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HELP. 1099-C on chap 7 discharged student loan

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  • HELP. 1099-C on chap 7 discharged student loan

    IRS- help- I might be behind the 8 ball
    As you recall-- I filed chapter 7 bankruptcy this past Summer.

    At issue now is a 1099-C form I got cancellation of debt, $12,395 (box 2) of that the interest $7707 box 3. (student loan)

    My SSDI for 2013 was $9948.

    I been reading, googling and I run into double -conflicting info. A few years ago- I was a day trader- mostly miners stock. I never filed. The IRS came down on me. So I had to go to an accountant- and bottom line, is once it was all itemized, I lost $2000. Happily the IRS did not fine or penalty me.

    In general, if you are liable for a debt that is canceled, forgiven, or discharged, you will receive a Form 1099-C

    Debt Cancellations or Reductions that Qualifiy for EXCEPTION to Inclusion in Gross Income:

    Amounts specifically excluded from income by law such as gifts, bequests, devises or inheritances
    Cancellation of certain qualified student loans
    Canceled debt, that if it were paid by a cash basis taxpayer, would be deductible
    A qualified purchase price reduction given by a seller
    Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program

    Canceled Debt that Qualifies for EXCLUSION from Gross Income:

    Debt canceled in a Title 11 bankruptcy case
    Debt canceled during insolvency
    Cancellation of qualified farm indebtedness
    Cancellation of qualified real property business indebtedness
    Cancellation of qualified principal residence indebtedness

    I dont know if there is a way to offset this.


    Pondering this further-

    Personal Exemptions. The personal exemption amount is $3,950 in 2014
    Standard Deductions. The standard deduction rises to $6,200 for single taxpayers

    That totals $10,150

    If one files- I think you reduce by half the amount of the SSDI

    $12,395 - $10,150 = $2245, a 10% tax on this would be $225. In addition- a state tax return might be needed as they all cross reference. So that is 3.5% or whatever it is now.
    I simply can not afford this. As it is I borrow money to get thru the month.

    I wonder if there is a difference in the boxes- box2 is $12,706.88, box 3 of that amount is the interest- $7,706.98. Box 6 identifiable code is "F". Box 4 says Federal Student Loan. Being that the interest does not exist-per haps I can claim the principle.

    Let me explain- this student loan- you prove for 3 years- that you are permanent and total disabled- with no chance of working- and a Dr signs off on it. During the 3 years they grill you. Once the 3 years was completed- I should have been all good-right? WRONG. They leave the matter in limbo- as it makes their balance sheet look nice. When I filed chapter 7, I figured- claim the student loan- which may or may not exist. (I think the 3 year plan is suppose to be perpetual- you do 3 years- then somehow you do another 3 years- forever)
    Discharged- pro se- chapter 7~!

  • #2
    I don't understand all the student loan part BUT
    if you were insolvent, you just fill out the form (1092? someone will correct me) that proves your insolvency and this will not count as income for tax purposes.

    Keep On Smilin'


    • #3
      If the debt was discharged in BK, or are insolvent, file Form 982 with your 1040, and do not include the amount as income.


      • #4
        The 1099-C on the Student Loan, if this is what you are asking, may be a godsend. You will need to check the "event code" (box 6) to determine why you received the 1099-C. I would refer to a tax specialist, but most of the codes, except I think "H", identify that the debt was actually forgiven (canceled/discharged).

        As everyone else is writing, you would still need to file Form 982 if you are trying to reduce your tax liability on that debt. A debt discharged by bankruptcy is the #1 item listed on Form 982, and there are others such as insolvency.

        You should truly seek a tax professional for this. You would not want to mess up again and then owe penalties on a rather large amount of tax.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog

        I am not an attorney. Any advice provided is not legal advice.


        • #5
          The event code is F
          Discharged- pro se- chapter 7~!


          • #6
            Originally posted by anykey View Post
            The event code is F
            From the IRS:
            A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration (for example, short sales). Enter “F” in Box 6 to report this identifiable event.
            Again, contact a tax professional. I can't tell you if this is a taxable event for you or not. If the underlying debt was discharged in your bankruptcy, or you were insolvent, you should be able to avoid any taxation of this, but I'm not a tax professional and do not offer tax advice.
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog

            I am not an attorney. Any advice provided is not legal advice.


            • #7
              ...even if I end up paying tax- it is NICE to have this gone! It followed me for 30 years.
              Discharged- pro se- chapter 7~!


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