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Need advice Just got 1099C for disability discharged loans UPDATE 4/25/2016

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Need advice Just got 1099C for disability discharged loans UPDATE 4/25/2016

Always something lately. So I got married in October and we filed a joint return. Refund received and went to pay credit cards for both of us. In yesterday's mail, post-marked February 12th, is a 1099C from NelNet for 2015 to the tune of $18,000. Thought I'd post here before I spend the day on the phone trying to get through to the IRS.

 

Applied for Disability Discharge in 2012. Was approved and went through the 3 year monitoring. So I'm poking around online and I find that I can try Form 982 to not have to pay taxes on it. Hell I never even claimed deductions for these loans when I took them out in 2009-2010. I'm lost on declaring "Insolvency". The loans were forgiven because of disability and not claimed in my banrpuptcy. I was living disability check to disability check with no assets at the time I applied.

 

-  So if I try Form 982, when exactly am I saying I was "Insolvent'? In 2012 when I applied for the discharge or 2015 when the monitoring period was over and 1099C'd ? 

- Even though I'm now married, this process started well before I was. If it is 2015 I have to justify "Insolvency" for, am I basing it on our joint return and income/debt or solely my disability income?

 

Any help/advice would be greatly appreciated.

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 1 of 12
11 REPLIES 11
Contributor

Re: Need advice. Just got 1099C for disability discharged loans

As of january 1,2016, no more live help on the phone. Guess I'm going to the local office tomorrow. I downloaded Form 982. If I did the worksheet properly - which is what I want to go there to make sure of - I qualify for the "Insolvency" by more than $2000...

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 2 of 12
Contributor

Re: Need advice. Just got 1099C for disability discharged loans

Hopefully they'll be helpful. What I need to be clear on is:

 

 - date of discharge of the debt is July 27,2015. I got married in October. Since I incurred and discharge this debt as SINGLE, do I only include MY debt at the time of discharge ? Or because I got married - althiough after the debt was incurred and discharged before hand - do I include spouse debt/liabilities in the numbers because it's the same calendar year regardless ? On my own, my liabilities at the time are $2000 more than the discharged amount. Combined with spouse liabilities - student loans, car note, credit card payments,etc, that jumps to $84,000 ABOVE my discharged amount lol.

 

There's so much unanswered on the IRS site regarding this form. I know everyone's case is different but I'm sure I'm not the only person ever put in this situation.

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 3 of 12
Contributor

Re: Need advice. Just got 1099C for disability discharged loans

So I got to the local office at 8:15 yesterday morning and there had to be 40-50 people on line already. GREAT. As I finally got near the desk to be checked in, I heard some of the conversations with the guy at the desk. I knew he was going to be a problem. My turn. I explained that I received the 1099C for student loan discharge AFTER our return and refund already being processed.

 - " A 1099C ? Are you sure it's 1099C ?

 -  "Um, yes. See ? "

 - I'm not sure we handle that here."

 - "So the IRS doesn't handle an IRS form ? Where do I go then? Walmart ?"  (yes I'm a smart ass)

 - I can give you a phone number to call and print the instruction manual for you."

 - "I already have the instruction manual and it isn't 100% clear on my situation. The debt was incurred AND discharged BEFORE I got married. I only need 2 minutes of someone's time to tell me if; since it was discharged in July 2015 and I got married in October 2015, do I use my SINGLE status debts and liabilities for Form 982 and it's worksheet? Or do I use both of our liabilities since we filed a joint return this year ? And I called two numbers yesterday that give an automated "live over the phone help for this issue is no longer available.' You see I'm walking with a cane and already standing on line for 45 minutes. I can't take a phone number from you only to leave and find the same answer then have to come back. I can't do this physically. Two minutes with someone and I'll be out of your hair."

 

So he had me take a seat without a number to go speak to his supervisor. He came back a couple of minutes later and had me sit at an empty cubicle.

 - "I didn't want to discuss this at the counter. Have a seat here and I'll be right back."

 -  "Thank you."

 - Two minutes later - "Yes, since you filed jointly, you include both of your assets and liabilities on the worksheet."

 

NOW the Form 982 and worksheet are cut and dry. So long as liabilities minus assets are higher than the amount discharged, I/We are "insolvent."  AND the amount discharged is included in your liabilities when you total them up.

 

Thanked him profusely and was out the door at 9:15. So i'm sitting at the laptop printing statements from July - the moment in time when it was discharged. We moved in December so I had to go to the old apartment complex to get a copy of last year's lease. I've got my credit card, utility and other statements printed so far. Over the weekend we have to get all that for my darling dearest lol. Just rough estimates at the moment, Our combined liabilities minus assets is $84,000+ more than the $18,600 discharged. Safe to say we're INSOLVENT lol.

