In 2011 we filled for ch 7 bankruptcy in Orange Co Fl. discharge was provided May 11, 2011We gave up our residence and done a keys for cash with MTG co. they sent a 1099 A at the end of year.I called them and was told that could be written off and a 1099C would be sent.I am concerned with 1099C I received from the BOA because data on form is wrong.I am VP With a small S corp with Wife being Pres. Have held since 2001 & I'm only employee.1099C states Bussiness card cancelled 5/31/2011 Reason given Bussiness Bankruptcy discharged dept and I was personally liable. Company never went bankrupt. Taxpayor ID given is my SS# XXXXX is how do we handle?
Hello there --
It is not unusual for the mortgage lenders to make mistakes on the 1099C document and I am not surprised that BofA is making this type of mistakes given the breadth of mistakes that they have made since the current economy took its first dive in 2008. My suggestion is that you go back to Bof A and ask them to correct it and to put the 1099 c in your name, removing all references to the business. I agree that if you send it into the IRS like this then it will do nothing but confuse the IRS and cause red flags to go up where red flags should not go up (you cannot file a 1099c releasing a mortgage to a business and write it off with Form 982 -- such write offs are for principal residences that you live in and it only extends to the individual owner/mortgage borrower). Once you get the corrected 1099c you should have the form 982 completerd by a tax preparer or an accountant when you are preparing and filing your taxes on these matters -- it may cost you a few hundred dollars but it will save you a small fortune in taxes and confusion.
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I may have confused matter. BOA had nothing to do with house. I had a nonsecured line of credit that I was personally liable for dept. Statement also said "dept discharged in bankrup"
Hello again ---
Was the line of credit written to the business? If yes, was the 1099 sent to and for the business? Or was it a line of credit that is still operative that you are paying on and the only thing you put into bankruptcy was the potential personal liability that you may have in the event that you defualt on the line of credit? Or, if I am way off base then can you explain it to me a bit better? THANKS
1. ch 7 was filed on personal residence and all other credit.we received a 1099a from MTGE company" They said they would not send 1099c.
2- BOA said they were releasing dept due to Company Bankruptcy. WHICH NEVER HAPPENED>credit card Line of credit Had Company name but also they indicated I was personally liable for note. 1099c sent to me personally. Bank discharged dept.
Hello again --
I think you need to get an answer from someone in our tax department because these are not really legal questions when this is coming back around to what type of 1099 was issued and why it was issued. I will transfer you over to that department and one of our tax pros will pick it up from there.
Thanks, XXXXX XXXXX requested a tax attorney,didn't I realize untill now I was in wrong place. do I pay them too?
No -- it is just one payment and when you are done with the tax dept. you can press the appropriate accept button at the bottom of the question.
Thanks, XXXXX XXXXX this site several times, Always satisfied.
Good Luck Charlie -- don't respond to me again because your question will keep getting referred back to me until someone in the tax dept picks it up.
The botXXXXX XXXXXne is that if it was a personal credit line and it was discharged in a personal bankruptcy, then debts discharged in bankruptcy are not taxable. That does not mean that sometimes it can get reported to the IRS as cancellation of debt income.
Just because it is reported to the IRS does not change the nature of the item. If it was discharged in bankruptcy it does not have to be included on your personal tax return as income. Rather than writing a long explanation to the IRS to go along with your tax return, which they don't read and don't like to have included, you could fill out your return as you feel it should be, and if they question the 1099 at some point, then would be the time to explain it and document the discharge, and they should accept that as your answer and not try to tax it.
Great - would this also apply to 1099a we recieved from vanderbuilt Mtg. They indicatated they would not send 1099C
since we gave up residence at bankruptcy. They said to complete 982 for mtg.
Sorry for the delay, yes also the mortgage company if it was discharged in the bankruptcy, then you don't have to include it, and if the IRS ever questions it, then would be again the time to prove the discharge and they should be satisfied and leave it alone. A lot of time with the IRS it is better to fill out your return as you know it should be and explain it to them if they ask within the time limit they have to be able to ask.
Another expert here.
Although there may be incorrect information on the 1099-C and even though there may not ultimately be any income, from that 1099-C or the 1099-A, that has to included as being subject to income tax it is required to use the Form 982 in order to demonstrate that the debt forgiven fits an exception for income from indebtness being included in income.
Without filing the Form 982 with the return, it is very likely that the IRS will send a notice to propose an increase in tax due to the amounts on the 1099 forms that were received by the IRS. Unless the Form 982 is used to show an exception, the IRS will presume that the income from indebtedness is subject to income tax and will propose a chang to the return to include that income can charge more tax.
Not including the information from the 1099 on the Form 982 is incorrect. It is important to include the information on debt discharged in bankruptcy on the Form 982 with the 1040 for the year that the 1099 was received, as was mentioned by the mortgage company; so it will not be counted as income.
For more information and links see http://www.irs.gov/taxtopics/tc160.html