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1099-C Question

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I received some 1099-C's in the mail for some credit card debt that I settled on. Now I'm in the process of doing a Chapter 7 bankrupcy. My question is when I file my return for 2009, do I have to add these 1099-C to it??? I'm insolvent but I will file bankrupcy so I'm not sure how it works.

Any suggestions?

Thanks

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Get IRS Pub 982. If I understand the gibberish correctly, you have to be insolvent at the time the debt was forgiven in order for it to be non-taxable.

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My guess would be yes...but, you should probably ask a tax professional.

Its been my experience that the IRS wants you to report income and pay taxes first....and then sort out whether you owed them or not.

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I knew that but if I'm filling bankruptcy do I have to file 1099-C on my return?? That was my question.

if you file bankruptcy that is the definition of insolvency and you do not pay taxes on debt relief in BK. This is the major benefit of BK. But you should talk to a BK attorney :)

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I have had great luck calling the IRS helpline. I always call and ask the same questions 3 or 4 times though, just to be sure I'm getting all the angles. (Once I got a nut who thought he knew everything and didn't know Anything.) You can get the publication online and look at it first to get a good understanding. Then I also read through the section on topic within the federal tax code (law) which can be found at cornell edu.

That way I know exactly what the law says rather than relying on some accountants interpretation of what the law says. If questioned in an audit, the law rules.

Been there too. The auditor argued "that's not the way it's normally done" and I just whipped out the law and asked to see his supervisor. Done.

Personally, if I have something that 'could' be income under different circumstances, I would rather find out ALL the details on reporting it and Prove that I was insolvent up front. That way it is declared and decided and the chance that it will come back to bite you in the way of questions from IRS in the future - well then it's all water over the dam.

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I just got off the phone with IRS. They told me that I still need to file 1099-C with my 2009 taxes because these weren't discharged in the bankruptcy that I'm doing right now. I kind of figured that but just wanted to make sure.

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If you still had more debt than assets when those debts were settled, you were already, technically, bankrupt (insolvent), so you still may not have any additional liability for those 1099-C's.

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if you file bankruptcy that is the definition of insolvency and you do not pay taxes on debt relief in BK. This is the major benefit of BK. But you should talk to a BK attorney :)

I would be careful because IRS sees debt relief as an income and there is no bankruptcy on income.

In the bankruptcy it self it is an asset. The mortgage debt relief have special treatment so look what the 1099-c is for.

But there is tax forgiveness by way of insolvency via the form 982. It just you should avoid duplication of insolvency.

I would report it as an income and file form 982. But I am not an accountant.

CORRECTION!!!! You do not report anything if you file Form 982

Edited by sub00

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