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.
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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.Ask a similar question
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 the facts and circumstances of your particular situation. (401) 383-7550 or email@example.com I am not your attorney and I am not giving legal advice. The Rhode Island Supreme Court licenses all lawyers in the general practice of law. The court does not license or certify any lawyer as an expert or specialist in any particular field of practice.Ask a similar question
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.Ask a similar question