 

Hope this helps anyone else going through it.

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 4 of 12
Contributor

Re: Need advice. Just got 1099C for disability discharged loans

Does anyone know if the local IRS office will give me a receipt of documents if I drop them off in person, or am I better off with registered mail ?

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 5 of 12
Frequent Contributor

Re: Need advice. Just got 1099C for disability discharged loans

Thanks for posting the updates. I will be filing mine soon and it looks like I am insolvent by about $96,000+. How did you do your Form 982? On mine I was told to just put my name, ssn, check the box 1B, and put the discharged amount in Part I - Number 2.

 

 


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Message 6 of 12
Contributor

Re: Need advice. Just got 1099C for disability discharged loans


@FIRECOURAGE wrote:

Thanks for posting the updates. I will be filing mine soon and it looks like I am insolvent by about $96,000+. How did you do your Form 982? On mine I was told to just put my name, ssn, check the box 1B, and put the discharged amount in Part I - Number 2.

 

 


I finally finished putting it together yesterday. Yes, I did the same but along with the Insolvency Worksheet,  I'm electing to include copies of all the liabilities from word go. I got all our credit card statements,utilities,spouse's student loan balance,car loan balance and KBB value of the car to show it's a liability, not an asset, since more is owed that it's trade/sale value, apartment lease, etc. Basically EVERYTHING lol. Similar numbers here. "WE" are insolvent by about $90,000. I have a dentist appointment Monday morning for part 2 of my root canal. Afterwards, I'll drive over to the local IRS office to drop it off hopefully. I want it in their hands ASAP before they send us  a "hey, we gave you a nice refund but you didn't include $18,000+ in income !!" notice lol.

 

I'm just hoping they accept everything. A couple of things are not readily "proveable" without taking more time. Hubby's student loans were transferred to Fed Loan / Dept of Education in October so I included that statement. Also, Walmart consolidated his Walmart Card into the Walmart MasterCard in late September so a July statement for the original card isn't readily available.

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 7 of 12
Valued Member

Re: Need advice. Just got 1099C for disability discharged loans

Just a word of advice, DO NOT include any documentation regarding the liabilities.  As a former tax auditor, it will actually SLOW the processing.  When it comes to the Form 982, they usually just take your word for it. This is especially true when the 1099C is from student loans or a mortgage. I have only seen 1 instance in which that was not the case.  In that situation, the person claiming insolvent for credit cards made over $500K for the 3 years prior so documentation was requested. 


Starting Score: EQ 434 TU 499 4/29/10
Current Score: EQ 651 11/1/2011
Goal Score: 700


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Message 8 of 12
Frequent Contributor

Re: Need advice Just got 1099C for disability discharged loans

Thanks for the info erika! I didn't include any documentation but was wondering if I should since I saw this thread.

3/13/2017 | Equifax: 663| Experian: 697| TransUnion: 740|
Goal Score: 750 - Across The Board --- Overall UTI: 9% - Debt: $26,089 - Credit: $230,100
NFCU goRewards: $18K | Navcheck: $15K | NFCU CashRewards: $25K | Wal-Mart: $6K | Sam's: $8K | Care Credit: $15.6K | Lowe's: $17K | Cap1 Venture1: $8.5K | Amazon Prime: $6K | USAA AMEX CashR $1K | AMEX HHonors: $2K | BOA MC: $18K | BOA BASS PS MC $14K | Blispay Visa: $5K | Home Depot: $7.5K | Marvel MC: $25K | Discover IT: $2K | Penfed Amex: $14K | Penfed Visa: $6K
Message 9 of 12
Contributor

Re: Need advice. Just got 1099C for disability discharged loans


erika wrote:

Just a word of advice, DO NOT include any documentation regarding the liabilities.  As a former tax auditor, it will actually SLOW the processing.  When it comes to the Form 982, they usually just take your word for it. This is especially true when the 1099C is from student loans or a mortgage. I have only seen 1 instance in which that was not the case.  In that situation, the person claiming insolvent for credit cards made over $500K for the 3 years prior so documentation was requested. 


That's interesting to read. I figured I'd include everything from the start becuase of my experience with the IRS. I was treated like the criminal rather than the victim of Tax Refund Fraud. No matter what I provided to show who actually did it, I was held accountable. Levied a $50,000+ lien in the county court, garnished my disability for 6 months before the Advocate got that removed. Are you REALLY saying NOT TO INCLUDE documentation for 982? Just send it in ?!  Not being an ass. Just find it astonishing lol.

CH 7 Discharged 6/10/15
T/U - 643
EQ - 588
Ex - 647 as of 6/14/15
Message 10 of 12
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