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A friend of mine did her 2009 taxes. She had a credit card

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that she settle with them...
A friend of mine did her 2009 taxes. She had a credit card that she settle with them. She never received a 1099 C (cancelation of debt). She does not know about that either. Well my friend and husband did 2010 and everything went well but now she received a letter about 2009 and apparently she owes Money $659 for that year. She is concern. Apparently the creditors send a 1099 C to the IRS and was reported but my friend did not receive that form. Please some one suggest me what to do???
Submitted: 6 years ago.Category: Tax
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Answered in 1 hour by:
7/3/2011
Tax Professional: Lev, Tax Advisor replied 6 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!
If your friend known about the settled debt in 2009 - she should be expecting the form 1099-C.
The forgiven debt is taxable income unless insolvency exemption may be used. Unfortunately - the IRS allows 6 month after the tax return was filed to amend it and to claim an insolvency exemption. At this moment - it is nothing your friend may do - but to pay the tax. She may ask the IRS to abate penalties as that was a honest mistake, but she still will be liable for taxes and interest.
If the creditor did not send a form 1099-C - they might be penalized by the IRS - the penalty is $50.
Sorry - but there is not much might be done to reduce tax liability.
Please let me know if you have any concern.

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