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1099-C Three Years After Discharge

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  • 1099-C Three Years After Discharge

    I have searched and read several threads regarding the receipt of a 1099-C years after a discharged and would llike to get an opinion on my situation for tax filing.

    - Here are the facts:
    - Mortgage was included in the BK.
    - BK was discharged in April 2009.
    - Moved out of home in June 2009.
    - Lender foreclosed in April 2011.
    - Filed my 2011 tax return January 22, 2011.
    - Received an unexpected 1099-C yesterday for the foreclosure in 2011.

    The 1099-C appears to be incorrect by not having the Bankruptcy box checked and I have contacted the lender who has stated they have filled it out correctly and do not plan to correct it.

    I believe that since I have already filed my taxes for 2011 I will need to file an amendment to include Form 982 with the information related to the 1099-C that was received yesterday, correct?

    That's where I am confused....since the mortgage was originally discharged in April 2009 do I still mark box 1a on form 982 to indicate discharge of indebtedness in a title 11 case? Then do I enter in line 2 of form 982 the amount of debt cancelled on the 1099-C? Is there any other information that must be entered on form 982 in regard to the 1099-C? When sending the amended return and form 982 in to the IRS do I also attach a copy of my discharge or do I wait to see if the IRS requests any paperwork?

    I did speak to the IRS today and the person I spoke with also indicated that I will need to fill out part 2 of form 982. I thought that with the bankruptcy discharge I would not need to fill that out?

    Any insight is much appreciated. I am trying to determine if I need to go to a tax professional now to take care of this.
    Filed C7: 12/16/08; 341 Meeting: 1/22/09
    Last Day for Objections: 3/23/09 (No Objections)
    Discharged: 4/3/09
    Closed: 3/23/10

  • #2
    take a look here:


    quick look:
    This year, it seems that more creditors than ever are sending IRS Form 1099-C to their debtors who have filed bankruptcy or settled debts with them. While in many cases it is unnecessary for the creditor to do this, it is nothing to fear. If a debt is discharged in bankruptcy, it is not treated as cancellation of indebtedness income, and it is not taxable. The IRS has provided a simple fix for the seemingly unnecessary 1099-C: Form 982.

    If you have received a 1099-C, you need to file IRS Form 982 to demonstrate to the IRS that it is not taxable. While it seems complicated, it is very simple with regard to consumer debt discharged in bankruptcy, and even do-it-yourself tax filers should be able to do it. You just need to check box 1a on the form (“Discharge of indebtedness in a title 11 case” — “Title 11″ being the Bankruptcy Code, not to be confused with Chapter 11, which is just one type of case under Title 11).

    You then list the amount discharged on line 2, and then list it again on Line 10a to reduce the basis in your property. However, only list it on 10a to the extent the basis (generally, the purchase price) of the non-depreciable property that you retain after discharge exceeds the debt remaining after your discharge (which includes both existing mortgages and loans secured by property you still own and any non-dischargeable debt). This reduction in basis can result in capital gains tax liability in later years, but because of the residential capital gains exclusion, for most people it has no effect.

    The 10a) basis is what keeps tripping me up.
    Hired Attorney 8/28/10 Filed Chapter 7 11/08/10 341 12/14/2010 Report of NO DISTRIBUTION 12/15/2010 Waiting for February 14 2011, date objections due.
    DISCHARGED and CLOSED 2/15/2011


    • #3
      oops, sorry, looks like the link will not work here. I put in a brief look at what it said.
      Hired Attorney 8/28/10 Filed Chapter 7 11/08/10 341 12/14/2010 Report of NO DISTRIBUTION 12/15/2010 Waiting for February 14 2011, date objections due.
      DISCHARGED and CLOSED 2/15/2011


      • #4
        I would definitely amend the 2011 filing and report on the form 982 the bankruptcy discharge, so that you will not have the IRS coming back with an audit, which they may do. From my understanding the 1099c is what will trigger the audit if it does not show up on your tax forms, so reporting it on the form 982 should take care of the issue. Keep in mind, the IRS does not know about anything until it is reported to them(or they find out some other way), so even though you filed BK in 2009, the IRS will not know about it until it is included on your form 982 with your taxes, but they will know about the 1099c as that will be reported by the bank.

        I hope this helps some, please keep in mind these are only my thoughts based on what little I know. Good luck.
        Hired Attorney 8/28/10 Filed Chapter 7 11/08/10 341 12/14/2010 Report of NO DISTRIBUTION 12/15/2010 Waiting for February 14 2011, date objections due.
        DISCHARGED and CLOSED 2/15/2011


        • #5
          Best thing to do is to consult with a tax professional to be on the safe side since you already filed. Don't fool with this since, as stated above, it can trigger an audit if not reported or not reported corrrectly.
          Filed 5 Year Chapter 13: April 2002
          Early Buy-Out: April 2006
          Discharge: August 2006

          "A credit card is a snake in your pocket"


          • #6
            Don't worry about trying to get the 1099-C corrected, that will simply not happen...and actually, the lender filled it out correctly.

            All you need to do is fill out form 982, and check the "included in a case filed under Title 11..." box, and that is all she wrote. Easy, peasy.


            • #7
              hhm...maybe a sticky would be a good thing about the 1099A's and C's you think?? so many questions about them
              8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


              • #8
                Might be a good idea. I keep pulling the info I have from CPA Diane Kennedy's website(, she is a guru on taxes and offers a free tax review and has some good info also. I am unable to get the website information to post here, which might be something we are not supposed to do anyway. Kennedy has so much valuable information for those of us going through this stuff. I will be dealing with it for several years as my house just finally got turned over for foreclosure to an attorney and will take probably another year to hit its final demise, which will put me into 2013. Yuck!! I just keep hoping things will move quicker and they never do, so I just do my best not to even think about it until times like this when it is in my face during tax time, again. At least I will be well prepared.
                Last edited by panda; 02-01-2012, 01:50 AM.
                Hired Attorney 8/28/10 Filed Chapter 7 11/08/10 341 12/14/2010 Report of NO DISTRIBUTION 12/15/2010 Waiting for February 14 2011, date objections due.
                DISCHARGED and CLOSED 2/15/2011


                • #9
                  hhm has explained it many a time, and i think it's pretty much right on the money (no pun intended )

                  yes, i might be a copyright issue to take that person's information, however, it's all listed right on the irs site, so it's not to difficult to just either put in the links directly to the irs which is information published for the public's viewing, or hhm can explain it LOL!!
                  8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! and all are welcome to bk forum's Florida State Questions and Answers on BK


                  • #10
                    Thank you for your replies. I have read through all of the instructions for filling out the forms and consulted with a tax advisor. The advice given here is right in line with what the tax advisor told me so this should be easy to take care of.

                    By the way, I also spoke to 3 different people at the IRS who worked in the complex tax law area. None of the three were able to advise me on how to properly complete the form. They just said to fill it out the best I can and send it in and the IRS would contact me if they needed anything else. Kind of scary advice I would say, especially when it's coming from the place that should know.

                    Thanks again. This should be my last hurdle related to my bankruptcy. Everything else has been going pretty smooth. Good luck to everyone else going through BK and continue sharing your stories. The information here is very helpful.
                    Filed C7: 12/16/08; 341 Meeting: 1/22/09
                    Last Day for Objections: 3/23/09 (No Objections)
                    Discharged: 4/3/09
                    Closed: 3/23/10


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