I just received a 1099c today. My ch13 was discharged in May. Do I have to pay taxes on discharged debt?

Attorney answers (6)

1. Licensed in GA

   

   Brian R. Cahn

   Cartersville Bankruptcy Attorney

   Contributor Level 4

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   Answered January 26, 2013 10:21. When a borrower receives a Form 1099-C relating to a debt discharged in bankruptcy, he or she must file an IRS Form 982. The form is entitled “Reduction of Tax Attributes Due to Discharge of Indebtedness.” The Internal Revenue Service explains Form 982 in IRS Publication 4681.
   
   I've included links to those IRS forms in the following blog post:
   
   http://northgabankruptcy.wordpress.com/2011/11/...
   
   Make sure to bring the 1099(c) to the attention of your CPA or tax preparer, so you don't have to amend your return later.

   I am a fully-licensed Federally-designated Debt Relief Agent. I assist my clients in a variety of ways, including... moreI am a fully-licensed Federally-designated Debt Relief Agent. I assist my clients in a variety of ways, including - but not limited to - filing petitions for relief under the United States Bankruptcy Code. less

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2. 

   Paula Sinclair

   Twin Falls Bankruptcy Attorney

   Contributor Level 20

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   Answered January 25, 2013 21:45. If you received a personal discharge, and the 1099C names you personally the forgiven debt need not be reported as income due to the discharge. It is necessary to file a Form 982 with your tax return. Find the form and instructions at www.irs.gov. Don't count on your tax preparer to know what to do, as many seem uninformed about this fairly common tax procedure.
   
   Best wishes for a favorable outcome, and please remember to designate a best answer.

   This answer is offered as a public service for general information only and may not be relied upon as legal advice.

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3. Licensed in GA

   

   Glen AshmanPro

   East Point Divorce / Separation Lawyer

   Contributor Level 20

   

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   Answered January 25, 2013 21:22. As a general rule, debts discharged in bankruptcy are not taxable, even if you get a 1099. Talk to your tax advisor (a CPA, not something like HR Block) on how to note this on your return.

   If you find this answer helpful, please mark it here on AVVO as helpful. In answering you, I am attempting to... moreIf you find this answer helpful, please mark it here on AVVO as helpful. In answering you, I am attempting to communicate general legal information and am not representing you (and am not your lawyer). Do feel free to call me at 404-768-3509 if you wish to discuss actual representation (the phone call also does not retain counsel; that requires an office visit and appropriate paperwork). In that a forum such as this provides me with limited details and doesn't allow me to review details and documents, it is possible that answers here, while meant to be helpful, may in some cases not be complete or accurate, and I highly recommend that you retain legal counsel rather than rely on the answers here. (You can also email my office at geaatl@msn.com . An email also does not retain my office, but can help you get an appointment set if you prefer not to call). I am happy to discuss possible representation with you. Any information in this communication is for discussion purposes only, and is not offered as legal advice. There is no right to rely on the information contained in this communication and no attorney-client relationship is formed. Nothing in my answer should be considered as tax-advice. To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. I am also required to advise you, if your question concerns bankruptcy, that the U.S. Congress has designated Ashman Law Office as a debt relief agency that can help people file bankruptcy. less

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4. Licensed in GA

   

   Shonterria MartinPro

   Morrow Bankruptcy Attorney

   Contributor Level 7

   

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   Answered January 26, 2013 10:21. Please contact the attorney who filed your chapter 13 along with a tax professional. Make sure the tax professional is aware of the discharge in bankruptcy. At that point you will be able to know whether liability exist. Sometimes it's as simple as contacting the creditor issuing 1099 to make sure they are aware of the filing and discharge.

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5. Licensed in GA

   

   Dana P. Shaffner

   Atlanta Tax Lawyer

   Contributor Level 11

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   Answered January 28, 2013 13:40. At the risk of duplicating the sound advice of the preceding lawyers, I wanted to clarify the situation a little bit. Income from the discharge of indebtedness is reportable as taxable income, regardless of whether or not its reported on a form 1099. However, the DOI income may be excluded from income if you (a) a filer in a case under Title 11 (you have filed any bankruptcy chapter), or if the forgiveness of the debt did not render you solvent (defined as debts and liabilities exceeding the fair market value of your debts). Form 982 is used when you have received a debt discharge 1099, which means that income has to be reported on your tax return, but following form 982, you may be able to exclude it from your income if you meet the exceptions. If you do meet the exceptions (bankrutpcy or insolvency), then you will have to give up certain "tax attributes", those are certain loss deductions, and/or reduce the basis of assets you may have. This is not a tax area for those who do their own return. Please meet with a tax advisor knowledgeable in this area.

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6. 

   Gary Bollinger

   Saint Louis Chapter 7 Bankruptcy Attorney

   Contributor Level 17

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   Answered January 26, 2013 18:01. See the blue hyperlink below to a Avvo legal guide.

   • Cancellation of 1099-C Income

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