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June 1, 2019
Question

I am in the middle of Chapter 13. Received a 1099-C for a vehicle that is included in the proceeding. Form 982 filled out. Do I still include the 1099c on my return?

  • June 1, 2019
  • 1 reply
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Also, my girlfriend is joint on this vehicle and received 1099-C as well, however is not part of bankruptcy.  Does she file hers as well?

1 reply

Employee
June 1, 2019
Yes. You need to include this on your return.

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.

However, if the debt, or part of it, was canceled before you filed bankruptcy (through debt settlement or negotiation, for example), the creditor must issue the 1099-C and that debt is not excluded, because it was not discharged in bankruptcy. As a result, even if you later file bankruptcy, you may owe tax on that debt cancellation income unless you were insolvent at the time you settled it.

According to the IRS:
A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the "insolvencyexclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent

Following this how to is a helpful link on handling insolvency

Here's how to enter the 1099-C:

1.       Open (continue) your return.

2.       In the TurboTax program, search for 1099-C or 1099C (lower-case works also) and then click the "Jump to" link in the search results.

3.       Select the type of cancelled debt (main home or other) and then click Continue.

4.       Follow the onscreen instructions to enter information from your 1099-C.

tim-m1822Author
June 1, 2019
Ok, so even though we are a year into the chapter 13 repayment plan, we still have to file this?  Form 982 won't be an option? Bankruptcy boxes are marked on the 1099c received.