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what happens if you dont pay the 1099-c?



jackszoey-d1

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Sub: what happens if you dont pay the 1099-c?
Thu, 17/03/2011 12:03

I consolidated all my debt and received 2 1099-c's from the banks. In total its around 10,000.
What happens if I dont report this to the IRS?
I did read up about being insolvent, and indeed I settled because I could not pay my CC any longer.

I am debt free and there still trying to get money out of me, just wondered the best way to go. Has anyone else out there not filed this and what happened?



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kaylee
kaylee
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Sub: #1 Whoops! i forgot to ask the most important question. On the insoThu, 03/17/2011 - 12:03



Whoops! i forgot to ask the most important question. On the insolvency worksheet (not the 982) I put my credit card debt as 106k ---under liability--because that is what the debt was before I settled. The 1099's add up to 43k but that is forgiven debt and my understanding from before is that I put the total of my credit card balances before settlement. Did I do that correctly?
thanks


kaylee
kaylee
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Sub: #2 Danthe Man!Thu, 03/17/2011 - 11:31



Best example yet of this complicated stuff!

Dan, my tax guys knows that on form 982 he puts in the dollar amount of my 3 1099's I received for settled credit card debt and he knows the figures must match so we are good there. The rest he does not know and so I am on my own and I just followed your formula here and did it...yippeee I think!

So let me run it by you. My liabilities came up to $405 704 and assets $322,784 so liablility of $82,920 and then my total of the 1099's was $43,520.

So if I read you right I do not have to pay taxes on any portion of that?

Also, just a few more questions to make sure I did the form correctly.

1. what is non recourse and recourse real estate?

2. on liabilities g, h and i do I put the figures for the year and I assume this would be for all three properties I have?

3. Example on the way I did my real estate with regards to LIA/ Assets.

Property 1 I owe 103k and it is worth 129k I put 103 in LIA column and 129 in ASSET meaning I will have a plus on that one.

Property 2 and 3 I am upside down but the way I reported it was LIA (what I owed the bank in OCT when I did settlements) and ASSET as 'what it would sell for.
Example LIA 80 /Asset 69 (what realtor said it would sell for).
Am I doing that correctly?

thanks so much,
Kaylee


dantheman
dantheman

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Sub: #3 I am reposting this from an anon poster in another forum from laMon, 02/07/2011 - 15:34



I am reposting this from an anon poster in another forum from last year. It is helpful in understanding the issue.

STRAIGHT from the mouth of the IRS. I read the booklet three times and then talked twice to different reps a the IRS directly and received the same answer twice. So, for those of your filers who have settled here are the instructions for taxes


For tax for 982--Reduction of Tax Attributes Sue to Discharge of Indetedness [URL="http://www.irs.gov/pub/ir s-pdf/f982.pdf"]http://www.irs.gov/pub/ir s-pdf/f982.pdf[/URL]

If the 1099-c received was for credit card debt, then you need to check the box 1 b

If you received one or multiple 1099-c forms then you add up the totals of all forms you received and place that total on line 2.

Line 10a is for credit card debt settlement. You must put the same amount you placed on line 2 on line 10a. Then must match as you will earn yourself an instant audit, which none of us want.


You need to fill out an insolvency worksheet. [URL="http://taxtipsfrombill.com/Documents/Cancellat ion%20of%20Debt%20Insolven..."]http://taxt ipsfrombill.com/Documents...0Worksheet.pdf[/URL]

If filiing by mail, this worksheet MUST be included with the 982 regardless of if you have to pay taxes on the settlement or not.


NOW HERE IS THE TRICKY PART

Step 1---If after finishing this worksheet you must subtract your assets from your liabilities. ( $40,000 assets - $100,000 liability= ) If your liabilities are great than your assets( -$60,000) you then put that total aside until step 3.

Step 2---You should put the total of all your 1099-c's($7,000 wachovia + $1,000 chase= $8,000 total taxable 1099-c) on line 2.

Step 3---Next you substract the line 2 1099-c total from your liabilities. (-$60,000-+ 8,000= $52,000 more liability to 1099-c taxable settlement)

In other words, if you 1099-c total is greater than the total of liability over of your assets you must pay on that total overage. ( 1099-c total taxable income $8000. Assets $40,000, Liabilities $12,000= +$38,000--you must pay taxes on all of the taxable 1099 amount) If it is less than your liability total then you do not pay taxes on the 1099 settlement amount. 1099-c total $10,000, Liabilities $50,000-Assets $10,000= --$40,000 which is more than the 1099c of 10,000) If the 1099c is only partially the amount then you are responsible for the difference, In other words ( 20,000 1099c total, Liabilities $30,000-Assets $15,000=--$15,000 which is less than the 1099c so you must take the 1099 total of $20,000 and substract the $15,000 from it=giving you the total taxable income to report on line 21 of your tax form or $5,000 in this example.)

$40,000 assets
-$12,000 liabilities
________________
$38,000 ---you pay taxes on ALL your 1099c total so if it is $4,400, you put $4,400 on line 21.

$10,000 Assets
-$50,000 Liabilities
___________________
-$40,000 ---You pay taxes on any amount over $40,000 so if you 1099 is under $40,000 you do not pay taxes, if it is over, you pay on what is over that total So, if it is $32,000 on your 1099c--since it is less than $40,000 you do not report anything extra on line 21


-$15,000 Assets
$30,000 Liabilities
__________________
-$15,000--- Your 1099c is $20,000

$20,000 1099c
$15,000 liability overage
________________________-
$5,000 reported on line 21 as extra income.


Step 4---Basically, if your total of 1099-c is larger than your liability total you must subtract the liability total from the 1099-c total and add that amount as income on line 21.

If your liability after assets is larger than your 1099 total then nothing is added to line 21.


******************You can use Turbo tax to file electronically, but the forms are only available on the Home and Business edition. You must go the forms portion of the taxes and click add forms and add the 982. Fill it out there and then click and add for insolvency of debt. Fill it out with your asset to liability ratios and then you can electronically file.


King Jabba Labba
King Jabba Labba

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Sub: #4 Greetings, Just received the last of my 1099-c's from 2010. Fri, 02/04/2011 - 18:21



Greetings,

Just received the last of my 1099-c's from 2010.

I'm on the home stretch and then it's finally over for me!

Don't think that the IRS will forget about the tax due on forgiveness of debt.

Read up on being insolvent.
Could help your situation.

Regards,
King "Kash" Jabba Labba

I really hate debt......let's destroy it together!


Unregistered

Sub: #5 The amount on the 1099 C is not something you have to pay back iFri, 02/04/2011 - 07:16



The amount on the 1099 C is not something you have to pay back it's just reported as income.


girlndebt
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Sub: #6 Not paying 1099-cTue, 04/01/2008 - 20:25



Chances are-the IRS got a copy of those 1099-c's. You may not hear from them for a little bit but when you do-be prepared to answer questions. If in fact you were insolvent then there is no reason to not include these with your taxes. You wont have to pay. If you do, why not just get it over with now? They will work out some sort of payment plan. It will beat getting hit up for it later down the road with added penalties.
Good luck!

http://www.girlndebt.com


goudah2424
goudah2424

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Sub: #7 If you were to ever get audited you would be in a lot of troubleMon, 03/31/2008 - 09:25



If you were to ever get audited you would be in a lot of trouble . . . . Taxes and the IRS is not something to take a chance on.

If they could prove that you intentionally left it out, there is the possibility of criminal charges in addition to financial penalties.

How I make some extra cash

I earn at least $20 extra every month doing offers. And you don't have to pay a cent.


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