The IRS Audit Blog

Archive for the ‘IRS Collections’ Category

Question: When a bankruptcy discharged debts should a bank send a IRS 1099 as debt forgiven and show it as income?

My company filed for and was discharged in bankruptcy in Aug 2006. Bank of America sent an IRS 1099 showing they forgave the debt in Aug of 2007. They showed an amount of over $8,000.00 as income due to the “forgiveness”. I called them and they refused to correct the 1099 and said it was my problem not their’s and advised that I just throw it away since the company no longer exists and I will NOT be filing a return on it. The Company was an “S Corp” so when it existed the money flowed through to me personally. Should B of A have sent this a year late? Should I just throw it away (doen’t sound smart to me)? Is there an IRS form that I can fill out to correct the error if there was one. Didn’t bankruptcy discharge and eliminate this debt without them forgiving it? By the way B of A continued to send collection notices many times after the discharge, so this seems to be a stabdard with them.

Answer: The bank was correct in sending you a 1099-C. They cancelled the debt and you were the person not paying it back.

The bank was incorrect in telling you to throw the 1099-C away. When you file your tax return, you will postpone the 1099-C cancellation of debt income by filing a form 982. If you have remaining assets the form has you write them down in value. When you sell these at a later date, you may have taxable ordinary income then.

If you total your remaining assets (not only business, but all personal ones as well) by their book value and compare that to your total liabilities, you only reduce the book value to the point it equals the liabilities. Any further COD is permanently eliminated.

IRS tax workshops March 26

Taxpayers who may have difficulty scheduling a visit to an IRS Taxpayer Assistance Center during normal weekday business hours can visit the IRS offices located in Seattle, Everett, Bellevue and Tacoma on Sat., March 26 between the hours of 9 a.m. and 2 p.m.

IRS Tax Problem Help – Forms,website information

Question: 1099-MISC form and Full Time Student Question and IRS collection of Money?

My gf has reecived her sole small income on a 1099-MIsc form for 2006 – less than $20k. She obviously is going to have to pay taxes on it and will wind up owing money. She was a full time student last year and is full time student this year and actually does not even work anymore – she just lives off of school loans. Can the IRS collect money off someone who is a full time student, unemployed and living off government loans?
To those have have answered below – I figured as much, so then as a follow up – How long does the IRS give to pay back the taxes on a payment plan?

Answer: She can either pay it now, or owe it to them with interest. They’ll set up a payment plan. The length of time to pay it will depend on her ability to pay, and her ability to negotiate.

3 IRS offices open Saturday in Alabama

The Internal Revenue Service offices in Montgomery, Birmingham and Mobile will be open this Saturday and on Saturday, March 26 to help taxpayers.

IRS Collections Math – IRS National Standards

Question: Misuse of social security numbers linked to debts?

I have a friend who attended nursing school funded by a local city agency. She last attended school in 1986. Sometime in 2001 she was contacted by a debt collection agency trying to collect on a debt for someone with the same name, social security number, but different school as well as different date of attendance being 1991. Because the debt was about the same amount, she thought it was hers and didn’t demand verification. Also, she wasnt’ at that time very consumer savvy on her rights. Because she made a payment, the agency attached her tax return on subsequent filings thereby involving the IRS at this point. She is on welfare and cannot afford legal counsel, but I know she’s entitled to free advocacy through the system. Who should I hit up first? There are about a thousand choices out there.

Thanks,

Debra

Answer: Debra:

It’s difficult to answer this question, because it’s not clear who funded this loan. If the US Department of Education was involved, as either the maker of the loan, or the guarantor, they would be the first choice for your appeal, starting, perhaps, with the Ombudsman’s Office at the Department.

However, you mentioned that she attended school “funded by a local city agency”, so that makes it sound like the Department of Education had no role in the financing. If that’s the case, the Department would most likely refuse to get involved.

Obviously, you’re going to run up against additional obstacles related to the age of this loan – I’m wondering if this “city agency” is even in existence any more, let alone the program that the loan was made under.

There are a lot of issues here, and to really identify the right resource, anyone trying to help you would really need to know more of the details.

For example, there is a statute of limitations on the collection of many kinds of debts – at most, it’s 20 years if the creditor obtained a judgment. However, changes in the bankruptcy laws a few years back made student loans a whole different kind of animal from other forms of debt. I imagine that this debt qualifies as student loan debt, but I’m not sure, without knowing the details.

For one thing, by now, your friend should have filed a police report. You’ll need documentation to “fight” this misdirected claim, and that’s the first step. Given the complexity and the lack of details, I suppose the next logical step would be to contact the Consumer Affairs Department for your state. Lawyers at that agency should be able to provide you with the best possible advice about how to substantiate your fraud claim, and how to most effectively work with the collection agency to call off the sharks.

I’m sorry I couldn’t give you a more specific answer, but I wish you the very best of luck. With enough perseverance, I am confident that you will get this resolved. Thanks, also, for being such a good advocate for your needy friend.

IRS Issues New Phone App To Track Refunds

For people who just can’t enough of the Internal Revenue Service, the federal tax collection agency is coming out with a new phone app.

Crazy Debt Collector Answering Machine Message

Question: can mortgage lenders tell if you owe irs and state taxes when you are applying?

i am and have been on a payment plan with an irs for the past 2 years. I just received a collections letter regarding state taxes from four years ago. if i were to go and apply for a mortgage would that pop up in some way?
none of that information regarding taxs is on my credit report

Answer: It will be there and you can’t finance with an instant lien.

Senate Fails to Repeal 1099 Rule

The U.S. Senate failed today to adopt language that would have repealed a rule, created by the health-care overhaul law, requiring businesses to report annual expenses to individual vendors in excess of $600.

IRS Collection Statute Expiration Date (CSED)

Question: Any attorneys out there? Tax lien situation whereby IRS has garnished wages to the point of poverty; remedies?

This info is for a freind whom has consulted w/ an atty. and stated that the only option is a settlement. This party does not have the money for a settlement nor enough assets to sell off to erase the tax liability. All wages garnished and personal asset(s) i.e. car has lien attached. Bankruptcy won’t work due to this is non-dischargeable debt. This person understands the need to pay and has a good job-salary, but the IRS has left her/him with $333 to live on ea. month. Bascially poverty-stricken. No doubt the gov’t has legal basis to due this, but, but, I believe it’s unfair/ unjust to propel a person into dire straits with collection efforts. If the garnishment was not at the present level e.g. leaving this person with say $1000 to live on monthly, it would be affordable. I don’t think the IRS… tax system, was setup to render a preson homeless or otherwise. Thank you for any assistance.

Answer: Obviously, I don’t know all the details, but the IRS will usually levy wages only after they have been ignored for a long time. Your friend needs to come up with a payment plan, either a proposed installment payment plan (form 433D, I think) or a partial pay offer in compromise (form 656), along with a financial statement on form 433A. The forms are on the IRS web site http://www.irs.gov. Good luck.

Erlanger provides biggest share of free care

Chattanooga’s two nonprofit hospitals each claim about 40 percent of the local market, yet one of them — Erlanger Health System — shouldered nearly 80 percent of the free hospital care provided to poor patients who aren’t expected to pay their bills last year, according to the most recent data reported to the state.

KJ Law Firm Introduction video