Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-31-2015, 03:52 PM
Junior Member
 
Join Date: Jan 2015
Posts: 2
1099 canceled debt

Hello~~In 2013, we negotiated a settlement on an old debt. We made the last payment on 21 December of that year. It cleared our bank before the end of the year. Our agreement with the company was that upon receipt of that payment, the balance of the debt would be forgiven. The IRS says that forgiven debts must be claimed and taxes paid on them in the year they were forgiven, whether a 1099 is received or not. We did not receive a 1099.

We included the income in our tax return for 2013 and paid the required taxes on it. (We were not insolvent in 2013.)

Yesterday, we received a year 2014 1099 on the debt. I suppose our choices are two: We can submit an amended 2013 tax return and wait for the refund, or we can send an explanation with our tax return for 2014, without including this income.

What do you suggest?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-01-2015, 09:10 PM
Moderator
 
Join Date: Oct 2010
Posts: 5,258
Quote:
Originally Posted by catherder View Post
Hello~~In 2013, we negotiated a settlement on an old debt. We made the last payment on 21 December of that year. It cleared our bank before the end of the year. Our agreement with the company was that upon receipt of that payment, the balance of the debt would be forgiven. The IRS says that forgiven debts must be claimed and taxes paid on them in the year they were forgiven, whether a 1099 is received or not. We did not receive a 1099.

We included the income in our tax return for 2013 and paid the required taxes on it. (We were not insolvent in 2013.)

Yesterday, we received a year 2014 1099 on the debt. I suppose our choices are two: We can submit an amended 2013 tax return and wait for the refund, or we can send an explanation with our tax return for 2014, without including this income.

What do you suggest?
some people received 1099-C Cancellation of debt even 9 years later; your lender may not have finished the paperwork in 2013, so they may issue one for 2014 possibly. you can send an explanation with your tax return for 2014 since you already included the income in your tax return for 2013. Any time that you have a lender who forgives or cancels a debt that you owe, the IRS requires that they send you a 1099-C to report the amount of debt that was cancelled. This then becomes taxable income to you. I realize that it is not really income, in the sense that you earned money, but in the eyes of the IRS it is treated as income since you received something in the form of goods or services or cash which you did not have to repay.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Cancelled Debt 1099-c MBaker Income 3 03-28-2014 01:56 PM
1099-c student loan debt/bankruptcy buster Income 5 05-29-2013 06:16 AM
I received a 1099-C from a timeshare that was canceled? Dalejess Rental Real-Estate 0 02-10-2012 09:53 PM
C Corporation receives 1099-C Canceled Debt Suzanne C-Corporation 1 02-05-2011 12:00 AM
Californians who lose their homes may face state income debt on cancelled debt!! TaxGuru California 0 09-09-2009 10:57 AM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.