How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Megan C Your Own Question

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 15588
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
23669918
Type Your Tax Question Here...
Megan C is online now
A new question is answered every 9 seconds

I received a notice from the IRS that taxes on a forgiven credit

Resolved Question:

I received a notice from the IRS that taxes on a forgiven credit card debt from 2004 or 5 in the amount of around $7K was not paid in 2011. I never received a 1099 on it and the money was used to fund a failed restaurant, for which I lost around $200K, but was not able to claim the loss because I had no income (other than my regular job). I'm concerned because I had a total of around $100K of credit card debt, so this could be the tip of the iceberg. I feel I should be able to now open that tax year and take the loss against any future debt forgiveness. Additionally, the IRS is now holding my current wife (since 2011) also responsible for the income and it's based on our combined income vs just my income. This seems wrong from many aspects. Do I have any recourse?
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

Megan C :

Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.

Megan C :

How are you today?

Megan C :

I'm sorry to hear about your tax issue.

Megan C :

I have some good news, and some bad news for you. The good news is that you can amend your 2011 tax return, claim any cancellation of debt income and apply your loss against it.

Megan C :

The bad news is that if you file a joint return, your wife would be liable for any income that you received in that year, even if the income is from activity that happened before you were married

Customer:

I'm ok with the bad news, provided I can take the loss against income. The loss occurred back in 2004 or 2005 when I had my restaurant. I lost $200K of my own cash and used around $100K in credit cards in a futile attempt to keep the place running. I did not incorporate and operated as Gate 9 Grille DBA (I don't recall the owners company but can find that out).

Megan C :

The cancellation of debt income does not become income until the debt is forgiven, so if the credit card company never forgave the debt, then you have no income.

Customer:

Apparently they forgave the debt in 2011 (around 7 years later). They apparently sent a 1099 in 2011 somewhere but I have since moved twice.

Megan C :

Okay. But you can apply your losses against the other income

Customer:

So how would you suggest I proceed? At this point they have just rejected my reply to their initial notice and want me to sign a consent to pay.

Megan C :

I would hire a tax professional and file an amended return, send it to the address on the notice.

Megan C :

Do not sign the consent to pay.

Customer:

Ok, so let me be certain about this and we can conclude. I should hire a tax professional, ask for my filed tax to be amended for 2004 or 5? and then also amend 2011. Or just amend 2011 and take the loss from the past?

Megan C :

You do not need to amend 2004 or 2005. You only amend 2011, the year of the loss. If you had a large loss in 2004/2005, that loss carries forward as a Net Operating Loss. Your professional could fill out the tax returns and apply the losses from the initial year of the loss forward.

Megan C :

The 1099 income is for 2011. You have to claim it in that year.

Customer:

Ok. I'm currently living in the Bay Area of CA. Do I need to get someone locally or can I retain anyone in the US? I had an accountant in PA, where the loss occurred. I had discussed it with him and it was he who advised me I could not take a loss. I was thinking of starting with him.

Megan C :

He could help you, yes - but it might be more convenient to have someone local.

Customer:

Ok, you have been very helpful. I see it's your 4 year anniversary with Just Ask, so Happy Anniversary and thanks.

Megan C :

Thank you so much!

Megan C :

If you would, please rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

My pleasure to do so.

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 15588
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thanks for your positive rating. Please come back and visit me any time you have a question that needs answered. IT's a pleasure working with you today. In the future you can request me directly. Thanks again for being a valued JustAnswer.com customer.
Customer: replied 1 year ago.

Hi Megan,


 


I just wanted to let you know that I plan to initially contact the accountant I used in Allentown PA, because he did my taxes in those years. Based on that, I may end up working with someone locally.


 


I will certainly give you excellent ratings when I get the survey.


 


Best Regards,


Phil Angelico

Expert:  Megan C replied 1 year ago.
Phil,

Thanks for touching base with me. I wish you the best of luck in the future.

Thanks,

Megan

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
Megan C
Megan C
8219 Satisfied Customers
Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level