Have a Tax Question? Ask a Tax Expert
Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
How are you today?
I'm sorry to hear about your tax issue.
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.
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
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).
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.
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.
Okay. But you can apply your losses against the other income
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.
I would hire a tax professional and file an amended return, send it to the address on the notice.
Do not sign the consent to pay.
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?
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.
The 1099 income is for 2011. You have to claim it in that year.
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.
He could help you, yes - but it might be more convenient to have someone local.
Ok, you have been very helpful. I see it's your 4 year anniversary with Just Ask, so Happy Anniversary and thanks.
Thank you so much!
If you would, please rate my response as "excellent" so that I may receive credit for assisting you today
My pleasure to do so.
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.