A creditor sent me an IRS Form 1099-C.
Do I owe more taxes?

If you’ve recently received a 1099-C form you may have many questions.  A 1099-C is issued when you have certain types of debt eliminated.  This can occur with a foreclosure sale, a short sale, or  when the balance of a loan is reduced without payment or forgiven.  The IRS considers this debt reduction as a type of income, which is why you may owe income taxes.

Sample IRS 1099-C Cancellation of Debt Tax Form for 2012

Depending on your individual circumstances, you may not owe taxes on 1099-C “income”.  Determining whether 1099-C “income” is taxable is a complicated process and tax preparers can be confused about this topic.  Many tax preparers do not know that if the debt is wiped out in bankruptcy, the debt reduction is not considered taxable income.

Everyone’s situation is different, which is why our office offers a free personal consultation with an experienced bankruptcy attorney. That way we can analyze your situation and advise you of the best way to save your property and protect your income.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Learn more about 1099-C debt.

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