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1099 C Social Security

Forum|Forum|7 years ago
June 1, 2019
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I received a 1099 C for a canceled credit card debt. I receive Social Security Disability and normally do not need to file taxes. My net benefits for 2015 were $16,414.80 How should I proceed? Do I need to file taxes? Do I need to file an insolvency exemption to the IRS? Do I need to report insolvency so that canceled debt isn't taxed?

Best answer by MargaretL

My recommendation is to file, even though you may not be required to. The IRS will be looking for the 1099-C since they received a copy of it as well. To avoid the summer correspondence from them, it's best to file even if the 1099-C debt may not be taxable due to a filing requirements (explained below).

In general, you don't have to file unless one-half of your social security benefits plus your other gross income (your cancelled debt and any tax-exempt interest) is more than $25,000 ($32K if married filing jointly).

If you are required to file, the cancelled debt will be taxable unless you show to the IRS that you were insolvent. To file insolvency, you would have to use Turbo Tax cd/download versions, and manually fill out form 982 and its insolvency worksheet. It cannot be done online.

I also recommend that you determine your insolvency situation by using worksheet on page 8 of the IRS publication 4681 first, then - once you know you need it, you can purchase cd/download Turbo Tax.

https://www.irs.gov/pub/irs-pdf/p4681.pdf

MargaretLAnswer

Employee

My recommendation is to file, even though you may not be required to. The IRS will be looking for the 1099-C since they received a copy of it as well. To avoid the summer correspondence from them, it's best to file even if the 1099-C debt may not be taxable due to a filing requirements (explained below).

In general, you don't have to file unless one-half of your social security benefits plus your other gross income (your cancelled debt and any tax-exempt interest) is more than $25,000 ($32K if married filing jointly).

If you are required to file, the cancelled debt will be taxable unless you show to the IRS that you were insolvent. To file insolvency, you would have to use Turbo Tax cd/download versions, and manually fill out form 982 and its insolvency worksheet. It cannot be done online.

I also recommend that you determine your insolvency situation by using worksheet on page 8 of the IRS publication 4681 first, then - once you know you need it, you can purchase cd/download Turbo Tax.

https://www.irs.gov/pub/irs-pdf/p4681.pdf

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darlene6778Author

Employee

Thank you for your assistance.

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DaveMudra

I understand that cancellation of debt is taxable however the IRS seems to think that it also affects how much money I can earn since I’m 64 years old and collecting Social Security. They are taking the little bit that I earned and adding the cancellation of debt on top of that and saying I earned more than allowable without additional taxes

dave

IsabellaG

Employee

If you are talking about how much Social Security says you can earn if you are under full retirement age, they shouldn't be counting Cancellation of Debt Income as earned income. But that's not handled by the IRS, that's handled by the SSA.

But if you are talking about how much tax you pay on your 1099-C, as MargaretL explained, 1/2 of your Social Security benefit is added to the rest of your income to compute how much of your Social Security is taxable, if any. That is handled by the IRS on your tax return, and is calculated the same whether your income is earned, like wages, or unearned, like Cancellation of Debt.

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Taylorgang2319

I have multiple 1099-C that where sent to the IRS from investment accounts I recieve SSI I was told by them the amount was 10k I never received any of that money what do I do is my income gonna be taken away from me

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ThomasM125

A form 1099-C reports cancellation of debt that can be taxable. There are exemptions if you are bankrupt, insolvent, had your home foreclosed on and a few other reasons. I suggest you enter the forms in TurboTax and see if it results in any tax, then you can use this link to investigate ways you may be able to avoid tax on it: Cancellation of Debt

You can enter form 1099-C's in the Less Common Income section of TurboTax, which is in the Wages and Income section.

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Taylorgang2319

I never filed taxes before don’t work only ever collected child tax credit SSI is my only income

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BrittanyS

It depends. You could receive a penalty for not prepaying tax if you have a balance due. The IRS expects the tax to be paid as you earn income throughout the year. To avoid the "not prepaying tax penalty," you must have met one of the following requirements:

Pay 90% of the tax you owe for the current year as estimated tax payments.
Pay 100% (or 110% for high income) of last year's tax bill as estimated tax payments.

The 1099-B will be issued from the Broker and mailed to you and the IRS. The 1099-B will list items such as:

description of items sold
date the item was bought and sold
how much was the original cost was
how much was received when sold

If you own an asset, such as stock, and sell it and then reinvest in another stock, there can be a gain or loss on the original stock. This gain or loss will be reported on your return on the Schedule D form.

If you feel the $10,000 listed on your 1099-B needs to be revised, you can contact the broker and have them correct the 1099-B. However, you will want to match any transaction listed to your record to make sure an error did occur.

Gains can affect your social security, depending on how much earnings you have for the year.

If you earn between $25,000-$34,000 as a single filer, you will pay income taxes on up to 50% of your Social Security benefits. Or if you earn more than $34,000 as a single filer, you will pay taxes on up to 85% of your Social Security benefits. The maximum your social security can be taxed is 85%. TurboTax will calculate how much of your taxable income is based on the income you entered.

Here are additional links on social security, 1099-Bs, and penalties:

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Taylorgang2319

I don’t file taxes even for my social security due to not working I am a single filer I don’t really understand how any of this works or what it means those transactions for the 1099-B that was filed as income never went through they where either canceled or reversed so the money never settled nor did I ever get I been trying to reach out to the brokers to correct them but hasn’t been easy because these accounts where closed

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ShirlynW

The 1099-C form is specifically used to report income related to cancellation of debt. The IRS considers forgiven debt as income.

To enter your 1099-C:

Open or continue your return
Search for 1099-C or 1099C (lowercase also works)
Select the Jump to link at the top of the search results
On the Tell us about your canceled debt screen, select the type of canceled debt (main home or other) and then select Continue
Go through the screens to answer any follow-up questions about your canceled debt
Follow the instructions to enter info from your 1099-C

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Taylorgang2319

If I decide to withdrawal from social security will this income reported still affect my daughters income since she gets SSI an I’m her payee or just mine