Tax Year Prior to 2020: Can a creditor send a 1099c 3 years after the statute limitations expired?

[Carl]

If the box to the right of boxes 1, 2 and 3 has the numbers (2017) in it, then this is reportable on your 2017 tax return.

[cjc0101--]

Carl - then what is the significance of the date in box 1?

[DianeW]

@cjc0101!! The significance is for and from the issuer/owner of the loan.  Box 1, Form 1099C. Shows the date the earliest identifiable event occurred or, at the creditor's discretion, the date of an actual discharge that occurred before an identifiable event. See the code in box 6 - .
A—Bankruptcy;
B—Other judicial debt relief;
C—Statute of limitations or expiration of deficiency period;
D—Foreclosure election;
E—Debt relief from probate or similar proceeding;
F—By agreement;
G—Decision or policy to discontinue collection; or
H—Other actual discharge before identifiable event

[Carl]

Basically, the date in box 1 has no meaning or significance for you. It's for the issuer of the form.

[rkghidossi]

Often times these 1099-C received for a debt that has not been paid on for several years are easy to defeat.

[tomc82]

@TurboTaxDianeW , I had an old bank account from about 8 or 9 years ago and I messed up didn't pay my loan and credit card payments. Just got notice from the IRS saying that this is the second time that they try to get in touch with me but this is the first notice that I have seen saying that I owe them tax money from 2016. After calling them up and being transferred 3 times I found out it was from debt from a bank and they close the account and did a 1099-C form and the bank never even sent it to me. Now I have to jump through some hoops and contact the bank get the 1099-C form that they issued the date that they close the account send it all to the IRS and then they decide if I am liable paying the taxes since it was from 2016. After all the running around and I get my paperwork and send it to the IRS around how long will this process take usually?

[chzagara]

Tom,I submitted paperwork around April 10th and got a response last week, so around 2 months. There are several factors that can be used when contesting these old cancellation of debt claims. Court cases, statutes of limitations, when expectations of collections ended and so on. I just got an old cancellation of debt of $6,500 tossed out for a client.

[Docrgl]

I'm jumping on the thread instead of starting anew,  but I can start a new query if preferred.

I received a 2016  1099C  from a cc company of 0 dollars  with specific account info.  The account was stale for easily 8 years and we were insolvent even with IRS activity during that time.

I received a 2018  1099C  from the same cc company of 30k  on the exact same account.  I sent them a note and advised this was  not permitted  and they responded that they were issuing it correctly anyway.  

I suppose this is the spot where an IRS form 4598  is to be used?    

Your thoughts would be appreciated.

[tlwill2010]

I have a 2019 1099c. Line 6 has the letter H. Does this mean I owe taxes on the debt that was discharged?

[WKins2]

Possibly.

According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged becomes taxable income to you. You'll receive a Form 1099-C, "Cancellation of Debt," from the lender that forgave the debt. 

For more information, please see When to Use Tax Form 1099-C for Cancellation of Debt. 

But even if you receive a Form 1099-C from a lender, you still may be able to avoid taxation on the forgiveness of a debt. If your debt was discharged in a Title 11 bankruptcy proceeding, such as a Chapter 7 or Chapter 13 case, you're not responsible for taxes on that debt. Also, if you can demonstrate to the IRS that you were insolvent at the time the debt was cancelled, you can similarly avoid taxes on that debt. 

To qualify for the insolvency, you must show that all of your liabilities (debts) were more than the Fair Market Value of all of your assets immediately before the cancellation of debt.

To show that you are insolvent and are excluding your canceled debt from income, you must fill out Form 982.  Although the form is available in Turbo Tax, it is not available on line.  You would have to use a cd/download and fill out the form manually, there is no interview questions for this.

I recommend that you first read the following links and fill out the insolvency worksheet and the form from the IRS website. Once you have completed it, purchase the cd/download to enter the forms' information into the software.

Please refer to page 5 for insolvency explanation and page 8 for insolvency worksheet:
https://www.irs.gov/pub/irs-pdf/p4681.pdf

Form 982 and its instructions:

https://www.irs.gov/pub/irs-pdf/f982.pdf

[highreturn]

How do we defeat this?

[AmyC]

@highreturn  There is not a way around the 1099-C. It must be entered. It may not be taxable. Please see Topic No. 431 Canceled Debt – Is It Taxable or Not? | IRS