Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I am getting a 1099c form (cancellation of debt) and I am on…

I am getting a 1099c...
I am getting a 1099c form (cancellation of debt) and I am on Social Security Disability SSDI. Does this mean my social security SSDI becomes taxable? I will have to pay taxes on the 1099c but I am thinking my social security may be taxable what do you think?
Show More
Show Less
Ask Your Own Tax Question
Answered in 16 minutes by:
9/17/2017
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,500
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

The 1099-C can be excluded from income under a number of exclusions. One who is on SSDI would VERY likely qualify under the "insolvency exclusion."

...

If on the "Date of identifiable event," (box one of the 1099-C), the taxpayer is insolvent, FORM 982 can be used to simply exclude the amount of debt as income from the form 1040 - to the extent of the insolvency.

...

Insolvency exists to the extent liabilities (including the debt that was cancelled) exceed the value of assets.

...

Social Security becoming taxable has to do with whether "Combined income," (combined income being a very specific Social Security term, meaning 1/2 of social security plus other income) is above certain thresholds.

...

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. If you:

...

  • file a federal tax return as an "individual" and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.

...

  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.

...

*Note, again:

Your adjusted gross income
+ Nontaxable interest
+ ½ of your Social Security benefits
= Your "combined income"

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,500
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 5 months ago
Ok so is my cancelled debt of $48,000 in student loans cause my social security to become taxed then?? half of my ssdi would be $6936.00.

48000 (IF you have to include it) ... again, if you don't have to include becasue you're insolvent it might be zero.

...

Or, lets say your assets are worth 10,000 and this debt is your ONLY debt, so insolvency is 38.000

...

You'd only include 10,000 of the income meaning that your potentially TAXABLE income is 16936.

...

But none of the social security would be taxable because your "combined income" is less than 25,000.

...

So now the only truly TAXABLE income is 10,000.

...

The standard deduction for a single filer is 6350 and the personal exemption is 4050, meaning that (given this example - based on single filing and an assumption about the worth of your assets) you have no tax at all. All income is below the standard deduction and personal exemption.

Ask Your Own Tax Question
Customer reply replied 5 months ago
I heard of IRS 982 but I have small credit card debt Lane (4000.00). So if that is my only debt is my social security taxable?? I am a little confused if you can help me understand if my social security is taxable I would appreciate it based I what I tell you,

Yes, but you have to understand that you include the 48000 AND the 4000 to calculate total liabilities.

...

Then you add up the market value (yard sale value) of all of the things that you own (401(k), house, car, etc) and net that 52,000 and the asset number.

...

If the debt total is larger than the asset total then you are insolvent.

...

you then subtract that number (from the 48000 and THAT's the amount of income that ever finds it way to the tax return)

Ask Your Own Tax Question

Here's a worksheet that can help you see if you're insolvent ... and remember, the 4800 is included as one of the debts

Ask Your Own Tax Question

(sorry for the typo ... the 48,000 is one of the debts - sounds like the 4000 plus the 48000 are the only debts)

Ask Your Own Tax Question

it's whatever THAT amount is (the 48000 less the insolvency amount) that you'd use to see if 1/2 of the social security plus that is less than 25,000.

...

If not, none of the social security is taxable

Ask Your Own Tax Question
Customer reply replied 5 months ago
Ok so social security is taxable Lane that is what I thought. Do I get a tax form for the social security to be entered? So $48000 minus a debt of $4000 would show insolvency. I hope I got this right.

No ... your ASSETS (car, furniture, 401(k) plan, etc.,) MINUS the 52000 (the 48000 of debt you had before cancellation plus the 4000) tells you the amount of insolvency.

...

Tell me what you'd estimate the value of all your assets to be, and lets go from there.

Ask Your Own Tax Question
Customer reply replied 5 months ago
Computer $500 Clothes $300 TV $500 thats all my assets Lane.

OK, so the insolvency is 52000 - (500 + 300 + 500) = 50700

...

50,700 is more than 48000 so NONE of the 48000 is included in income.

...

This means that NONE of your social security is taxable.

...

You'll have to FILE to show the form 982 to Answer that 1099-C, but your tax liability will be zero

Ask Your Own Tax Question
Customer reply replied 5 months ago
You can use the student loan debt in the insolvency form you showed me? I thought you couldn't use the 1099c amount in insolvency?? Wow!

Yes, that's why I made the point about the date on the 1099-C.

...

It's your debts on the day BEFORE the debt is forgiven that is used to calculate insolvency or this purpose.

...

Note what it says on that cancellation worksheet I gave you: "I. Total liabilities immediately before the cancellation..."

Ask Your Own Tax Question
Customer reply replied 5 months ago
I LOVE THIS SITE! Thank You Lane! I did not know you could use that 1099c amount. So that is what the IRS worksheet says to your debt before the cancellation??

That's right. Insolvency is a "point in time measurement." And the point in time that's measured for this purpose, in the tax code, is the extent of your insolvency on the day BEFORE the debt was cancelled.

...

Glad to help.

...

If you’d like to work with me again here at JustAnswer, just say "For Lane," at the beginning of your question (OR you can go to your questions page for reviewing questions and choose an option to make me a preferred expert)

..

Thanks again,

Lane

Ask Your Own Tax Question
Customer reply replied 5 months ago
For Lane. Lane my 1099c form doesn't come till 2021 is that gonna hurt me??

Likely not. You'll just perform the same calculation we did using 2021 tax year numbers.

Ask Your Own Tax Question
Customer reply replied 5 months ago
If the debt isn't there in 2021 but was present in 2017 if you get what I am saying?? Now I am worried again.

