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3 very Specific questions about 1099's, Insolvency, and form 982 please.

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  • 3 very Specific questions about 1099's, Insolvency, and form 982 please.

    3 Specific questions about 1099's, Insolvency, and form 982

    Sorry, this may be a little jumbled, I have been in the hospital…..and I am writing this from there.

    Questions

    1) If you have 3 separate 1099-cs all from the same OC
    all on a dif date but just (1 day apart from each other ex may 1,2,3rd ) and from the same OC.

    What is the date that you use to show your insolvency?
    as the date immediatly prior to discharge. The day before the first 1099c? Which is May 1st? i.e.? April 29th?


    2) I paid the sales tax in full with my state extension.
    does the Federal 1099 cs, and the 982 that is all Fed
    affect the state tax if at all? is there anything I have to send them?

    3) On form 982 and 1040, do I fill int total liabilties? or total of only the 1099 cs ?

    ASSETS

    4) How do i determine the Value in the assets liabilities worksheet of old stuff?

    A) 200 books but they are highlighted so they cant be sold? so what are they worthless?

    b) Old equip 5-10 years old computer.

    c) Furnishing - old tvs, old microwaves, couch, coffee table, table all at least 5-10 years old.



    Thank you so much, I really appreciate this. it was all i could do to just write the questions.

  • #2
    1) To exclude the forgiven debt from gross income, you must have been insolvent at the time each debt was forgiven. So, you must first show you are insolvent on the date of identifiable event shown on the 1099c with the earliest date. Then, go to the next 1099c and show that you were insolvent on that date, without including the first discharged debt as a liability because you no longer owed the first debt at the time the second debt was forgiven. Then, move on to the 3rd one.

    2) I don't see how sales tax has anything to do with excluding forgiveness of debt from your income. If you mean state income tax, read the instructions for the state return to see how forgiven debt is treated by your state. You may need to amend that return.

    3) I don't see anywhere on form 982 to fill in your liabilities. What line are you asking about? If everything included on 1099c's is excludible from income, then you don't enter any of the discharged debt on your 1040. You enter the total amount of debt reported on forms 1099c that is excludable from income on line 2 of Part 1 of form 982. I don't see anywhere in the instructions for form 982 that requires you to attach evidence of your insolvency. But, you should complete the work sheet in publication 4681 for each 1099c and keep it in case the IRS later asks for evidence of your insolvency.

    Your assets should be valued based on what a willing buyer will pay a willing seller. Think garage sale and thrift store prices. You could also try checking craigslist or Ebay to value assets similar to yours. None of the stuff you list is going to be worth much, but I am sure the IRS would think those books are worth something, even with highlighting.
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

    Comment


    • #3
      1) If you are talking about college textbooks with excessive highlighting, they are completely worthless because no bookstore or textbook wholesaler will accept them.

      2) The computer equipment, if it is as old as you say, is worth no more than $50 per complete system--i.e. laptop or tower, monitor, keyboard, mouse, and speakers. If you have a decent printer, that might be worth another $50 to $60, however a cheap inkjet printer or all-in-one would be worth less than $20 used.

      3) Your home furnishings also have negligible value. If it is the cheap particle board furniture which most lower-income people buy, an entire apartment worth of furniture is probably worth less than $200. After all, if you were to have a yard sale and try to sell the stuff, a used particle board dresser, desk, nightstand, table, or bookcase is not going to sell for more than $20, if that.

      It sounds to me like you have less than $500 in personal property, so whatever you have in bank accounts and/or investment accounts plus $500 should be used as your total assets, and anything owed above that amount is insolvency (both legally, and practically).

      Comment


      • #4
        Originally posted by bcohen View Post
        1) If you are talking about college textbooks with excessive highlighting, they are completely worthless because no bookstore or textbook wholesaler will accept them.
        But somebody might pay a quarter or even a dollar for one at a garage sale or thrift shop. I would give some value to them.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

        Comment


        • #5
          First of all I want to thank you for you generous time and wise council. You are most appreciated.

