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1099C and 982 IRS forms


Zelph
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I getting a little better with the FDCPA regulations and JBD dealings (DV, C&D and Refusal to Pay).  Research now has led me to the tax situation that I will encounter in the journey.

 

1.  I'm basically judgement proof and being retired will have the time to deal with the lawsuits.  

2.  I monitor the circuit court docket in my county daily in case they try to slip one past me.

3.  I called the state attorney's office a got information and what forms I needed to file with my bank to protect my pension and SS (both are exempt).

4.  I've been diligent to CMRRR the DV's (so far only one) on a timely basis. 

5.  Pulled my free credit report to verify what is listed.

6.  Cancelled my phone service, forcing JDB's to contact me through the mail.

 

IRS filings 1099C and 982.

 

Prior to this I was the go to guy when co-workers, friends and relatives needed to file taxes.  It became somewhat of a hobby of mine helping people with filing, audits and tax problems.  I got on a first name basis with the auditors (yes you call them sir or madam, they're the big dawg), dealing with 3 indepth audits (none were my doing by the way).  I had to instruct a CPA what was needed from him for an audit from my brother's Sole Proprietership/Partnership/Corporation tax returns,  I helped my sister and husband deal with the IRS and their Corporation audits and my other sister and husband's Sole Proprietership audit.  I quit doing taxes when the IRS wanted to train/register and license me years ago.  I also had our city Auditor/CPA publicly complement me on my knowledge and tenacity.  

 

That being said when you get a 1099C don't forget that there is a form that you file (982) that will exempt a portion of you reported write off if any of those charges were used for medical/educational/moving expenses or expenses to update your home for sale or before foreclosure.  Make sure you start with the final statements showing balances and final payment for SOL.  

 

I have saved all my statements for years and being OCD I have enough evidence to satisfy the IRS regulations on form 982.   My final walkaway balances were $14,700 and I'm sure with interest/late fees/JDB charges that it will be more.   An example of mine is a home improvement account I had that was $2,700 I had charged somewhere near $10,000 total to that account and three other charge cards to upgrade my home to sell during the economic turmoil of the last few years.  I had to pay off a lien that was attached to my home for $3,100 for my stupidity of signing up for a pie-in-the-sky fiber optic service my former city bought into.  They placed liens on all homes that signed up as a guarantee of payment.  The disastrous utility is in shambles with everyone concerned pointing fingers but no official has the guts to pull out, it's become a multi-million dollar money pit.  My net worth when my walkaway journey began was negative and I barely escaped the home sale with enough equity to move, pay my deposits and rent a mobil home.  I didn't even have the white picket fence that everyone aspires too.  All of that will be a help when I file the 982 with my future returns.

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Get IRS Pub 4681.  It explains.  I keep saying, form 982 (claiming insolvency) is not as simple as it sounds. 

 

Basically, you add up all your assets, and subtract your liabillities, and if its less than $0...you're insolvent...and therefore, you do not have to pay taxes on some or all of the 1099c income reported by your creditors.

 

However...you must include ALL your assets...401k, cash vvalue of life insurance, equity in your house, etc.

 

Its as though you were filing for a BK 7...without claiming any of the exemptions...

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Another caveat to this process is when and if you need to claim the 1099C's and file subsequent 982's, you don't necessarily need to include the documentation from the JDB but it will help the IRS determine if the claims are a valid exemption and give approval to your return, so by all means include a copy of their documentation with your return.  Warning, if you do file the forms make sure you have documentation to back up your claims and that your return is accurate.  The IRS has a whistle blower program for taxpayers to turn suspected cheaters but the IRS does an audit of the whistle blower's return first to verify they are above board.  

 

I have learned that the threat of the IRS is one of the strongest weapons in your arsenal and judges, lawyers, businesses, politicians and the general public doesn't want to take on the IRS.  THEY ARE THE BIG DAWG in the ring.  I only had to mention that I was dealing with the IRS and you could watch the look on people's faces and there would be a great rustling of paper to get you what you were requesting.  Getting the JDB's name noticed by the IRS may cause them to take a closer look at the JDB and they had better have the correct documentation for your reported 1099C.  Paper trail is the key here as has been pointed out all over this forum.

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Get IRS Pub 4681.  It explains.  I keep saying, form 982 (claiming insolvency) is not as simple as it sounds. 

 

Basically, you add up all your assets, and subtract your liabillities, and if its less than $0...you're insolvent...and therefore, you do not have to pay taxes on some or all of the 1099c income reported by your creditors.

 

However...you must include ALL your assets...401k, cash vvalue of life insurance, equity in your house, etc.

 

Its as though you were filing for a BK 7...without claiming any of the exemptions...

 

Sounds like a flippin' hassle.  

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Sounds like a flippin' hassle.  

Actually it's really not that hard.

