Attention Katrina Victims - Look at your 1099-C closely

[Texadelphia]

If you were a Hurricane Katrina victim, you may not have to report a 1099-C as income (Cancellation of a Debt).

1099-Cs are often filed by Junk Debt Buyers, Original Creditors and Collection Agencies after a debt is settled. See the instructions at the back of the 1099-C for more information.

Further, programs that allow students to get a loan forgiven (in exchange for contract work requirements), could also cause a OC to kick out a 1099-C. Depending on the amounts, these can really sting and could even put you in arrears with the IRS if you aren't prepared to pay for the increased income tax (through W-2 withholding).

As part of the relief effort, settled debt may not have to be counted as taxable income to you.

Talk with your tax professional if you were in the Katrina disaster and received a 1099-C from your creditor(s).

If you previously received a 1099-C last year and reported this as income, you might be able to file a IRS Form 1040-X to have the amount from the 1099-C removed off your Adjusted Gross Income, resulting in a refund.