Question Cancellation of debt to IRS? BK

[djrazr]

Hello everyone


About 5 years ago i was suppose to file BK. I started to, did a down payment and never followed through. I never followed through, because i never got the harassing phone calls. I brushed things off. About that time, i had got a ready credit line for my business at the time. Not an SBA
My business tanked after about 2-3 years, and that was about 5-6 years ago

Today i get a letter "cancellation of debt" 1099-c which is forward to the IRS i believe for the ready credit line
Give or take i have been dead broke for the past 4-5 years, living with my mom, then my sisters. I'd do little side jobs here and there, and i havent filed taxes in that time, because i wasn't making nothing ( i know )

I'm in a situation where this 1099-C has made my filing of BK resurface again.
The thing is i opened up a new bank account about 6 months ago, and there has been transactions in the account, money in vs money out, selling some stuff on ebay. Should my account be clear of transactions for 6 months before i file bk? So for the next 6 months, no transactions?

I'm going to file this time. Just looking for suggestions. I have an appt with my attorney on friday
I just re-opened my business after those years in oct 2012

thanks

[AngelinaCat]

Hi djrazr:

Welcome to the forum. Do not worry about your bank account. Keep using it for you everyday living, just as you are now. The request for the six months worth of bank statements is for the attorney you eventually choose, to be able to see your income and outgo, and if there are any potential problems that must be addressed before you file. The trustee will also be viewing these. But from what you have posted here, you have nothing to worry about.

[djrazr]

Hi djrazr:

Welcome to the forum. Do not worry about your bank account. Keep using it for you everyday living, just as you are now. The request for the six months worth of bank statements is for the attorney you eventually choose, to be able to see your income and outgo, and if there are any potential problems that must be addressed before you file. The trustee will also be viewing these. But from what you have posted here, you have nothing to worry about.

please explain. I haven't filed in years. this is driving me crazy

thanks

[LadyInTheRed]

You don't have to stop all financial activiity before filing BK. There is nothing wrong with having transactions in the account in the 6 months before filing as long as you aren't hiding anything. If any of those transactions are income, then they have to be included on your petition as income. You may have to answer some questions about significant transactions, but it also may never come up.

What are you hoping BK will solve in connection with the already issued 1099-C?

[AngelinaCat]

For help with not filing an income tax return, you need help from a tax attorney, or other income tax professional. I see that you are in California, so I am guessing that you haven't filed a tax return with the state either. Even if you don't owe any IRS or State income tax, you should have filed those returns each year.

I am simply talking about the six months of bank statements that you will be requested to show to your BK attorney, when you pick one. Or, if you decide to file on your own, that you will need to provide to the trustee. From the date that you file CH7 BK, which is the chapter that you probably would file, there is a six month look-back period for all of your financial activity. As I said earlier, if you are simply engaged in everyday life activities, like buy groceries, pay bills, etc., you should not have a problem.

[djrazr]

You don't have to stop all financial activiity before filing BK. There is nothing wrong with having transactions in the account in the 6 months before filing as long as you aren't hiding anything. If any of those transactions are income, then they have to be included on your petition as income. You may have to answer some questions about significant transactions, but it also may never come up.

What are you hoping BK will solve in connection with the already issued 1099-C?

Nothing significant. I don't own a house or anything. I own my car
I was hoping the BK would eliminate the 1009C?

[tobee43]

when you file you taxes and as long as the debt that is related to the 1099C was listed in your petition you just attach your 982 by marking 1a in section one which refers to a discharge of indebtedness in a title 11 case (meaning a 7,11 or 13) then section II is filled in what is applicable to your gain.

it's best to consult an tax professional to deal with the C....as you need to attach the 982, again, as long as you listed the related debt into your bk, you will not have a tax ramification.

however, your question if the bk would eliminate the 1099c would depend on as i stated you listed the debt and it was discharged with you bk. however, you must still fill out the 982 along with your 1040 or 1041. the 982 explains to the irs you don't own them.

best of luck to you.

[AngelinaCat]

tobee43, he never filed BK in the first place. That is part of the problem. He hasn't filed tax returns either. So he is wanting this 1099 to 'go away', and I don't think it is going to. But I am certainly no tax person.

[tobee43]

tobee43, he never filed BK in the first place. That is part of the problem. He hasn't filed tax returns either. So he is wanting this 1099 to 'go away', and I don't think it is going to. But I am certainly no tax person.

<-----knock knock, got it now...but:

no it certainly will not be going anywhere soon, however, that only means there may be another applicable situation to be able to be used on the 982 to indicate he may not have tax ramifications.


Part I General Information (see instructions)

1 Amount excluded is due to (check applicable box(es)):

a Discharge of indebtedness in a title 11 case . . . . . . . . . . . . . . . . . . . . . . . .
b Discharge of indebtedness to the extent insolvent (not in a title 11 case) . . . . . . . . . . . . . . .
c Discharge of qualified farm indebtedness . . . . . . . . . . . . . . . . . . . . . . . . .
d Discharge of qualified real property business indebtedness . . . . . . . . . . . . . . . . . . .
e Discharge of qualified principal residence indebtedness . . . . . . . . . . . . . . . . . . . .



there's more, of course on the 982 but if any of these are applicable to the OP...even if he didn't file for years, if he didn't owe can you believe it's likely they don't care LOL!! they really only care if you owe them, NOT if they owe you.

truth be told OP should get back taxes done if needed and deal with the 1099 asap.

