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Lane
Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3697
Experience:  Providing Financial & Tax advice since 1986
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I filed my family taxes already before the deadline, i filed

Resolved Question:

I filed my family taxes already before the deadline, i filed a form 982 Insolvency for a couple of 1099-c credit card i received for 1500 dollars. I'm insolvent because i have a property in the process of foreclosure debt around 200,000.00 and the market value of the property is around 70,000.00 so as you can see my debts are way above my assets.

this is the problem, 4 other companies filed the 1099-c (total 10,000.00) with the irs but they never sent those forms to me, today i received a letter from the irs asking for almost 3000 dollars in taxes...

can i file a new 982 form to add this 10,000.00 to my insolvency...? how is this process...
what i need to respond to the letter from the irs?

Will this trigger a full audit on me?

thanks
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Lane :

Hi,

Lane :

What you need to do is simply file an amended return and add the amounts and make the 982 changes

Lane :

If you used turbotax, its really easy, you just bchoose 1040X as the return you're oing

Lane :

It will ask you for the changes and there will be a box for explainging the changes

Customer:

but i already file a 982 for 1500, can i change it to 11500.00 correct? there in turbo tax

Lane :

Yep ... just explain in the "reason for change" box that you did not know that the companies had forgive the debt until you received the additional 1099s

Lane :

every change you make on the 1040X (the amended return) there will be a box for making the explanation ... you won't have to completely re-do the taxes

Customer:

i did not received the 1099 c , i received a letter from the irs asking for the taxes of those 10000

Lane :

Sounds like you must have missed to 1099s somehow... IRS gets a copy of what tey send you ... that's the nly way they know it;s there

Lane :

IN this case just be truthful... you did not know the companies had actually forgiven the debt until you received the IRS notice

Customer:

very possible a move a lot in the last 3 years

Customer:

must me lost in the mail.

Lane :

you could even say that .. "It's possible that I missed the 1099s as I have moved... Did not know that this was actually forgiven debt until I received your notice"

Customer:

yes very possible they have my old address those debts have more than 3 years

Lane :

again, we're just talking about what you put in the "reason for change box that will come up for any line item that you make a change to

Lane :

You'll be fine ... thank goodness they extended this through 2014 ... DO take advantage of it ow.

Customer:

correct

Lane :

"now... this year"

Customer:

what they extended?

Customer:

sorry what they extended?

Lane :

yes, it was slated to end in 2012, but the last tax act (the "fiscal cliff"deal) extended this

Customer:

extended what sorry?

Lane :

the waiver of taxation on forgiven debt

Lane :

IRS consider's forgiven debt as income ... always has

Customer:

they will remove it for credit cards also? in the future?

Lane :

it was only through the debt forgiveness act of 2007 that they started waiving the tax on this money that was borrowed but never paid back

Lane :

we do not know if it will e extended again

Customer:

ok finally the calculation i made is correct for the insolvency right?

Customer:

my property in foreclosure have marked value of 70000 and my debt for that property is 200000

Lane :

yes, insolvency is simply the fair market value of assets minus value of debts (will be a negative numbner if you're insolvent

Customer:

so for that i have insolvency of 130000

Lane :

Must be ALL assets, although the house is probably your biggest piece of the pie

Customer:

i dont have any other valuable assets

Lane :

thats it then

Lane :

yes

Customer:

never will reach 130000

Lane :

no 401(K) PlN, ETC?

Lane :

"PLAN"

Lane :

RIGHT

Customer:

not even selling my teths

Lane :

you're find .. the important part here is getting it dont this year

Lane :

"fine"

Customer:

can i ignore the letter then?

Customer:

after a file the 1040X?

Customer:

with the fix of the 982

Lane :

NO, I would not ignore... I would do the amended return then respond that you have amended the return to indicate the additional debt and changed 8982

Lane :

982

Lane :

Someimes the right arm at IRS doesn't always know what the left arm is doing... the folks that process that amended return are not the collection folks that sent you the nletter

Lane :

I'd respond by letter to the address on the notice AFTER you know you've gotten the amended return in

Customer:

excellent !!!!