          Originally posted by LadyInTheRed View Post
          1) To exclude the forgiven debt from gross income, you must have been insolvent at the time each debt was forgiven. So, you must first show you are insolvent on the date of identifiable event shown on the 1099c with the earliest date. Then, go to the next 1099c and show that you were insolvent on that date, without including the first discharged debt as a liability because you no longer owed the first debt at the time the second debt was forgiven. Then, move on to the 3rd one.

          CLARIFICATION; These are the exact figures. 60K cc and other liabilities. 30K in CC 1099c all from OC. 10K in assets.

          May 1st 1099c = 9K, May 2nd 1099c = 13K, May 3rd - 8K, / liabilities on 4/29 including all CC = 60K. 10K assets.

          do I have to do 3 different insolvency sheets? I just can't quite wrap my head around how to do this right.


          2) I don't see how sales tax has anything to do with excluding forgiveness of debt from your income. If you mean state income tax, read the instructions for the state return to see how forgiven debt is treated by your state. You may need to amend that return.

          CLARIFICATION: yes I meant state income tax. Since i paid the state income tax in full with the extension, I wondered if the
          1099cs and the fed return have anything to do with state income tax at all or am I done with that portion as i paid my tax in full?

          3) I don't see anywhere on form 982 to fill in your liabilities. What line are you asking about? If everything included on 1099c's is excludible from income, then you don't enter any of the discharged debt on your 1040. You enter the total amount of debt reported on forms 1099c that is excludable from income on line 2 of Part 1 of form 982. I don't see anywhere in the instructions for form 982 that requires you to attach evidence of your insolvency. But, you should complete the work sheet in publication 4681 for each 1099c and keep it in case the IRS later asks for evidence of your insolvency.

          CLARIFICATION; My mistake. I meant form 1040 line 21. Do i fill in total of all 3 1099c in this line so it matches the IRS record 1099cs?
          (30K) or do i fill in the total insolvency on the day prior to the 1099c? (the total liabilities I would use for the insolvency worksheet?)

          Your assets should be valued based on what a willing buyer will pay a willing seller. Think garage sale and thrift store prices. You could also try checking craigslist or Ebay to value assets similar to yours. None of the stuff you list is going to be worth much, but I am sure the IRS would think those books are worth something, even with highlighting.
          CLARIFICATION; makes sense thanks. Does salvation army, goodwill or other have a list, chart or link, that makes this easy to price your stuff?

          Again thank you for your valuable time.

          Comment


          • #6
            I did have one other question please.

            How in Gods sake do you determine the value of your Assets and liabilities of the Date Prior to the 1099s? I mean How do you go back in time and see the exact liabilities and Assets? What do tools, statements or documents, do you use to determine or prove this? and how do you get them from that far back?

            Comment


            • #7
              Originally posted by slvnomore View Post
              First of all I want to thank you for you generous time and wise council. You are most appreciated.
              I'm happy to help. This forum helped me when I was trying to figure out what to do about my debt problem and I'm glad to be able to pay that forward.



              Originally posted by slvnomore View Post
              Does salvation army, goodwill or other have a list, chart or link, that makes this easy to price your stuff?
              I Googled "how to value donations to thrift stores" and the first result was: http://satruck.org/donation-value-guide I didn't go beyond that, but I am sure there are other online sources.

              Originally posted by slvnomore View Post
              How in Gods sake do you determine the value of your Assets and liabilities of the Date Prior to the 1099s? I mean How do you go back in time and see the exact liabilities and Assets? What do tools, statements or documents, do you use to determine or prove this? and how do you get them from that far back?
              I assume you are within a year or two of the date of identifiable event. The value of your stuff wouldn't change that much. Make you best estimate of what you had on any particular date. For liabilities, if you don't have old statements or online access to the accounts, you may need to ask your creditors for copies of old statements or a letter confirming the balance as of the relevant dates.
              LadyInTheRed is in the black!
              Filed Chap 13 April 2010. Discharged May 2015.
              $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

              Comment


              • #8
                Thanks. Was flat on my back yesterday and couldn't even ask a clarification question. better today. one day at a time.

