Question about filling a 1099C on my 2014 Taxes.

Asked 8 months ago - Raleigh, NC

I am unemployed right now and have been since 11/2012. I am trying to settle a credit card debt with Capital One for $411.00 The settlement amount would be $411.00 from $991.00. My question is how do I fill out a 1099C on my taxes and my tax calculator to see if I need to pay any taxes on it. I wouldn't be filling any taxes for 2013 if I wasn't going to settle this debt as I didn't have any income in 2013, but from what I read online I do need to fill a 1099C from the debt company and I may have to pay taxes on it. Is there anyway when I go online and fill out a tax calculator that I can enter an amount of whatever I would be tax on and see if I will have to pay any taxes on it this year. if so, where would I enter this and in what column would I write it in.


Thanks.

James

Attorney answers (4)

  1. Christine B. Adams

    Pro

    Contributor Level 20

    6

    Lawyers agree

    1

    Answered . James, the 1099C will be issued by the creditor that will report the write off to the IRS. . However, the recipient of a form 1099-C may be able to file IRS form 982 to offset the income. Also, the amount that the creditor is entitled to issue a 1099c is $600, it appears from your facts that the amount is $20 short. Look at the link below, the bottom of page 2 discusses this information.

  2. Paula Brown Sinclair

    Contributor Level 20

    4

    Lawyers agree

    Answered . A Form 1099C is prepared and filed by the creditor, with a copy to you. Not all 1099 income is reportable. Find Form 982 and the instructions to see if you qualify to exclude the 1099 income.

    Best wishes for an outcome you can accept, 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.
  3. Rachel Lea Hunter

    Contributor Level 14

    Answered . I agree with my colleagues. You indicate that you have been trying to settle a debt. Is the debt settled or not? If its settled, when was the settlement reached? If you settled in 2013 or earlier you would have received a 1099c by now from the creditor. If you settled in 2014, then you would not receive a 1099c until January 2015.

    However, you would not receive a 1099c here at all from your facts. By law, a creditor is only required to report forgiven debt which exceeds $600. Your settlement leaves a balance of about $580. Doubtful that a 1099c would be issued and in speaking with my CPA about this, if a 1099c is not issued it means that the balance of the debt is not forgiven and at least theoretically the creditor or any junk debt buyer can still come after you for it. You also do not need to report it.

    If you receive a 1099c, my colleagues are correct that you can use the insolvency test in form 982 to exclude all or some of the forgiven income from your taxable income depending on your assets and debts. The test is not whether you are employed or not. The test for form 982 is whether you are insolvent or not. Insolvent means debts outweigh assets.

    here are instructions and a worksheet at www.irs.gov (forms and publications). However, I would recommend not doing it yourself and seeing a real CPA who is familiar with the form.

    Under the form, you add up all your assets, whatever the value. You also add up all your debts, whatever the value. This would include a mortgage or car payment. Use the values as of now - for example, if you are filing 2013 taxes then use the values as of now - not what they were a year ago.

    If your debts outweigh your assets by more than the forgiven amount, all of the forgiven amount can be excluded. If debts outweigh assets by less than the forgiven amount, then some of the debt can be excluded up to the amount by which your debts outweigh assets. If assets outweigh the debts, you are stuck paying tax generally.

    Tax rates depend on what tax bracket you are in. I assume since you are unemployed that you are in the lower tiers (the brackets run from 10% to 40%). Just as a rough estimate figure about 20% to 30% of the forgiven amount would be the tax rate if the forgiven amount is taxable. Since we are talking about a very small sum, any tax would not be that much.

    However, I would see a CPA if and when you receive a 1099c and would not worry otherwise.

  4. John T. Longo

    Contributor Level 12

    1

    Lawyer agrees

    Answered . Creditor issues 1099 not you. Just because they report the debt forgiveness does not mean you have to pay taxes on it. When you file you can fill out the IRD's insolvency form to determine if it is taxable.

    I am giving you general information about the law. To give you legal advice I would first have to learn more about... more

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

25,922 answers this week

2,967 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

25,922 answers this week

2,967 attorneys answering