How to file a fraudulent Form 1099-C, Cancellation of Debt in Turbotax and have it not included in your Income Totals

[TaxHelpNeeded750]

I have a situation where a fraudulent 1099c was issued solely to inflict financial pain on someone after refusing to sign a contract, and subsequently quitting, because of how they were treated after refusing to sign the contract.

There were never any contracts before the incident, no mention that any funds provided to the group was debt. Background is that the father was financing his son's venture, hoping the venture would make it big.  That never happened and after this member quit, the father issued a 1099c to the quitting member out of spite.   I am thinking the person should file (1) Form 3949-A online or by mail (2) report the 1099c in their taxes in turbotax.  

Question:  How does one file a fraudulent Form 1099-C, Cancellation of Debt, in Turbotax, and have it not reflected in the Income Totals for tax purposes. Please provide detail, if possible.

[rjs]

Do you know if the father actually filed the 1099-C with the IRS? If he just sent a 1099-C form to the member who quit, but didn't file it with the IRS, then the 1099-C is meaningless. The member can just ignore it.

[TaxHelpNeeded750]

Thank you for the response. That’s a good point. How can I find out if a 1099C was filed, call the IRS? Knowing the father, he probably did file it.   We did contact him through a lawyer to tell him to retract the 1099C, and if he did not, we would be reporting it to the IRS as a fraudulent 1099C.  He responded in writing and refused to retract it.  We have written support to support our claim that it’s fraudulent.  We just need to know how to report it in TurboTax, so that the income is not reflected as income.  We will report the fraudulent 1099C with an explanation of why it’s fraudulent and that they refused to retract it, with support.  I think the IRS does the rest of the work from there.

[rjs]

There is no provision in the tax law or the IRS forms for reporting a 1099-C and excluding it from income because it's fraudulent. It's an unexpected and extremely rare situation. Since there is no provision for it on the IRS forms, there is no proper way to enter it in TurboTax. In a situation like this, TurboTax recommends that you consult a local tax professional for help. The tax professional should coordinate with your lawyer. This is not a do-it-yourself project.

[TaxHelpNeeded750]

Thank you for the response! Like you said this is a rare and unique situation.  This is a one where the debt was made up out of thin air just to spite the person who left the venture.  I am thinking we don't include the amount in the taxes and then provide support documentation of why we did not include it.  We are going to contact the IRS today and confirm and determine what Forms and support documentation they need.  It doesn't make sense to me that someone could fraudulently make up a 1099C and then the recipient has to bear reporting it.  I understand if there was initially some form of debt, but in this case there was no debt to start with.  I will post a response after talking to the IRS on how they suggest to proceed in this particular circumstance.  If the IRS does not provide guidance, then we will contact a tax professional to complete the taxes.

[ee-ea]

@TaxHelpNeeded750 

FWIW

https://www.google.com/search?q=26usc7434&rlz=1C1TSNP_enUS927US927&oq=&aqs=chrome.2.69i57j0i10i512j6...