The IRS Audit Blog

Posts Tagged ‘irs collection’

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: 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: How do I find out my irs collection district?

I need it for a job app. I couldnt find anyone with an answer but I’m trying this site for help. Federal job app so it has to exist. Thanks guys

Answer: IRS does not use the term Collection District.

Tax Increases Expected in Aurora

Aurora taxpayers with property outside the Village of East Aurora were warned to expect a 33 percent tax rate increase in their “town outside the village” tax bill in 2011, primarily reflecting the cost of police service. Aurora Supervisor Jolene Jeffe previewed a tough budget year at Monday’s regular board meeting.

IRS Lien Policies May Unnecessarily Harm Taxpayers – Taxpayer Advocate Service

Question: 8 months into chapter 13 bankruptcy, is it too late to add federal tax liability?

i just got a letter from the irs that said i owe them 2 grand. i already sent my lawyer my state and federal tax information for the last few years, so he must’ve dropped the ball and didn’t add on the federal one. now the letter says after the automatic stay ends, they will continue with the collection efforts. this is not fair. is it too late to add them 8 months after filing the ch.13?

Answer: I think so – talk with your attorney and see if they will reopen the case. Or, get in touch with the IRS, determine if the $2k is an accurate number, and ask them for a payment plan on this. There is a form you can download from the IRS’s website that allows you to request a pyament plan.

IRS Offers Tips for Filing Taxes

The Internal Revenue Service kicked off the 2010 tax filing season Monday by issuing the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers.

Pastor & Church Controlled 30 Ways to Sunday irs 501 Part 2