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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » Regarding Income from Cancelled Debt, What If You Never Receive a 1099 Form?

Regarding Income from Cancelled Debt, What If You Never Receive a 1099 Form?

I had a lot of debt settlement activity in 2009 and I’m aware of how to handle that activity as it relates to taxes, but my question is this: what if I do not receive some (or perhaps all) of the 1099 forms associated with this settlement activity? Do I count it as income anyway and base the numbers on my records, or do I just include what I actually receive 1099′s for?

It’s kind of a moot point since I can make a case for insolvency and therefore won’t have to figure it in as income anyway, but I don’t want to open myself up for an audit should the IRS think I should be showing more income that what’s in my tax return because of the settlement activity.

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2 Responses to "Regarding Income from Cancelled Debt, What If You Never Receive a 1099 Form?"

  1. Bash Limpbutt's Oozing Cyst© says:
    It’s not treated as a canceled debt until it’s actually forgiven, as evidenced by Form 1099-C. You address the issue of COD income in the year that you receive the 1099-C. The statute of limitations on collections of debts can run quite long in some states so it can be years later when the 1099-C arrives.

    Unless you have an explicit written agreement with the creditor that they are forgiving the debt and that you don not have to repay it, do not include it in taxable income.

    Catch 22: While you may meet the insolvency tests when you stopped paying on the debt, if they don’t actually forgive the debt until a future year you have to address the insolvency at that point in time. If your circumstances have improved by then, you may not longer be able to meet the insolvency test.

  2. travelguruette says:
    You wait for the 1099C and file it in that tax year. You use insolvency based on the day 1 day before the date on the notice.

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