Hello! I received a Form 5564 Notice of Deficiency from the IRS for my 2015 tax return. They rightly say I received a 1099-C for the cancelled amount of $8,983, but it wasn't reported. ===========>In general, Unless you pay off a loan or other debt, you may wind up owing the IRStaxes on that amount. The IRS considers a debt that was cancelled or written off by the lender as income to the debtor. It requires lenders to report such cancellations over $600 on a Form 1099-C, foreclosed homes and some farm debt carry some special conditions. However, If you don't file a return including as income a debt cancelled on a 1099-C, you'll have to prove to the IRS that the amount is not taxable. You can do this by completing a Form 982 or attaching to your return a letter explaining your case and detailing bankruptcy or insolvency, the most common exclusions. So you need to attach bankruptcy discharge forms or a statement of liabilities and assets to support your claim.
I know I was insolvent (still am) for more than this, based on the insolvency worksheet to the tune of $58,264. ======> then,as said above, you need to attach bankruptcy discharge forms or a statement of liabilities and assets to support your claim.
My question is this: can I file an amended 2015 return and send in the form 982 along with the insolvency worksheet to take care of the cancelled debt, or is there another way to go about having that cancelled amount NOT included in my 2015 income, thereby nullifying the Notice of Deficiency?==========> many Form 1099-C(s) arrive late in tax seasons ibelieve . If you receive a late or corrected 1099-C, after filing your 2015 tax return, you need to amend the original return by filing Form 1040-X and Form 982 ; note that sometimes the tax payer only becomes aware of the Form 1099-C after the IRS sends them a CP2000 Notice. In that case, sometimes you don?t need to file 1040-X. The CP2000 Notice explains how.
I guess this is not your case , however, If the 1099-C stems from Corp or Partnership cancelled debt, you?d have to amend the Form 1120, Form 1120-S or Form 1065
There are some restrictions on both bankruptcy and insolvency. Your debts must have been discharged in bankruptcy before the creditor wrote them off to qualify. The fair market value of all your assets has to be LESS than your total debt for insolvency, and you're limited to the amount of insolvency. If your debts exceed your assets by $10K, for instance, that is the limit you can exclude from income. If your debts don't exceed your assets, you are not insolvent. please contact an IRS Enrolled Agent/ a CPA doing taxes in your local area fro professional help.