Lane :

You'll e fine... you have a legitimate reason.. just don't let it go .. In my experience, you'll always do better by getting to them first

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Customer:

sorry what do you mean with you'll always do better by getting to them first

Lane :

I mean people that don't respond to their notices end up getting into more issue (failure to respond, etc) ... If you take action before they have a chance to send you that second notice, you'll be fine

Customer:

excellent thanks

Lane :

yw!

Lane :

have a good rest of the evening

Customer:

ok when is the rating

Customer:

i need to close the chat right?

Lane :

I think you rate first, then close but honestly I'm not sure (I just know that if you never rate me, they won't pay me ... :)

Lane :

That did it.. Thanks!

Lane, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3697
Experience: Providing Financial & Tax advice since 1986
Lane and 7 other Tax Specialists are ready to help you
Expert:  Lane replied 9 months ago.

Thanks for the rating Miguel!

Let me know if you need anything else.

You can ask for me again by saying "For Lane Only," at the beginning of your next question.

Thanks again
Lane
Customer: replied 9 months ago.

For Lane Only,

hi there.

the taxes are the taxes from 2011 is ok anyway right?

thnaks

Expert:  Lane replied 9 months ago.

Hi Miguel

Yes those are fine UNLESS the notice said that the 1099s were for 2011.

Hate to have to tell you this, but if the income (1099s) we're for tax year 2011, then you'll have to do an amended return for that year too.

The notice wi tell you which tax year.

The good news is that 2011 is covered too.

But, yes. Whatever year the company forgave the debt, is the year that you technically had income. And that will be the 1099 year... Again, somewhere on that notice it will say "TAX YEAR xxxx"
Customer: replied 9 months ago.

yes the notice is just for 2011

Customer: replied 9 months ago.

yes the notice is just for 2011, just for 2011, nothing to do with 2012, i realized now...

i dont have to touch 2012 right? I just need to amend the 2011 taxes correct?

Expert:  Lane replied 9 months ago.
Good deal you're kind of like me. Sometimes I have to say it to think it.

Thank again,

Lane
Customer: replied 9 months ago.

Sorry !!


just to confirm


i just need to amend the taxes for 2011 because the letter is just 2011 taxes, correct?


i don't need to touch the 2012 taxes? correct?

Expert:  Lane replied 9 months ago.

Yes, only amend your 2011 return

Lane
Customer: replied 9 months ago.

thanks


i sent you a 10 dollar bonus, i know is not much for your expert advises...


 


i plan to send the letter on monday, so i have a question in the letter there is a check box that said "I dont agree with some or all of the changes" and said also "please return this form and include a statement signed by you that explain what you don't agree with. Also included copies of any document, such as corrected w-2, 1099, or missing forms that support your statement.


 


my question is: there i just have to mark the checkbox "i dont agreed and write an additiona letter explaining that i did not know about the 1099-c and that i will amend the 2011 taxes including a new 982 form with the amount in those 1099-c.


 


Please correct my small paragraph, my english is not good...


 


thanks

Expert:  Lane replied 9 months ago.

Your intuition is good.

You DO NOT agree.

AND your letter explains why

Then by amending the return, you are tying it all together.

You DO NOT agree that you own the extra tax because the 982 form waives that extra taxation.

Lane
Customer: replied 9 months ago.

For Lane Only,


Hi there.


 


This get a new twist, i will explain


 


i went to my archives and look the tax declaration in detail with the form used and everything:


 


Im my 2011 tax declarations i reported 2 of the 3 1099-c the IRS is claiming


 


the 3: 1099-c in the letter from the IRS are: $5300, $4081 and $1412: in my tax declaration in the 982 i reported the 2 big ones: total amount: $9381. i never received the 1099-c for $1412 so i did not included it in my 982.


 


now i'm confuse: why the IRS is claiming the taxes for $10793.00 they should claim just $1412 as i reported $9381 in my 982...


 


Please help !


 


Thanks

Expert:  Lane replied 9 months ago.


Hi Miguel,

Now I'm confused as well! :) (Not really)

I think you're at the point where you need to call the number on the notice and tell them exactly what you said here.

Sometimes the system (IRS computer system) just works that way. For example, I just had a client who trades stocks a lot and because her came up with a loss for the year reported nothing (because he OWED nothing).

BUT, the IRS just sent a bill (a huge $200,000+ bill) to him as if every simgle stock trade that he made was all profit.