[djrazr]

no it certainly will not be going anywhere soon, however, that only means there may be another applicable situation to be able to be used on the 982 to indicate he may not have tax ramifications.


Part I General Information (see instructions)

1 Amount excluded is due to (check applicable box(es)):

a Discharge of indebtedness in a title 11 case . . . . . . . . . . . . . . . . . . . . . . . .
b Discharge of indebtedness to the extent insolvent (not in a title 11 case) . . . . . . . . . . . . . . .
c Discharge of qualified farm indebtedness . . . . . . . . . . . . . . . . . . . . . . . . .
d Discharge of qualified real property business indebtedness . . . . . . . . . . . . . . . . . . .
e Discharge of qualified principal residence indebtedness . . . . . . . . . . . . . . . . . . . .



there's more, of course on the 982 but if any of these are applicable to the OP...even if he didn't file for years, if he didn't owe can you believe it's likely they don't care LOL!! they really only care if you owe them, NOT if they owe you.

truth be told OP should get back taxes done if needed and deal with the 1099 asap.

I was always looking over my shoulder for the IRS (not good). I never received a letter or phone call from them...ever. I think i last filed in 05-06 as i had an employer. Since then, i just been doing my own thing here and there. I haven't moved much. Maybe they owe me, i don't know. I set up an appt with a tax attorney. I'm gonna file 2012 with a 982 just because and see what happens

[tobee43]

I was always looking over my shoulder for the IRS (not good). I never received a letter or phone call from them...ever. I think i last filed in 05-06 as i had an employer. Since then, i just been doing my own thing here and there. I haven't moved much. Maybe they owe me, i don't know. I set up an appt with a tax attorney. I'm gonna file 2012 with a 982 just because and see what happens

good idea, i would start with a CPA prior to spending what may be unwarranted legal expenses for a specialized "tax" atty. (although i LOVE all atty's lol!) this may not be a big deal at all. if you were not working for the past 5-6 years or so and had no income to claim, you have no need to file a tax return.

however, now that you have rec'd a 1099 you have to file...i'm certain with your unemployment and lack of income you will qualify under "b" if you didn't or haven't filed a bk.

[djrazr]

good idea, i would start with a CPA prior to spending what may be unwarranted legal expenses for a specialized "tax" atty. (although i LOVE all atty's lol!) this may not be a big deal at all. if you were not working for the past 5-6 years or so and had no income to claim, you have no need to file a tax return.

however, now that you have rec'd a 1099 you have to file...i'm certain with your unemployment and lack of income you will qualify under "b" if you didn't or haven't filed a bk.

Well i was working for myself here and there, little side jobs. mostly cash and check (cashed at their bank). Now i got this 1099 so i have to file. I'll file for 2012 and see what happens with form 982. I havent filed bk yet...crazy because i have about 50k in debt , and nobody is blowing up my phone. Only verizon blows up my phone. I even have a judgement against me which nothing has ever happened from that either. I no longer have credit cards. I just use cash and it's taught me

i assume insolvent meaning unability to pay for a certain time frame?

[tobee43]

<------------(covering my eyes about ''cash" payments)......well it sounds as though you have yourself established off the grid. it's difficult to prove your income other than what goes into your bank account. yet, someone at least one of your creditors is writing off the debt by issuing the 1099 to you and apparently, they didn't feel they could collect so opted to just write it off and issue you the 1099 on their loss. leaving the burden on you to prove you don't owe on a gain.

i don't really think by the sounds of what you say it will be that difficult unless you made a ton of large deposits in your bank for those side jobs.

[djrazr]

I always figured i would be off the grid. I don't really know how it happened. It just did, and i probably would of kept going, but the 1099 stops me.
Large amounts? Thousands, no? Sometimes a check would be like $500 from another bank not in my town in another state . I had no choice but to deposit it into my account, but could of cashed it at walmart or something if they do personal checks. Paypal would come through $200-$300
Month of January, i had probably $200 in my account, Dec of 2012, about $1000. some months $0, average $300 a month on months something is in my account
I was thinking to open up another bank account elsewhere and start over or just barely any money in my account for a few months. Money to pay some bills, even though i could walk in and pay cash. I got a little lazy

I want to do this right. Just opened up my window tinting business couple months ago and do it right

[tobee43]

the only reason i mentioned the cash in your bank accounts is all that one can really establish as creditable income...on an in and out basis. if you had thousands of dollars rolling in and out of your bank account then i would likely think you would have a problem claiming insolvency. in what you are stating your income has been low and hopefully, low enough to allow you to get this behind you with a insolvency claim on your tax return. just to tell the irs you are unable to pay due to lack of income and put it all behind you.

then you can rethink filing your bk?