Janitor Bob Posted January 31, 2014 Report Share Posted January 31, 2014 I have two clients that had bankrupties finalized in 2013. Neither of them have yet received any 1099-Cs....and both had multiple large balance credit card balances at the time of bankruptcy....So I assume they would receive them. Does anybody here have experience in this that could tell me about how long it should take to receive the 1099-Cs? At least one client really needs to file her return ASAP for college financial aid reasons (FAFSA), but I am not sure what to tell her about how long or even IF she will receive the 1099-Cs. I seem to recall that I received a 1099-C for my deceased wife 2 years after her death. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted January 31, 2014 Report Share Posted January 31, 2014 When the 1099C is issued is up to each lender. Typically, they will issue it after the debts have been totally cleared from their books. I have seen as much as 3 years, depending upon the lender and the situation. The taxpayer will have to deal with it in the year it is issued by the lender. This can be especially sticky for people with personal residence foreclosures. Currently, the rules are not so nice in 2014, UNLESS, Congress changes things and makes them retroactive. Job security!!! (It is a bittersweet thing) Quote Link to comment Share on other sites More sharing options...
Mr. Pencil Posted January 31, 2014 Report Share Posted January 31, 2014 I am not sure what to tell her about how long or even IF she will receive the 1099-Cs. According to the Instructions for Form 1099-C (for the issuer), "You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes." Assuming the subject debts were indeed discharged in the BK (which of course we can't assume), they would probably have no tax effect anyway. 3 Quote Link to comment Share on other sites More sharing options...
Janitor Bob Posted January 31, 2014 Author Report Share Posted January 31, 2014 I did see that blurb where they are not "required" to send a 1099-C if debt was discharged in Bankruptcy....and I know the net tax affect will be zero after including the Form 982 in the return...but for IRS matching, I want to make sure the client's return includes any 1099-C amounts. So what do I do...file now and amend as 1099-C's arrive (or respnd to any notices from IRS about 1099-C income not included) or wait until...when? Fortunately, no forclosures involved....just a lot of credit card debt. Even if they are not "required" to send 1099-C, how do I know they will not. I guess I'm answering my own question. Since it does not seem reasonable (or possible) to delay filing until 1099-Cs are received...as they might never be sent, I will file without them and tell clients that we will respond to IRS notices regarding 1099-Cs when/if they arrive. 1 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted January 31, 2014 Report Share Posted January 31, 2014 I did see that blurb where they are not "required" to send a 1099-C if debt was discharged in Bankruptcy....and I know the net tax affect will be zero after including the Form 982 in the return...but for IRS matching, I want to make sure the client's return includes any 1099-C amounts. So what do I do...file now and amend as 1099-C's arrive (or respnd to any notices from IRS about 1099-C income not included) or wait until...when? Fortunately, no forclosures involved....just a lot of credit card debt. Even if they are not "required" to send 1099-C, how do I know they will not. I guess I'm answering my own question. Since it does not seem reasonable (or possible) to delay filing until 1099-Cs are received...as they might never be sent, I will file without them and tell clients that we will respond to IRS notices regarding 1099-Cs when/if they arrive. 1099C can arrive any time during the year. Nothing to do but wait. If your client is in a rush to file, then do so with his understanding that if he receives 1099C forms dated 2013, you will have to amend. Quote Link to comment Share on other sites More sharing options...
Max W Posted January 31, 2014 Report Share Posted January 31, 2014 Debts discharged through bankruptcy are not taxable. However,if the bank sends a 1099C ( and I have seen some come after 7 [seven] years), it should have bankruptcy stated on it. Do Not amend the return. Wait for a CP2000 letter from the AUR unit, which may or may not happen. Then, respond to the letter with the 982 form showing the debt discharged. If you amend the return it will be rejected and marked as Duplicate return as there will not be any change in the tax due (or refund) 2 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted January 31, 2014 Report Share Posted January 31, 2014 I'm with Max on this. DO NOT AMEND if they do get a 1099C. It may well be that it's marked correctly as 'bankruptcy', [about 50% of the time] in which case there will be no CP2000 in at lest 60% of the cases. Only respond if they get a CP2000. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted February 1, 2014 Report Share Posted February 1, 2014 Each state can set limits on how long lenders have to discharge a debt. I think in CT and NY it's three years, but I've heard as long as six in a few states. Quote Link to comment Share on other sites More sharing options...
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