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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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Received a 1099C today mortgage loan balance that was

Customer Question

Received a 1099C today for a mortgage loan balance that was cancelled debt. Totally confused about how to handle this. I was a cosigner on a mobile home loan for my s-daughter back in 1998. She filed Ch 7 bankruptcy and the debt was discharged in bankruptcy in 2005. The mobile home was returned to the bank. I never saw it, never used it, and never gained any benefit from it..... just grief (!) My social security number wouldnt have been listed as the primary one on the loan, yet here we are 11 years later.... and the debt is being reported to the irs as income to me.
JA: The Accountant will know how to help. Is there anything else important you think the Accountant should know?
Customer: I dont have a copy of the original loan papers to prove I was only a cosigner. The 1099c form indicates that I was the debtor but I wasnt.
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 9 months ago.
Category: Tax
Expert:  Lev replied 9 months ago.

Several issues...

1.

Multiple Debtors. For debts of $10,000 or more incurred after 1994 that involve debtors who are jointly and severally liable for the debt, you must report the entire amount of the canceled debt on each debtor's Form 1099-C. Multiple debtors are jointly and severally liable for a debt if there is no clear and convincing evidence to the contrary. If it can be shown that joint and several liability does not exist, a Form 1099-C is required for each debtor for whom you canceled a debt of $600 or more.

So if the amount discharged is above $10k - the creditor is required to send form 1099C to you.

2.

Regarding timing... If the debt was discharges in 2005 - that means - form 1099C must be issued in 2005 and not many years later.

So it looks as the form is issued incorrectly.

3.

What to do? Contact the sender and point out that the form is issued incorrectly and ask to correct the year issued.

If they refuse - you would need to file a formal complain with the IRS.

But you may not ignore that reporting.

Questions?

Expert:  Lev replied 9 months ago.

2.

Regarding timing... If the debt was discharges in 2005 - that means - form 1099C must be issued in 2005 and not many years later.

So it looks as the form is issued incorrectly.

3.

What to do? Contact the sender and point out that the form is issued incorrectly and ask to correct the year issued.

If they refuse - you would need to file a formal complain with the IRS.

But you may not ignore that reporting.

Questions?