Taxes after Bankruptcy

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I filed bankruptcy in 2013. One of the companies that was included on the Chpt 7 sent a 1099 to the IRS claiming that the debt was “forgiven”. The IRS sent me a letter telling me I owed taxes for this debt. I have forwarded the bankruptcy information to the IRS for review. What can be done in this situation?

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Posted by Jayzwife
Asked on April 29, 2016 1:52 am
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Debts that are discharged through bankruptcy proceedings are not subject to income tax based on cancellation of indebtedness. Therefore the 1099-C you received from your previous creditor is in error. Normally you would use IRS Form 982 to report the 1099-C and state that you have received a discharge and you will not be taking the amount as income. Since your return has already been filed you will need to provide the IRS with a copy of your creditor matrix and discharge from your chapter 7 bankruptcy. The IRS only has the 1099-C they do not have your bankruptcy information until you provide it to them. From your comment I see that you’ve already provided this information so you’re on the right track. If you feel that you need professional assistance in dealing with the IRS give us a call and we can assist you in resolving this issue. Thanks.

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Posted by Matthew Blackburn (Questions: 0, Answers: 1)
Answered on May 3, 2016 9:45 am