Bank Error Issued 1099-C 4-Years Late

[RobP64]

Hi - Any input would be appreciated.  I had car that was totaled in a storm in 2019.  Vehicle declared a total loss, and I was told by the bank, the outstanding loan was being fully covered by insuranace (loan was slightly higher than insurance value).  Jump forward 4 years and I just received a 2019 1099-C from the bank (Yes, a 2019 1099-C was received in 2023).  Bank said it was their error a 1099-C was not issued more timely, but nothing they will do about it.  Value of discharged debit is $1700.

Question 1:  Can I include as income on my 2023 tax return or must I file a 2019 amended?

Question 2:  Can I still file an amended 2019.  My 2019 Turbotax is giving me an error message (Error 630) when trying to open?

Thanks.

[Opus 17]

If the date of the "identifiable event" is 2019, it will be easiest to report the income on your 2019 return.  However, since that will show you owing back taxes to June 18, 2020, the IRS could assess late interest and maybe a penalty, that would be between 0.5% and 1% per month.  It could be argued that the bank should pay that for you, but you may have a hard time getting them to pay, unless you take them to court.  On the other hand, you knew or should have known the forgiven loan would be taxable income, even if the bank didn't issue the form.  So it could be argued that the late fees are your fault for not reporting the income voluntarily.  

I can't answer your technical question -- you can always amend a return with the IRS even if the software doesn't work, but you would have to do it by hand.  To figure out why Turbotax won't work, you may need to call customer support.

Separately, we can talk about the IRS statute of limitations.  Generally, the IRS must assess tax within 3 years of the income.  That means that if they did not audit you for this within 3 years of the deadline (June 15, 2023) (or within 3 years of the date you filed if you filed late) they can't tax you on the money now.  (The statute of limitations is 6 years if the missing income resulted in an undercalculation of tax by more than 25% of your total tax liability.)  So it could also be argued that you can ignore the 1099-C and not amend because it is passed the statute of limitations.  But I would not take that route without professional tax and legal advice.  

Lastly, there was a recent (in the last 10 years) change in the regulations of when banks must issue a 1099-C.  It is possible that a 1099-C issued 4 years late is simply invalid.  But here again, I would seek professional advice before relying on that possibility. I did that research a long time ago and don't have my notes any longer.  And, even if the 1099-C is invalid because it's too late, the IRS could argue that you knew or should have known that a forgiven debt is taxable income even if the form was never issued.

[RobP64]

Hi Opus17 - Thanks for the quick response.  As suspected,  an amended 2019 is probably the safest bet.  I just need to figure out how to do since my 2019 TT doesn't seem to work anymore. 

Just a quick follow-up comment, I continued to repay the auto loan for several months after my vechile was totaled and until everything was settled.  At the time, the bank said the forgiveness was less than $500 and would not be reportable.  A few months after that, the bank sent a refund check for loan payments made after the accident.  I guess I should have questioned their accounting and the refund at the time.  Anyway, thanks again.  Your response is greatly appreciated.