                1) To exclude the forgiven debt from gross income, you must have been insolvent at the time each debt was forgiven. So, you must first show you are insolvent on the date of identifiable event shown on the 1099c with the earliest date. Then, go to the next 1099c and show that you were insolvent on that date, without including the first discharged debt as a liability because you no longer owed the first debt at the time the second debt was forgiven. Then, move on to the 3rd one.

                CLARIFICATION; These are the exact figures. 60K cc and other liabilities. 30K in CC 1099c all from OC. 10K in assets.

                May 1st 1099c = 9K, May 2nd 1099c = 13K, May 3rd - 8K, / liabilities on 4/29 including all CC = 60K. 10K assets.

                do I have to do 3 different insolvency sheets? I just can't quite wrap my head around how to do this right.

                Comment


                • #9
                  3) I don't see anywhere on form 982 to fill in your liabilities. What line are you asking about? If everything included on 1099c's is excludible from income, then you don't enter any of the discharged debt on your 1040. You enter the total amount of debt reported on forms 1099c that is excludable from income on line 2 of Part 1 of form 982. I don't see anywhere in the instructions for form 982 that requires you to attach evidence of your insolvency. But, you should complete the work sheet in publication 4681 for each 1099c and keep it in case the IRS later asks for evidence of your insolvency.

                  CLARIFICATION; My mistake. I meant form 1040 line 21. Do i fill in total of all 3 1099c in this line so it matches the IRS record 1099cs?
                  (30K) or do i fill in the total insolvency on the day prior to the 1099c? (the total liabilities I would use for the insolvency worksheet?)

                  Comment


                  • #10
                    worksheet?)

                    Comment


                    • #11
                      Originally posted by slvnomore View Post
                      May 1st 1099c = 9K, May 2nd 1099c = 13K, May 3rd - 8K, / liabilities on 4/29 including all CC = 60K. 10K assets.
                      So, immediately before the first identifiable event, if you had $60K in liabilities and 10K in assets, you were insolvent immediately before May 1 by $50K, which is higher than the forgiven debt, so the $9K in forgiven debt is excluded from income. Immediately before May 2, you had 51K in liabilities (after subtracting the $9K debt forgiven on May 1) and 10K in assets. You were insolvent by 41K, so the $13K in forgiven debt is excluded from income. Immediately before May 3, you had 38K in liabilities and 10K in assets. You were insolvent by 28K, so the $8K is excluded from income.

                      Originally posted by slvnomore View Post
                      do I have to do 3 different insolvency sheets? I just can't quite wrap my head around how to do this right.
                      Yes, one worksheet for each 1099c.

                      Originally posted by slvnomore View Post
                      CLARIFICATION; My mistake. I meant form 1040 line 21. Do i fill in total of all 3 1099c in this line so it matches the IRS record 1099cs?
                      (30K) or do i fill in the total insolvency on the day prior to the 1099c? (the total liabilities I would use for the insolvency worksheet?)
                      If you are claiming that all of the forgiven debt is excluded from income, you enter nothing on line 21 of the 1040 and you enter the total of all 1099cs on Line 2 of Part 1 of form 982. Then keep your insolvency worksheets with your copy of your return in case you are audited. You also need to determine whether part 2 of form 982 applies to you.

                      Please read about insolvency in Publication 4681, starting at page 5. http://www.irs.gov/pub/irs-pdf/p4681.pdf. Keep in mind that I have never received a 1099c and have no actual experience with this. I am not a tax professional. I've just done the research by reading IRS publications and form instructions because this question comes up so often. So, please read the publications and instructions and understand for yourself how to fill in the forms. If you are not certain, you should get the help of somebody qualified to help you.

                      Originally posted by slvnomore View Post
                      worksheet?)
                      ??
                      Last edited by LadyInTheRed; 05-31-2014, 05:13 PM.
                      LadyInTheRed is in the black!
                      Filed Chap 13 April 2010. Discharged May 2015.
                      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                      Comment


                      • #12
                        thank you again for all your help.
                        I have filled everything else out as far as I can.

                        ready to meet with acct. and see how this all works out….

                        Comment

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