I Got a 1099-C For Debt I Didn’t File Bankruptcy On


Dear Steve,

I had debts little over $100,000 from several credit card companies, in 2008 (I remember, not exact). Because most of the creditors refused to lower the interest rate, I decided not to pay off all credit card debts. I thought to file the bankruptcy but I didn’t do it because I even had no money to pay the attorney fee.

In middle of Dec 2019, I received the notice mail from IRS that due to 3rd party report (cancellation of indebtedness) I have to adjust 2017 tax return and pay the tax for the discharged amount of indebtedness with penalty and interests, requiring to pay the tax very tightly (just two weeks deadline after I received the notice mail).

I have never received the notice of this discharge from creditor or IRS before. I guess the reason I did not receive it is that I have moved several times since 2008.

Anyway, I knew that I can file form 982 as insolvency to reduce the tax.

1. To calculate the amount of discharged the indebtedness, the car should be involved in my asset? When should be base of asset calculation? 2017, current, or 2008 I had debt? If it should be 2017, the amount can’t be exact because it is over two years ago.

2. Except for 982, what other documents should I send?

3. Can I appeal for the penalty and interest?

4. This is the first time I receive this notice and I think I may have to keep receiving more notice from IRS for other discharged indebtedness because other creditors would report 1099C.

What I should do if I receive it again after I file form 982 this time. If I get all at a time, I can use my asset value for all and all can be waived as insolvency but if I receive them in split, my asset would be used for all of them.

Thank you.



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Dear Jay,

The bottom line is you have three ways to deal with this situation.

1. You could find a competent tax professional to assist you. One place to look is on the National Association of Enrolled Agents website.

As the IRS says, “An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee. Enrolled agent status is the highest credential the IRS awards.” – Source

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2. You could always try to figure out how to best deal with this by reading the free forms available on the IRS website. The online instructions for Form 982 can be found here.

3. You can call the IRS at 800-829-1040 and ask for specific assistance with this issue. I’m less enthusiastic about this option given the chance you may receive conflicting advice from IRS employees. However, so many IRS employees are nice and want to help.

No Substitute for Experience

There is no substitution for having someone with experience that has dealt with this same situation many time before, on your side.

I certainly understand the position that you decided not to file bankruptcy to eliminate this debt tax-free because you did not have enough money to file.

Logically, that may mean you were insolvent at the time the debt was forgiven. But that will really depend on your status when the debt was actually forgiven.

More information on Form 982 can be found here.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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