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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16559
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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In November of 2012, I completed a bankruptcy in the state

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In November of 2012, I completed a bankruptcy in the state of Ohio, where I was living at the time.

One of the items included as an asset in my bankruptcy was my home. I had purchased this home originally as an investment property a few years before. Since it was my primary residence at the time of the bankruptcy, I kept it.

At the end of 2012, I received a 1099C from my lender, saying that I had the debt discharged in bankruptcy. However, I am still paying on this debt. I have contacted the lender twice about this, and they assure me that I was supposed to receive a 1099C, even if I still have the property and am still paying the debt to them in a timely manner (and have no intentions of giving up the property).

Is this correct, that the 1099C was issued in a proper manner? And if so, should I file an amended return and form 932 with the IRS to demonstrate why I shouldn't be paying taxes on this amount of money that was supposedly "forgiven"? (If it turns out that the 1099C was incorrectly issued, what should I do about it, given that my lender insists the 1099C is right and seems to not want to do anything about it?)

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Was the 1099-C received for debt that was discharged during bankruptcy

MyVirtualCPA :

If the 1099-C is received for debt that was discharged in bankruptcy you should account for the amount on form 982

MyVirtualCPA :

You will not owe tax on this amount

MyVirtualCPA :

If a portion of your debt was forgiven, then the 1099-C is appropriate. You will fill out form 982 to showcase that this is not taxable debt forgiveness.

MyVirtualCPA :

Is there anything else that I can further assist you with?

MyVirtualCPA :

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Customer: replied 3 years ago.

Hello there,


 


For some reason, JustAnswer would not let me join the chat, and it's only now that I've seen your reply.


 


So I first need to sort out.. is this debt considered "forgiven", since I am still paying it and still have the property?

If you are still paying on the debt, then it is not forgiven. I was under the assumption that you had a modification where a portion of your debt was forgiven.

If you are still paying on the debt, then it is not forgiven and you should not receive a 1099-C. You would simply keep the 1099-C for your records, then if the IRS gives you an inquiry, show them that you are still paying on the debt to show it was not truly forgiven and the 1099-C was erroneous.

If you would, please rate my response as "excellent" once you are satisfied with our correspondence. Thanks again for using JustAnswer.com and have a great day.
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