 

I use a spreadsheet program, on the left I have the name of the asset and the value.  For my auto I use nadaguides.com to establish a value of my car.  I used to use the appraised value of my home +3.5% added for each year since the last appraisal.  I had my bank statements to establish cash on hand.  Monthly statements from my life insurance policy, statements from my 401K easily downloaded from our company's financial firm.  Estimate house goods replacement values, Estimate values of anything else.  It wasn't that hard, with online access.  You also have to have money owed to you if any.

 

Then on the right side I listed all my obligations, the name of the creditor for auto loans, bank loans, credit card balances, medical bills,  outstanding utility bills, insurance payments and any other obligations you have.  I add the totals for each side then subtract the right from left for either a positive or negative net worth.  You can expand that and add addresses and account numbers.  

 

By keeping a current monthly 'Balance' sheet gives you a picture of your financial positions and can be used when applying for loans or mortgages. (something I don't foresee for many years hence).  It also gives an insurance application a picture of you finances.  I've kept one for years and have them going back at least 10 years.  Believe me it's not a pretty picture.

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So what can you do to get the IRS to "take a closer look" and "demand documentation" for the case of a 1099C issued for a debt that is simply not owed (for any of various reasons, such as "not mine", "not me", "Identity theft", "already paid in full", "never did business with the alleged OC", "paid off settlement with previous owner", "creditor lost in court", etc).

 

The IRS is giving liars and thieves too much power.  IMHO, every 1099C from a JDB should be automatically challenged by the IRS ("where's the beef ... err, documentation").

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So what can you do to get the IRS to "take a closer look" and "demand documentation" for the case of a 1099C issued for a debt that is simply not owed (for any of various reasons, such as "not mine", "not me", "Identity theft", "already paid in full", "never did business with the alleged OC", "paid off settlement with previous owner", "creditor lost in court", etc).

 

The IRS is giving liars and thieves too much power.  IMHO, every 1099C from a JDB should be automatically challenged by the IRS ("where's the beef ... err, documentation").

 

What I said in my earlier post is 'may' (underlined).  I'm not saying the IRS will look at them, only that now there is a business name in their system and if the followup check of your return has a question about how the amount on the 1099C was arrived at then they have a vague source document that may not satisfy their checks and balances and if they want to justify dis-allowing your claim they will need to have accurate documentation to dis-allow it, so it could create a query notice to the JDB.  IRS auditors, I assume are promoted via job performance and accurate results.  

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I got a 1099c from a creditor 4 years ago and filled out the 982 claiming insolvency. The IRS audited me and excepted the form.

 

I just recieved a 1099c from Portfolio for a charged off debt from 2008 that they were not able to collect on. The 1099c is dated 12/2012.

 

My question is, does anyone know if I can use 2008 as the year for this debt to claim insolvency?

 

If not and I have to use 2012 I guess I will be paying taxes on this since I will not meet the guidelines today to claim insovency.

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I have a client right now that has 1099c problems.

 

And NO the Gunny is not scared of the IRS.

 

My client has four 1009c's for the same debt starting with the OC in 06, jdb1 in 2008, jdb 2 in 2008 and jdb 3 in 2012. The 1099c is for the exact same debt. My client has kept very good records.

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I have a client right now that has 1099c problems.

 

And NO the Gunny is not scared of the IRS.

 

My client has four 1009c's for the same debt starting with the OC in 06, jdb1 in 2008, jdb 2 in 2008 and jdb 3 in 2012. The 1099c is for the exact same debt. My client has kept very good records.

 

So what are they doing about this?

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Gunny-

 

As an IRS licensed Enrolled Agent I would send the IRS a copy of ach 1099C your client was issued and the SINGLE 982 that claimed it and ask the IRS "how may times is a person supposed to pay tax on the same income?"

 

Zelph - being a paperwork packrat is never a bad thing when dealing with the IRS. I have found over the years that auditors are human beings also and they will respond in kind to the treatment they are given. While the IRS is the 800 pound gorilla in the room, the Internal Revenue Code, Internal Revenue Manual and the various other tax resources are the gorilla's cage - they hold, that gorilla to one place and one position. Only once in 30 yeqars of tax practice did I find the IRS to take an unreasonable position - and in that case they were investigating hundreds of cases of tax preparer fraud (no, not me - I was representing one of the preparer's clients - where he actually did the return correctly for once).

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Gunny-

 

As an IRS licensed Enrolled Agent I would send the IRS a copy of ach 1099C your client was issued and the SINGLE 982 that claimed it and ask the IRS "how may times is a person supposed to pay tax on the same income?"

 

Zelph - being a paperwork packrat is never a bad thing when dealing with the IRS. I have found over the years that auditors are human beings also and they will respond in kind to the treatment they are given. While the IRS is the 800 pound gorilla in the room, the Internal Revenue Code, Internal Revenue Manual and the various other tax resources are the gorilla's cage - they hold, that gorilla to one place and one position. Only once in 30 yeqars of tax practice did I find the IRS to take an unreasonable position - and in that case they were investigating hundreds of cases of tax preparer fraud (no, not me - I was representing one of the preparer's clients - where he actually did the return correctly for once).

I did just that, but i don't want to highjack the thread.

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