Canceled Debt Provides No Easy Solution

If you don’t believe that times are that much harder, take a look at the statistics. In 2003, there were less than a million 1099-C notices being sent to struggling Americans. In 2010, it was more like 3.9 million. And just what is a 1099-C? It’s a tax form sent to you from a creditor who has forgiven a debt you owed them…basically stating that your forgiven debt is taxable income. You don’t owe your lenders anymore, but you very well may wind up owing the IRS back taxes. And, quite honestly, it’s much worse owing the IRS than anyone else.

I’ve discussed 1099 surprises before, but the 1099-C issue affects a much larger percentage of Americans. Many people don’t really know that they’re going to be taxed on their forgiven debt until they see that 1099-C. Also, since many of these people had to foreclose and move into a more affordable home, the creditors often send the notices to the wrong address. They might not know they owe IRS back taxes until well after tax season when they receive a notice of deficiency.

In some cases, the United States Treasury has been prompting lenders to send out 1099-C notices for debts they haven’t attempted to collect on for a minimum of 36 months. So, even if none of your debts have not been forgiven, you might wind up owing IRS back taxes. There is also the chance that forgiven debts from years and years before could just now be getting around to sending in a 1099-C to the IRS. It is quite common that they mistakenly put the wrong debt down or send more than one 1099-C for the same debt as well.

What all this means is that there is no easy way to get out of your debt. It is even harder to find an easy way out of owing IRS back taxes. If your debt was discharged in bankruptcy or you can prove you were insolvent when the debt was canceled, you may be exempt from owing the IRS. However, you should be prepared to take on the IRS as well. Different situations call for different solutions to IRS tax problems.

If you owe IRS back taxes from having a debt forgiven, the IRS Hitman Team can help! Call 888-415-1337 now or fill out the form for a free consultation with the best in the industry!