I Got a 1099-C and My CPA Says I Have to Pay Taxes On It

“Dear Steve,

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I’m confused now. I just had 1099-c sent that canceled out 51,000.00 of debt (30,000.00) from one creditor who never even called me, or sent nasty emails. The rest was the balance from other cards I settled for much lesser. I just went to my cpa and found out I owe 19,000.00 in taxes to the irs for the above mentioned debt. He has advised I file solvency which I have, so waiting to hear back on if it’s accepted. I would of received a refund of $6,000.00 but the irs will apply that towards the balance owed, and put me on a payment plan for 5 years. So If this debt is not discharged, why am I paying it back if it comes to that, and later receive a call that I still owe the creditor that’s a double wamy! so what to do?”


I think what you are saying is that your CPA has advised you to file bankruptcy. But if you are insolvent you don’t need to do that to eliminate your tax liability. Instead, you need to complete IRS Form 982.

Yes, you would still owe the creditor and yes it is a double hit.

The reporting of the forgiven debt is a tax function and the collectibility of the debt is a legal function of the agreement with the creditor.

Please post your responses and follow-up messages to me on this in the comments section below.

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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