to file a form 982.

The problem is that legaleze is sometimes a little different than plain English. At the dinner table, everyone would know that insolvent means broke, but in the context of filing your taxes, legal money I owe the IRS, and virtual income I am responsible for, things are not as clear cut, which is why I am asking this question. For all I know, the IRS has some obscure definition of "insolvency" that I am unaware of OR perhaps I should take that at face value?

Obviously I need a good accountant and lawyer, BUT I am asking the question in the forum in the meantime because I am working every day this week and next week and will not be able to talk to one immediately so I would like all your opinions for now. ;)

[BKOnce]

Pay tax for big forgiven debts (1099) as your income is still less than paying back at least 30% through a chapter 13 plan for those debts??.. Call IRS to make monthly tax payment plan or ask so it should work out just like you go through c13 (only for those debts)?

The question is how much tax$ out per $100 CC debt that IRS would get from you?

[newbie2]

Caveat: I am not an accountant, but have read quite a bit.

My understanding of the IRS standard for insolvency is this: Note the date of the debt cancellation that is on the 1099 that you received. Then add up all of your assets as of that specific date. If your assets are more than the 1099 amount, you are not insolvent.

You really need to take some time off of work to meet with an accountant who is familiar with the form 982 AND knows how it might pertain in your situation.

[mysticspirit25]

Pay tax for big forgiven debts (1099) as your income is still less than paying back at least 30% through a chapter 13 plan for those debts??.. Call IRS to make monthly tax payment plan or ask so it should work out just like you go through c13 (only for those debts)?

The question is how much tax$ out per $100 CC debt that IRS would get from you?

Are you kidding me? How can you tell a person to "just pay it"? Yes, it is income, I received over $50,000 in 1099-c's this year. I made about what the OP posted, and filed 982's on each and every 1099. Didn't pay a dime. While each person's situation is different, you cannot automatically assume that a person has to just pay it. The 982 form is really quite simple actually, the IRS has a publication on it and itemizes every line to help you figure if you are insolvent. I'll make it very simple, if you had less than $10,000 in the bank, and you either 1) don't have a home, or 2) have a home that is encumbered by what or more than it is worth, and you have alot of other debts (yes the 982 takes ALL debts into consideration), then you are insolvent. The 982 pub is basically a financial statement, assets and liabilities (all are counted), and if you are in the negative by even 1 dollar you are insolvent. You don't pay tax. However; as everybody else has said, I suggest that you seek a qualified tax accountant (not H&R block or the like) pay $250 for an hour of advice on how to fill out the 982's.

ETA: On the brighter side, in the future if you apply for a mortgage or something, you can legally say on the loan app you made over $120k in income this past year, as when they pull transcripts, they will see an AGI of over 120k, not that it means anything, but it does "puff" up your income on file for future cc issuers and mortgage lenders, in a legal way. That is the only positive I see in a 1099-c

[newbie2]

ETA: On the brighter side, in the future if you apply for a mortgage or something, you can legally say on the loan app you made over $120k in income this past year, as when they pull transcripts, they will see an AGI of over 120k, not that it means anything, but it does "puff" up your income on file for future cc issuers and mortgage lenders, in a legal way. That is the only positive I see in a 1099-c

Actually, that looks worse. If the return shows one year over 120K, and then substantially less in years 2 & 3 post that time, the lender and the underwriter will delve to see what went on.

[NSH]

Are you kidding me? How can you tell a person to "just pay it"? Yes, it is income, I received over $50,000 in 1099-c's this year. I made about what the OP posted, and filed 982's on each and every 1099. Didn't pay a dime. While each person's situation is different, you cannot automatically assume that a person has to just pay it. The 982 form is really quite simple actually, the IRS has a publication on it and itemizes every line to help you figure if you are insolvent. I'll make it very simple, if you had less than $10,000 in the bank, and you either 1) don't have a home, or 2) have a home that is encumbered by what or more than it is worth, and you have alot of other debts (yes the 982 takes ALL debts into consideration), then you are insolvent. The 982 pub is basically a financial statement, assets and liabilities (all are counted), and if you are in the negative by even 1 dollar you are insolvent. You don't pay tax. However; as everybody else has said, I suggest that you seek a qualified tax accountant (not H&R block or the like) pay $250 for an hour of advice on how to fill out the 982's.

This is precisely what I was hoping was true. For the record, I have NO ASSETS. lol (well not so funny, but true) I have no property, no bank accounts, no savings, no investments, only debt and I make a meager living. BY the way, I absolutely intend to speak to an accountant about this and I will have to declare BK once I can afford to do so, but this forum is a great resource thanks to people like you, mysticspirit.

[mysticspirit25]

You are welcome, but I cant stress enough, just because my situation was declared as insolvent, I cannot guarantee yours will, which is why a good $250 for an hour of professional advice will be in order. From what you say above it looks like you qualify under the insolvency rule.

[mysticspirit25]

Actually, that looks worse. If the return shows one year over 120K, and then substantially less in years 2 & 3 post that time, the lender and the underwriter will delve to see what went on.

I never thought of it that way. Maybe a mortgage lender would look, but I doubt a cc lender would. Hell, it probably would even pass an AMEX F/R..although If in the situation such as the OP, I doubt they would be in a position for an AMEX F/R

[NSH]

Okay, thanks for all the information, guys. I still need to eventually talk to a lawyer before filing my 2010 return, but at least this is encouraging. ;)

[keepsmiling]

If you have no retirement funds either, sounds to me like you are the definition of insolvent.
Those DO count for purposes of 1099's/taxes, as I just learned.

[olivies]

This link may be helpful
http://www.irs.gov/individuals/artic...179414,00.html

If it was a primary residence, you may not be liable for the debt but you still have to report it on form 982.