I filed my 2005 taxes, received my return, NOW I receive a letter from the IRS advising that I owe money for an undeclared 1099-C. This 1099C "income" raised my earned income and now I owe the IRS money. I was not aware that when you settle a dept the unpaid portion needs to be declared... how can I avoid this? I'm a single parent, and the children's tax refund now needs to be returned to the IRS because of this.

Hello karze:

The IRS is just like any collection agency (well not ANY). They can be negotiated with. I would do that.

excon

You need to amend your return if the IRS has not already done it for you.

If you owe money, the IRS WILL let you set up a payment plan.