1099C on Reaffirmed Auto Question

[ace300s]

Yesterday I recieved a 1099C ($2200) on a reaffirmed auto. It lists Cancellation of Debt on the form and Settlement in the Debt Discription box.

The lender reduced the loan $2200 to below value and gave me zero interest on the remaining balance. This was done during my BK7 process and the forms were submitted to the Trustee. The car was included in my BK7.

Do I have to pay taxes on this amount? I thought the whole car balance was included in BK7 and I just agreed to reaffirm a new loan balance.

Any information and advice is appreciated........

Thanks

[justbroke]

If you have an accountant or tax preparer, be sure to mention this 1099-C and also mention IRS Form 982. That form would allow you to declare the amount "discharged in a Title XI (11)" proceeding -- which is Bankruptcy. You would not need to pay taxes on this amount. If you are using a tax preparation software package yourself, make sure it is abler to distinguish this 1099-C and allow you to exclude it as ordinary income.

TurboTax, a popular package, does include Form 982 for the desktop software versions, but not with their free on-line version. I highly recommend that when you have special tax issues (1099-A/C) you make sure to use a deluxe version of the software packages, or use a seasoned tax preparer. If you use a tax preparer or accountant, I will repeat myself again. Tell them about the 1099-C and that the debt was discharged in bankruptcy and that you need to file Form 982.

[ace300s]

If you have an accountant or tax preparer, be sure to mention this 1099-C and also mention IRS Form 982. That form would allow you to declare the amount "discharged in a Title XI (11)" proceeding -- which is Bankruptcy. You would not need to pay taxes on this amount. If you are using a tax preparation software package yourself, make sure it is abler to distinguish this 1099-C and allow you to exclude it as ordinary income.

TurboTax, a popular package, does include Form 982 for the desktop software versions, but not with their free on-line version. I highly recommend that when you have special tax issues (1099-A/C) you make sure to use a deluxe version of the software packages, or use a seasoned tax preparer. If you use a tax preparer or accountant, I will repeat myself again. Tell them about the 1099-C and that the debt was discharged in bankruptcy and that you need to file Form 982.

Great news! Thank you so much.....I've been buying and using the Delux Turbo Tax for a few years now. So it looks like that will work? Is the form 982 easy to use?

[justbroke]

Great news! Thank you so much.....I've been buying and using the Delux Turbo Tax for a few years now. So it looks like that will work? Is the form 982 easy to use?

I have not used Form 982 with TurboTax but the product does have it. It does take a little more work in TurboTax. .

It's under Less Common Income (1099-C) in the Wages & Income section of TurboTax (under Federal Taxes). Then it will be the Cancellation of Debt (1099-C/A) area. After going through the prompts, one will have a question "Tell Us About Your Main Home". There is a checkbox for "The loan on my home was was canceled in bankruptcy".

I'm not sure that it generates the Form 982. You'd have to play with it. This is why I suggest having a seasoned tax preparer do this. I'm sure you could do it on your own, but if you're concerned you might want some help so that you don't end up with an IRS notice years later.