Have Tax Questions? Ask a Tax Expert for Answers ASAP
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.
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I'm sorry to hear about your issue. I understand that you are frustrated that the IRS has billed you for income tax on your friend's forgiven debt
However, according to the IRS the following is true:
Persons who receive a Form 1099-C showing the full amount of debt. If you and another person were jointly and severally liable for a debt that is canceled, each of you may get a Form 1099-C showing the entire amount of the canceled debt. However, you may not have to report that entire amount as income. The amount, if any, you must report depends on all the facts and circumstances, including: State law,
The amount of debt proceeds each person received,
How much of any interest deduction from the debt was claimed by each person,
How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and
Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication.
So, you should be able to write the IRS and tell them the situation, and get the amount excluded from your income.
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The tax preparer who did your 2012 return should be able to do this for you. Since it qualified for the bankruptcy exclusion, you should not have to pay tax on the entire amount
My tax man file form 982 and listed it on line 2, stating Total amount of discharged indebtedness excluded from gross income.
That was the correct thing to do. But, now, he will need to respond to the notice you received and explain the sitatuion
that should clear things up
Thank you I will indeed see if he can help.
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