Credit Card Debt Discharged in Chapt 7 and Form 1099-C

Discussion in 'Tax' started by bm30003700@aol.com, Oct 8, 2010.

  1. Guest

    Is only credit card debt reported on 1099-C reported as income. ? My
    client had credit card debt discharged in Chapter 7 bankruptcy, but
    only received 1099-C showing portion of the debt discharged.
    Bankruptcy attorney
    said she was not surprised no other 1099-C's issued because,
    "Technically, debt discharged before 1099-C is issued is not cancelled
    debt".

    I've read in at least one article that 1099-C income should be
    reported on the tax return, and can then be deducted on Form 982.
    Seems strange to me to only report amount which one credit card
    company reported on 1099-C,
    although if it is ultimately not included in income anyway, due to
    being part of bankruptcy perhaps it doesn't matter.

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    , Oct 8, 2010
    #1
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  2. "" <> wrote:

    > Is only credit card debt reported on 1099-C reported as income.
    > ? My client had credit card debt discharged in Chapter 7
    > bankruptcy, but only received 1099-C showing portion of the debt
    > discharged. Bankruptcy attorney
    > said she was not surprised no other 1099-C's issued because,
    > "Technically, debt discharged before 1099-C is issued is not
    > cancelled debt".


    Apparently the bankruptcy attorney hasn't a clue what she's talking
    about. Certainly it's cancelled debt - it's an obligation that once
    had to be paid, but no longer does.

    There is an exemption in the tax law, however, for debt cancelled in
    bankruptcy or debt cancelled while the debtor was insolvent. These
    cancellations of debt are not taxed.

    --
    Stu
    http://downtoearthlawyer.com

    --
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    Stuart A. Bronstein, Oct 9, 2010
    #2
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  3. Phil Marti Guest

    On Oct 8, 4:08 pm, "" wrote:

    > Is only credit card debt reported on 1099-C reported as income. ?  My
    > client had credit card debt discharged in Chapter 7 bankruptcy, but
    > only received 1099-C showing portion of the debt discharged.


    If there's a 1099-C it must be addressed on the return. Not all
    cancelled debt, for example, debt discharged in bankruptcy, is taxable
    income. The back of the taxpayer's copy of the 1099-C gives clues
    about how to deal with it on the return.

    If the taxpayer had taxable income from cancelled debt that wasn't
    reported on a 1099-C it still goes on line 21 of the 1040.

    Phil Marti
    VITA/TCE Volunteer
    Clarksburg, MD

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Phil Marti, Oct 9, 2010
    #3
  4. Guest

    On Oct 9, 3:50 am, Phil Marti <> wrote:
    > On Oct 8, 4:08 pm, "" wrote:
    >
    > > Is only credit card debt reported on 1099-C reported as income. ?  My
    > > client had credit card debt discharged in Chapter 7 bankruptcy, but
    > > only received 1099-C showing portion of the debt discharged.

    >
    > If there's a 1099-C it must be addressed on the return.  Not all
    > cancelled debt, for example, debt discharged in bankruptcy, is taxable
    > income.  The back of the taxpayer's copy of the 1099-C gives clues
    > about how to deal with it on the return.
    >
    > If the taxpayer had taxable income from cancelled debt that wasn't
    > reported on a 1099-C it still goes on line 21 of the 1040.
    >
    > Phil Marti
    > VITA/TCE Volunteer
    > Clarksburg, MD


    I must be missing something here. My client had debt on several
    credit cards discharged in the bankruptcy. Only one of the credit
    card companies filed form 1099C. It seems strange to me that because
    one credit card company filed 1099C,
    while the others could have, but didn't, only the income on form 1099C
    from one credit card company is reported. Does
    one then file Form 982 with the return, reducing tax attributes only
    by the amount on the 1099C? Sorry to ask such
    an elementary question.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    , Oct 10, 2010
    #4
  5. Phil Marti Guest

    On Oct 10, 12:47 pm, "" wrote:

    > I must be missing something here.  My client had debt on several
    > credit cards discharged in the bankruptcy.  Only one of the credit
    > card companies filed form 1099C.  It seems strange to me that because
    > one credit card company filed 1099C,
    > while the others could have, but didn't, only the income on form 1099C
    > from one credit card company is reported.  Does
    > one then file Form 982 with the return, reducing tax attributes only
    > by the amount on the 1099C?


    I wouldn't swear to it, but I think the 1099-C instructions say not to
    issue one when the debt was discharged in bankruptcy. That would
    explain why only one issuer issued a 1099-C, which must be addressed
    on the return or the IRS computers are going to bother the taxpayer
    down the road.

    Adjustments related to bankruptcy is a totally separate issue, which
    I'm happy to say is beyond my pay grade.

    Phil Marti
    VITA/TCE Volunteer
    Clarksburg, MD

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2007) - All rights reserved. >>
    << ------------------------------------------------------- >>
     
    Phil Marti, Oct 11, 2010
    #5
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