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The amount of debt forgiven is reportable on 1099-C - http://www.irs.gov/pub/irs-pdf/f1099c.pdf - generally is taxable, unless any exemption could be used -- you should file a form 982 - to proof your exemption - and might exclude all or part of canceled debt from taxable income.
On the form 982 - www.irs.gov/pub/irs-pdf/f982.pdf - you will check the box 1(b) if that is a discharge of chapter 7 bankruptcy.If you timely filed your tax return without making either of these elections, you can still make either election by filing an amended return within 6 months of the due date of the return (excluding extensions). Write “Filed pursuant to section 301.9100-2” on the amended return and file it at the same place you filed the original return.
Because you will be filing late - you might not be able to exclude the cancelled debt – and would have to include the amount reported on the form 1099-C into your 2008 tax return. Additional penalties and interest will be added.
I strongly suggest having a local tax professional representing you with the IRS and discuss the issue.Let me know if you need any help.
the bankruptcy and repo was filed in 2006. the chapter 7 was discharged in dec of 2007 and filed with my 2007 taxes which the bankruptcy court claimed the debtor is saying it was not written off until 2008 the debtor was part of the chapter 7 proceedings. isnt 2007 returns past the tax limitations
If you timely filed your 2007 tax return - the statute of limitation for the IRS to assess additional tax liability - which generally is three years - started on Apr 15, 2008 and run out on Apr 15, 2011. However the statute of limitations is 6 years if you omitted additional gross income in excess of 25% of the amount of gross income stated in the tax return filed with the IRS.
If the debt was discharged in December of 2007 – the creditor should issue the form 1099-C for 2007 and not for 2008. However – because it was reported to the IRS for 2008 – you should either convince the creditor to correct reporting or convince the IRS that reporting was incorrect. In any case that is not a simple task.