Discussion:Forgiveness of Debt
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| {{ForumReplyPost|UserID=TaxNerd|Date=19 February 2008|Text=You've probably already considered this, but just in case, check to see if he was insolvent at the time of the debt forgiveness. If liabilites exceed assets by more than $8,000, no tax due.}} | {{ForumReplyPost|UserID=TaxNerd|Date=19 February 2008|Text=You've probably already considered this, but just in case, check to see if he was insolvent at the time of the debt forgiveness. If liabilites exceed assets by more than $8,000, no tax due.}} | ||
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| + | {{ForumReplyPost|UserID=TxSrv|Date=19 February 2008|Text=How confident are we that the client is correct? Have we looked at the details? If t/p merely says its wrong, and payer tells IRS it's correct, there's no shift of burden of proof to the IRS.}} | ||
Revision as of 22:45, 19 February 2008
Discussion Forum Index --> Advanced Tax Questions --> Forgiveness of Debt
Discussion Forum Index --> Tax Questions --> Forgiveness of Debt
IheartTaxes (talk|edits) said: | 19 February 2008 |
| Hello All,
As I am sure the rest of you are doing, I am pretty busy preparing tax returns right now. Here is my questions about "Forgiving a debt" Situation: Taxpayer was issued a 1099-C (Cancellation of debt) in the amount of $8,000. Taxpayer claims that actual debt was only $5,000 Question: How would I handle this when preparing taxpayer's return? How would I approach it and what kind of backup documentation would I need? If anyone has experience with this kind of situation or any information that might help, it would be greatly appreciated. Thank you | |
Wkstaxprep (talk|edits) said: | 19 February 2008 |
| First, i would see if i could get a corrected 1099-c from payer for $5,000.
If not, then i would report the $8,000 and then make a separate entry : "1099-C issued in error" $(3,000) | |
RoyDaleOne (talk|edits) said: | 19 February 2008 |
| Sometime there is attorney fees, costs, maybe accrued interest included in the 1099-C, not just the remaining principal. | |
| 19 February 2008 | |
| First review Section 108 to see if they have an exemption. | |
IheartTaxes (talk|edits) said: | 19 February 2008 |
| That's it? | |
IheartTaxes (talk|edits) said: | 19 February 2008 |
| Thank you all who replied | |
| 19 February 2008 | |
| When an erroneous 1099 is issued the burden of proof is on the issuer to establish that it is correct. However, you must raise the issue. Do that on Line 21 as Wkstaxprep has suggested. | |
| 19 February 2008 | |
| You've probably already considered this, but just in case, check to see if he was insolvent at the time of the debt forgiveness. If liabilites exceed assets by more than $8,000, no tax due. | |
| 19 February 2008 | |
| How confident are we that the client is correct? Have we looked at the details? If t/p merely says its wrong, and payer tells IRS it's correct, there's no shift of burden of proof to the IRS. | |
