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, Told by Nelnet that they r not sending out 1099c

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Ann JA: Thanks. Can you...
Ann
JA: Thanks. Can you give me any more details about your issue?
Customer: Told by Nelnet that they r not sending out 1099c for 3 years now (after probation time) instead of the year that the debt was for logiven. They said I would receive my in the yr 2019. How in the world r people going to have information to see if they are insolvent. The website for Nelnet says "The Department reports the discharge of any loan debt totaling $600.00 or more to the Internal Revenue Service (IRS) for the year that the loan was discharged. If your loans are discharged, we will send you an IRS Form 1099-C that will identify the total amount of your discharged debt. The amount of the discharged debt will be considered income for federal tax purposes and possibly for state tax purposes. You may want to consult with a tax professional to determine how this may affect your personal taxes." Said ruled changed Jan 18th this yr. I am going ahead and putting mine on my 2015 taxes because I do not know what the tax laws will be for 2019 and finding the correct information will almost be impossible.
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Submitted: 1 year ago.Category: Tax
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Answered in 33 minutes by:
1/30/2016
Tax Professional: Lev, Tax Advisor replied 1 year ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,660
Experience: Taxes, Immigration, Labor Relations
Verified

Hi and welcome to our site!

1.

When the debt is forgiven and it becomes obvious that it will not be paid back - that amount is classified as COD - cancellation of debt (COD) income - and it is income recognized because loans are cancelled.

In general, you must report any taxable amount of a canceled debt for which you are liable as ordinary income from the cancellation of debt, on Form 1040.

2.

In general - that is taxable income and reported on form 1040 line 21.

HOWEVER under certain conditions - you might be able to exclude COD income from taxable income.

3.

You MIGHT qualify for the insolvency exclusion.

When you prepare your Insolvency Worksheet - you need to determine if you were insolvent.

The worksheet may be found on page 8 in this publication -

http://www.irs.gov/pub/irs-pdf/p4681.pdf

You list all your assets and all liabilities - on the day before the loan was forgiven - so include that loan into the worksheet.This worksheet is not sent with your tax return - just keep it for your record.Do not send any supporting documents and do not send that Insolvency Worksheet - to the IRS - just keep for your record.

4.

That exclusion is claimed on form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.

and that form 982 should be included into her tax return.

- check the box 1(b) and list excluded amount on line 2.

Here is the form -

www.irs.gov/pub/irs-pdf/f982.pdf

Let me know if you need help to verify qualification and reporting.

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Customer reply replied 1 year ago
Lev, I already knew all the above. My understanding is that my date for insolvents paperwork would be the day before my doctor signed with was April 18, 2015. There r two loans that have not been sent to Nelnet so I will not receive my 1099 C this year. I will go under the new rule. The new rule, as of Jan 18th, they are not sending out 1099c's until your probation of 3 years are over with in my case would be in 2019. I am going ahead and reporting this year and will deal with the issue in 2019. My disability is making my brain slower and slower and not sure in 2019 I would be capable. My understanding is that many times 1099c are sent to IRS but not to the debtor Do you see any problems with me going ahead and putting on 2015 taxes because this was the year in which I have paperwork showing proof that my debt was cancelled..
Tax Professional: Lev, Tax Advisor replied 1 year ago

If you do NOT receive form 1099C - that likely means - your debt is NOT forgiven - and there is NO COD income.

So there is nothing to report on your tax return.
However your debt is NOT forgiven - that actually means you are still legally responsible for that debt.
If you truly believe that the debt indeed is forgiven - you will report it as if you received form 1099C - and attach a note to your tax return with explanation of facts and reasoning.

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Customer reply replied 1 year ago
Here is what is said on Nelnet
"After the U.S. Department of Education (called “the Department” throughout this site) approves your discharge request on the basis of your total and permanent disability, your loan holders will transfer your federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) Grant Program service obligation to us for discharge. If you are approved for TPD discharge based on Social Security Administration (SSA) documentation or a physician’s certification, you will be subject to a 3-year post-discharge monitoring period that begins on the date the discharge is approved.Monitoring
The Department will reinstate your obligation to repay your discharged federal student loans or complete your discharged TEACH Grant service obligation if at any time during the 3-year monitoring period:You have annual employment earnings that exceed the Poverty Guideline amount for a family of two in your state, regardless of your actual family size;
You receive a new William D. Ford Federal Direct Loan (Direct Loan) Program loan, Federal Perkins Loan (Perkins Loan) Program loan, or TEACH Grant;
A disbursement of a Direct Loan, Perkins Loan, or TEACH Grant that you received before the discharge date is made, and you do not ensure the return of the full amount of the disbursement within 120 days of the disbursement date; or
You receive a notice from the SSA stating that you are no longer totally and permanently disabled, or that your disability review will no longer be the 5-year or 7-year review period indicated in your most recent SSA notice of award for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits.
In addition, during the 3-year post-discharge monitoring period, you must promptly notify or respond to the Department if:You receive annual earnings from employment that exceed the Poverty Guideline amount for a family of two in your state, regardless of your actual family size;
There is a change in your address or telephone number;
You receive a request to provide the Department with documentation of your annual earnings from employment; or
You receive a notice from the SSA that you are no longer totally and permanently disabled, or that your disability review will no longer be the 5-year or 7-year review period indicated in your most recent SSA notice of award for SSDI or SSI benefits." It goes on to say " "The Department reports the discharge of any loan debt totaling $600.00 or more to the Internal Revenue Service (IRS) for the year that the loan was discharged. If your loans are discharged, we will send you an IRS Form 1099-C that will identify the total amount of your discharged debt. The amount of the discharged debt will be considered income for federal tax purposes and possibly for state tax purposes. You may want to consult with a tax professional to determine how this may affect your personal taxes." So according to when I applied and was approved the 1099c would have come in 2015. Now they are saying 2019. I have amply proof that is was approved in 2015 and what information was available to me when I applied. They change the rules in 2016 and leave everyone in limbo. What is going to happen to many people that get their 1099C in 2020 for yr 2019 and are unable to prove insolvency because they can not get the information from the date that the IRS says you have to use. Everything I have read is even if you don't get your 1099C you should report it because it very possible the IRS got it.
Customer reply replied 1 year ago
No I am not willing or able to pay for the phone call.
Tax Professional: Lev, Tax Advisor replied 1 year ago

There are several issues

- if the debt is discharged or not?

- if the debt is discharged - the creditor is REQUIRED to issue form 1099C - that is not a part of negotiation - that is based on the tax law.

- if the debt is NOT discharged yet - you may not expect the form 1099C.

- if the debt WILL be discharged in 2019 - that fact will be reported on form 1099C for THAT tax year.

Whether you you are insolvent now or will be in 2019 - that is a separate issue and not directly related to the fact of the debt forgiveness.

We may not force the department to forgive the debt NOW if that is not actually taking place...

.
I appreciate if you take a moment to rate the answer.
Experts are ONLY credited when answers are rated positively.
If you still have any doubts, need clarification - please be sure to ask.
I am here to help you with all tax related issues.

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