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Do you have debt you can't afford to pay?

Are You Receiving Social Security, Pension or Disability Income?

WE CAN HELP.


HELPS is a nonprofit law firm and 501(c)(3) charitable organization. We serve senior citizens and disabled persons struggling with debt.


Call HELPS now to learn how your retirement income is protected by law and how we can help.

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Need immediate help? Call 855-435-7787 to speak to a HELPS representative.

What Does It Mean When You Receive A 1099-C Form From a Creditor For a Cancelled Debt?

When you use credit or take out a loan, that borrowed money is money you can use. If you don't pay off the credit or loan, and the creditor cancels the debt, you may receive a 1099-C from the creditor. The "C" in this form stands for cancellation of debt. The IRS categorizes the credit you originally received as income. This means (if the cancelled debt was over 600 dollars), you need to report the 1099-C on your tax return.

Yep, Uncle Sam gets a cut of the portion of your debt that was forgiven or discharged. There are, however, exceptions to being responsible for paying any taxes on a 1099-C form.

Don't be alarmed if you receive a 1099-C. If a person is insolvent, there is no tax liability from 1099-C income.HELPS clients virtually never have to pay tax on 1099c income. Insolvent means your assets are worth less than the total amount of alldebt you owe. For example, if you have assets worth twelve thousand dollars but owe 20,000 in debt, you are insolvent. The value of assets is determined by what price they would get at auction – which usually means prices lower than you would get at a garage sale. The amount of debt you have includes all debt you owe: mortgage, auto loans and any outstanding bills.

IF YOU RECEIVE A 1099-C FORM AND YOU ARE NOT REQUIRED TO FILE TAXES.

When you receive a 1099c form, if you aren’t required to file tax returns then you don’t have to do anything. Your income is so small that the IRS will generally do nothing. In the unlikely event that the IRS sends an inquiry regarding the 1099c, here’s what to do:

  • Send a simple letter to the IRS with a completed IRS form 982. he form is located at the IRS' website here: https://www.irs.gov/pub/irs-pdf/f982.pdf In the letter you will include a Statement of Assets and Liabilities, which can be handwritten on a piece of notebook paper if necessary. Remember to list the value of your assets as what they would sell for – not what you paid for them. The IRS wants auction value, which is probably even less than garage sale value. Be sure to reference your Social Security number. Please note that it’s possible that the IRS will later ask you to file a return. However, that is very unlikely.
IF YOU RECEIVE A 1099-C FORM AND YOU ARE REQUIRED TO FILE TAXES.

If you receive a 1099c form and you will be filing tax forms with the IRS, here’s what to do:

  • File IRS form 982 with your 1040 income tax form. The form is located at the IRS' website here: https://www.irs.gov/pub/irs-pdf/f982.pdf.
  • Simply list the dollar amount shown on the 1099c and indicate 1. (b) on the 982 form that you are insolvent.

IF YOU OWE TAXES FOR THE "INCOME" ON THE 1099-C FORM

 If your tax preparer says you will owe taxes for the “income’ on a 1099c form, show him this webpage. Direct him to this helpful webpage explaining how a form 982 and the insolvency rule work: https://www.irs.gov/forms-pubs/about-form-982 Alternatively, contact HELPS. Too many tax preparers do not know about or understand form 982 and the insolvency rule for cancelled debt. If you are insolvent, you should not have to pay taxes on cancelled debt.

Learn More About Other Issues and What HELPS Can Do For You.

Peace of Mind
These HELPS clients were dealing with harassing debt collectors and anxiety over old Debt. HELPS provided a solution to their financial worries.