There will be a date on the 1099-C (box 1) See this: https://www.irs.gov/pub/irs-pdf/f1099c.pdf

...

THAT is the date that the debt is forgiven, not before. They MUST send the 1099-C for the tax year that the debt is forgiven. That's when the "income" happens.

...

The debt will be there UNTIL the debt is cancelled, and the 1099-C is sent for THAt tax year. You're fine here

Ask Your Own Tax Question
Customer reply replied 5 months ago
Oh so the loans have not been officially cancelled until the year of the form likely when they notify the IRS right?

That's right. They cannot send the form UNTIL the tax year they cancel.

Ask Your Own Tax Question
Customer reply replied 5 months ago
what kind of proof do you need to show the IRS how much debt you have? Is the worksheet what they go by or will I have to print them out stuff?
Customer reply replied 5 months ago
Thanks for your time Lane and if I think of any other question I will let you know. I am so happy now I was so worried before.

You simply file the 982 with the return for the year you get the 1099-C. Keep the worksheet for your records in the event you were ever audited.

...

This scenarios is pretty common however. No audit triggers here. But even if you were, you'd be fine here. Very straightforward.

Ask Your Own Tax Question
Customer reply replied 5 months ago
For Lane what if interest accrues until they send the 1099c? This is my last question for you. Do I count that in with the insolvency worksheet?

That would only help your case. The debt that's finally forgiven will be a larger number.

...

SO unless you add assets faster that that, the insolvency will be even larger.

Ask Your Own Tax Question
Customer reply replied 5 months ago
You are the best! Thanks for your help! =).
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,500
13,500 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,312 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,362 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

14,120 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,652 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
If my adjusted gross income is less than 10,000.00 dollars
If my adjusted gross income is less than 10,000.00 dollars I'm single over 65 not working anymore do I need to file a tax return?? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
I was audited for my federal tax return in 2014 and I
I was audited for my federal tax return in 2014 and I submitted all the requested info and the irs decided there was no extra tax to pay. I just received another audit for the year 2015 for the same i… read more
abci168
abci168
Principal
27 satisfied customers
I was mailed an cancellation of debt form from a debtor that
I was mailed an cancellation of debt form from a debtor that repossesd a car I had 4 hears ago, and the cancellation of debt was for 17,000. I bought the car in 2011. … read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,326 satisfied customers
I submitted my 2017 federal income tax forms to Turbo Tax to
I submitted my 2017 federal income tax forms to Turbo Tax to be submitted to the government. Turbo Tax recognized an error to be corrected because I omitted completing one section. Since Turbo Tax did… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,065 satisfied customers
The standard deduction is 12,700 for married filing jointly
The standard deduction is 12,700 for married filing jointly why does the 1040 form say 4050? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,065 satisfied customers
My wife and I have always filed joint returns and itemized
My wife and I have always filed joint returns and itemized deductions. This year we would like to file separately. Can we still itemize, and if so can she take most of those deductions since she makes… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
94 satisfied customers
Are there any refundable tax credits for an individual with
Are there any refundable tax credits for an individual with children and only Social Security disability income?… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
I NEED MY 2016 ADJUSTED GROSS INCOME. I NEED GROSS INCOME TO
I NEED MY 2016 ADJUSTED GROSS INCOME JA: The Accountant will know how to help. Please tell me more, so we can help you best. Customer: I NEED GROSS INCOME TO FILE 2017 TAXS JA: Is there anything else … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,065 satisfied customers
I'm retired, about 24,000, adjusted gross income for 2017. I
I'm retired, about 24,000, adjusted gross income for 2017. I am going to sell my owner occupied duplex that I've had for 29 years. I rented half for a few years, but haven't rented it in over 10 years… read more
Carter McBride
Carter McBride
LLM
449 satisfied customers
What is the federal income tax exemption for a single tax
What is the federal income tax exemption for a single tax payer for 2017? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
How does applying the standard deduction, or any itemized
how does applying the standard deduction, or any itemized deductions, impact your federal tax bracket? the top end of the 15% tax bracket is $75,900 for married filing jointly and the standard deducti… read more
Carter McBride
Carter McBride
LLM
449 satisfied customers
I am disabled, i have no taxable income but i was told that
hi, i am disabled, i have no taxable income but i was told that i could get the proff of all the medication i had to buy this and get money back … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
My withholding exceeds my tax liability for each of the the
My withholding exceeds my tax liability for each of the the first three quarters of 2017. However, in December 2017 I received a taxable gift of $78,000 from which nothing was withheld. I know this mu… read more
abci168
abci168
Principal
27 satisfied customers
Under the new tax plan if my federal adjusted gross income
Under the new tax plan if my federal adjusted gross income is $77,230.00 how much are my federal taxes? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,065 satisfied customers
On line 37 my 2015 Form 1040 I had an adjusted gross income
On line 37 my 2015 Form 1040 I had an adjusted gross income of $291,546. on my Amended 1040X for 2015 I have taxable income of $179,542. How do I get proof of this to get an adjusted MAGI to give to M… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,065 satisfied customers
From a tax liability perspective, what are the differences
From a tax liability perspective, what are the differences between filing taxes from a trust versus a personal income tax filing ?… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,326 satisfied customers
Can the Internal Revenue Service Audit an Amended 1040 after
Can the Internal Revenue Service Audit an Amended 1040 after the statue of limitations expire ? If so , can you specify why and the federal statue in the Library Of Congress that allows the examinatio… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I filed a joint return through TurboTax. My taxable income
I filed a joint return through TurboTax. My taxable income was $87,829. Using the IRS's published tax rate schedule, the tax I owe should be $13,499.25. TurboTax calculated I owe $17,787 (this compare… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x