Received first 1099 for cancelled debt

[treehugger1]

I received my first 1099-C cancellation of debt today. Cap1 was the OC. The debt was my largest of four C1 credit card accounts with a cancelled amount of $6000.

The last payment was five years ago next month.

I'm meeting with a tax accountant to clarify my level of "insolvency." I am insolvent in that my net worth is several thousand dollars in the negative. The only catch to insolvency is whether or not I have "interest" in my future pension plan. Since I will only receive some future formula amount of a monthly pension when I retire, there does not appear to be any cash asset value for my pension plan.

I do have optional retirement accounts, but I think with my student loans, two chitibank judgments and outstanding JDB/CA/OC unsecured debts, I will still be able to show insolvency.

I just thought I would share this information. I have heard about the 1099's for cancellation of debt. I just never received one. Now I have.

And, Cap1 did sue me over a $2000 debt and my wages were garnished to pay this off. After the garnishment, Cap1 sent me a $1000 check for overpayment on the account. Very strange, but the C1 lawyers filed a satisfaction of judgment.

Who knows what sort of collection model Cap1 operates under.

[keepsmiling]

Congrats ( I think)
that is bizarre about the refund. in a good way of course.
Keep us posted on that insolvency thing.

[Flamingo]

It is good you are working with a tax professional because trying to prove insolvency with the IRS is a big trigger for an audit. It's best to have someone do your returns if you take that step in case an audit does take place. Best of luck to you....

[tobee43]

I received my first 1099-C cancellation of debt today. Cap1 was the OC. The debt was my largest of four C1 credit card accounts with a cancelled amount of $6000.

The last payment was five years ago next month.

I'm meeting with a tax accountant to clarify my level of "insolvency." I am insolvent in that my net worth is several thousand dollars in the negative. The only catch to insolvency is whether or not I have "interest" in my future pension plan. Since I will only receive some future formula amount of a monthly pension when I retire, there does not appear to be any cash asset value for my pension plan.

I do have optional retirement accounts, but I think with my student loans, two chitibank judgments and outstanding JDB/CA/OC unsecured debts, I will still be able to show insolvency.

I just thought I would share this information. I have heard about the 1099's for cancellation of debt. I just never received one. Now I have.

And, Cap1 did sue me over a $2000 debt and my wages were garnished to pay this off. After the garnishment, Cap1 sent me a $1000 check for overpayment on the account. Very strange, but the C1 lawyers filed a satisfaction of judgment.

Who knows what sort of collection model Cap1 operates under.

did you file bk and was it discharged and closed? if so, you just attach the 982 form and you are fine. you don't need to much more of anything else. accountants are just really beginning to understand 1099C and A's actually, since they haven't seen so many until recently, not that they were not ever issued, however, with the state of many, more are being issued now than ever before with all the bk's and defaults going on.

remember the 1099C and A are really the creditors way of informing the IRS of THEIR loss, not so much that there are any tax ramifications to you. i would suggest if this tax consultant suggests you owe anything, it's time to get another one.

best of luck!

[keepsmiling]

Tobee, TH hasn't filed. Entirely different story.

[tobee43]

Tobee, TH hasn't filed. Entirely different story.

ahhhhhhhh....yes it is! a completely different story. tree's been around for so long i just thought it was a done deal

thanks keep for keeping me on my toes LOL!!

[treehugger1]

According to the CPA, I am insolvent under IRS rules! I guess there are many different pension plans, and some of these consider future income stream an asset. For whatever reason, it appears my pension/retirement plan is not considered an asset. My net worth is about negative $50K. The student loan debt and two big judgments really helped offset my optional retirement tax-deferred accounts. I have no complaints.

The accountant did advise me to file a paper return and include the worksheet showing my insolvency. You are not required to supply this information, however, it seems like a good idea.

The information and form (page 6-7) can be found in the IRS publication 4681.

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

[DYLAN150]

Tree, Yes, I am doing the worksheet to. (List of assets and Liabilities)

[tobee43]

According to the CPA, I am insolvent under IRS rules! I guess there are many different pension plans, and some of these consider future income stream an asset. For whatever reason, it appears my pension/retirement plan is not considered an asset. My net worth is about negative $50K. The student loan debt and two big judgments really helped offset my optional retirement tax-deferred accounts. I have no complaints.

The accountant did advise me to file a paper return and include the worksheet showing my insolvency. You are not required to supply this information, however, it seems like a good idea.

The information and form (page 6-7) can be found in the IRS publication 4681.

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

that's good news. insolvency doesn't necessarily mean filing for bk. so i'm glad you rec'd good direction from your accountant.