What he didn't do was report, on schedule D, the BASIS (the invetment he already had) in the stocks ... once he did that, IRS could see that he actually had a loss for that year.




It could very well be that the WHOLE thing has "kicked out of the system" because the amount you reported didn't match the TOTAL amount of 1099 income.

I would do two things:

(1) DO the amended return, as we discussed before, but be sure that the 982 amounts (1099 amounts) total to exactly what they received, and

(2) Answer the notice in the same way. Tell them exactly what you've said here an get that amended return file BOTH, as quickly as possible.

I think you'll be fine. Everything just has to match up.

Make sense?

Lane

Customer: replied 9 months ago.

please clarify something for me when you include 982 you don't need to put the 1099-c in the declaration, right? just the 982 with the amount


 


 

Expert:  Lane replied 9 months ago.

Right ... was saying the AMOUNT from the 1099.

It's that automatic computer matching (mis-matching)of the 1099 AMOUNTS and the income in the 982 that's causing the "kick-out."

But yes, just the 982, with the amount.

Sorry for not being clear.

Lane
Customer: replied 9 months ago.

finally


 


 


Also i don't need to call them right? with a letter explaing is ok correct?


and i dont need to send in the letter the copy of the 982 fixed and sent in amendment...correct?


 


i failed with taxact and the e-filing is closed? i need to mail it then?


there's not way to send electronicly the amendment, right?


thanks


 

Expert:  Lane replied 9 months ago.


Actually I think calling might not be a bad idea ... BUT that can be frustrating anyway, given the call volumes and the fact that sometimes you get someone in a call-center that might not completely understand anyway.

DO THIS:

DO the amended return, and yes WITH a copy of the 982 that completely matches up in amounts (AS A PART OF THAT AMENDED RETURN) and send in the cover letter that explains AS WELL.

Whatever you do - Keep a full copy

Then send by private delivery service, such as FedEx, so that you'll ALSO have documentation that it was received.

Here's a site that gives you the addresses to send to.

http://www.irs.gov/uac/Submission-Processing-Center-Street-Addresses-for-Private-Delivery-Service-(PDS)


Make sure that everything in that package connects (copy of the notice, corrected return, corrected 982, letter explaining), so that when they read the notice , they'll see everything there that addresses the entire issue.

Once you have your proof of delivery, through the FedEx tracking number,... THEN you might try calling them to verify, tell them that they have it... even give them the tracking number.

But the main point is that you give them that amended return that covers everything. If you'll spend the 12 bucks of so to send it FedEx, they can't say they didn't receive it.

Lane
Customer: replied 9 months ago.

i will resume in my words:

 

i will amend the return in taxact, print it out and i will send it with my letter explaining everything, i will mark the no agreed check box in the letter they sent me and i will send everything via fedex/ups.

 

i checked the link for the address to send everything and they said:

 

If you are filing Form 1040X:THEN mail Form 1040X and attachments to:
In response to a notice received from the IRS

The address shown in the notice

 

so i will send it to the address in the letter..?

 

my question is: Answering the letter and sending the amendment and everything to the address in the letter will be the "filing on my amendment" also, right?

 

or the amendment as such is in another address?

 

Thanks a bunch !!!

 

 

Expert:  Lane replied 9 months ago.



No, the amendment (as long as you DO the 1040x along with the changed 982) IS the amended return.

I wanted you to use FedEx because that way you get proof of delivery.

I'm betting the address on the notice is a P.O Box, however.

But , yes to send EVERYTHING as a response to the address on the notice itself is ideal.

If all they give you is a P.O Box then go to the Post Office and send "CERTIFIED MAIL, RETURN RECEIPT REQUESTED) .. you can also ask them (I think it's on the card they'll give you) for the web address to track the package.

But yes everything I listed 1040x (amended return) 982 that coincides, copy of notice, and letter explaining should all be in the package.

Lane

Expert:  Lane replied 9 months ago.
Did I answer all your questions now?

let me know

Lane
Customer: replied 9 months ago.

if i make a new question can i enter to the chat again...


i still have doubts and need to ask about 1040x

Expert:  Lane replied 9 months ago.
Yes .. That will work ... If you want me on that one, just for lane only. At the beginnig

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