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Taxes Information |
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Taxation of Forgiven Debt: The 1099C & You
Often people fall on hard times and stop paying on credit cards. After a while the account may go to an outside debt collector who might offer a settlement of the debt for 30-40% of theoriginal sum. Once this is paid, the debtor often thinks the matter is closed, but it is not! It is very likely that the creditor will issue a 1099-C. This is a notice to IRS of the forgiven debt. If the debtor does not address this on his return he may get an IRS bill a year or two later with penalties and interest. A foreclosure on a home may also result in a 1099-C from the mortgage lender if the property is sold for less than the amount of the loan. In this instance, a person loses their home and may also face a tax bill. Usually, the bill comes many months after the tax return was filed as a result of an IRS document matching program. This "under-reporter" notice brings grief to the taxpayer. The key issue is whether or not the debtor was insolvent. If they were insolvent, it may not be taxable depending on the circumstances. There is an "Insolvency exclusion." You are insolvent when, and to the extent, your liabilities exceed the fair market value of your assets. So it is possible none of your forgiven debt is taxable or it is possible that all or only a portion of it is includable in income. If you get a 1099-C, don't ignore it. Have a tax professional do your return and they can help you determine how much of the 1099-C is taxable. If you get a letter from IRS on a 1099-C you left off your return, get help ASAP. Otherwise, IRS might file a Federal Tax Lien and take action. Look for a CPA, Enrolled Agent, Accredited Tax Advisor, Accredited Tax Preparer, or Tax Attorney to help you with serious tax issue. You may call the IRS at 1-800-829-1040 for help as well. Websites you can check out include: www.irs.gov;www.naea.org; www.nsacct.org; and www.exirsman.com. James Robert Coleman, E.A., A.T.A.
MORE RESOURCES: One state lawmaker wants to impose a tax on strip club patrons. Another plans to call for higher cigarette taxes. A third will propose putting the state's four percent sales tax back on all groceries. With the state facing a $2 billion to $2.5 billion shortfall this fiscal year and possibly worse financial news next year, lawmakers are searching for ways to fill gaps to avoid slashing education, ... Some out-of-work residents choose not to have taxes withheld from their unemployment checks, but that can be dangerous. Property owners are seeking payment plans on their taxes in Wake County. SHELBY - Long lines formed at the Cleveland County Administrative building Monday as people paid their property taxes at the last minute.Jan. 5 is the final day to pay before interest begins to accrue.Derek Mauney, waiting in a line that stretched down A new poll shows that registered voters in New York appear willing to pay higher taxes in order to prevent spending cuts in the state’s massive Medicaid program. Antrim Township in Franklin County is eliminating property taxes. LANCASTER, Pa. -- The Lancaster City Council unanimously passed Mayor Rick Gray's 2009 budget. The $46 million spending plan calls for a 5 percent increase in property taxes. With the economy struggling, Hoosiers have more on their minds: more jobs, more efficient government and surprisingly, more taxes. Being self-employed can bring a strong sense of independence and ownership. But like every business, self-employed individuals still must pay taxes. The Conservatives would abolish basic-rate income taxes on savings if they were elected this year, Cameron promised today. He also pledged to raise the income tax allowance for pensioners - currently up to around £9,180 - by £2,000. |
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