You should be asking a tax professional, not an attorney. I am not a tax attorney, but if the IRS considers you to be "insolvent", you do not have to pay tax on forgiven debt. If you have proof of your dispute, you may also be able to avoid the tax by proving it was disputed. There are certain forms that need to be filed with your tax return. Please, consult a tax professional about this.
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I agree with Attorney Coleman. Cancellation of debt 1099c forms have nothing to do with the statute of limitations. Even if the statute of limitations (which is a court defense only) has expired, as long as you have not received one there still remains an obligation to pay the debt. If you received a 1099c, it means that the creditor has given up - they will not sue.
If you get a 1099c, you have to include the forgiven amount in your income and pay tax on the forgiven amount unless you can exclude the forgiven amount. One such way is through the use of Form 982. There are tests on the form - one is insolvency, i.e., if your debts outweigh your assets then you are deemed "insolvent" for purposes of the test. IF your debts outweign your assets by at least as much as the forgiven amount then you can exclude the entire forgiven amount on the 1099c.
Like Attorney Coleman, I am not a tax attorney and this is not tax advice. If you do not have an experienced real CPA (not a tax service place) then you need to get one. If the CPA has never heard of from 982 then find another CPA who has. Take the 1099c and your other tax documents and have the CPA review your assets and debts to see whether you can exclude all, some or none of the forgiven debt.
Even if have to pay taxes, paying taxes on the forgiven amount, given your circumstances, should be very low.
As an aside, the statute of limitations generally is either where you reside, or where the debt was created or any statute provided for in the credit card agreement. The problem here is that you indicate the fraudulent use was in CA. Did you live in CA at the time the debt was created and then leave? If so, there could be a tolling issue. That is why the statute of limitations is not as simple as you make it sound and would need to be reviewed by an attorney. However, since you have not been sued, this is irrelevant as the defense can only be raised in a legal action on the debt or as a proposed defense should a creditor try to collect on the debt. Even if this was a debt for which you are responsible, expiration of the statute of limitations means not that you don't owe the debt but that you no longer have a legal duty to pay the debt. Once a debt, always a debt - they never really go away unless paid or discharged in bankruptcy. I have a few brief articles about Zombie debts, tolling and revival of debts on my website at rachelhunterlaw.com if you are interested.
One final thing - you indicate the use of your card was fraudulent. If that was the case, you had 60 days to notify your credit card issuer after the charges appeared. Did you get a police report and dispute the charges? If not, then you are responsible for them whether fraudulent or not.
Attorneys Coleman and Hunter have provided you with excellent advice. you should consult with either a tax attorney or CPA regarding the issue. This is beyond the scope of a tax preparation service.
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