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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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Capital One issued me a 1099C on a credit card that I was a

Resolved Question:

Capital One issued me a 1099C on a credit card that I was a second card holder, and the card holder filed chapter 7 in 2001 dismissing this card. The lawyer wrote a letter saying I did not have to file along with my friend. I filed the 1099C on my income tax in 2012 and the tax man listed it as a bankruptcy. The IRS has now billed me for $1800.00 dollars.
I also contacted Capital One with a couple of letter and bankruptcy and they wrote back it
was a valid 1099C. Is there anything I can do?
Submitted: 11 months ago.
Category: Tax
Expert:  Megan C replied 11 months ago.

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 :

How are you today?

MyVirtualCPA :

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

MyVirtualCPA :

However, according to the IRS the following is true:

MyVirtualCPA :

http://www.irs.gov/publications/p4681/ch01.html#en_US_publink1000244074


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.

MyVirtualCPA :

So, you should be able to write the IRS and tell them the situation, and get the amount excluded from your income.

MyVirtualCPA :

Is there anything else you need assistance with?

MyVirtualCPA :

If not, please rate my response "excellent" so that I may receive credit for assisting you today

MyVirtualCPA :

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

Customer:

My tax man file form 982 and listed it on line 2, stating Total amount of discharged indebtedness excluded from gross income.

MyVirtualCPA :

That was the correct thing to do. But, now, he will need to respond to the notice you received and explain the sitatuion

MyVirtualCPA :

that should clear things up

Customer:

Thank you I will indeed see if he can help.

MyVirtualCPA :

you're welcome. If you would, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 12187
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and 4 other Tax Specialists are ready to help you
Expert:  Megan C replied 11 months ago.
Thank you for your positive rating. Please come back and visit MyVirtualCPA for any of your tax, finance, and social security questions. It was a pleasure working with you today.

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