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Cancellation of debt
Help-
I have been disputing a debt on my credit report for three monthes. They have finally taken it off and I received a letter in the mail yesterday saying they were turning it in to the IRS. The amount of debt cancelled was 1805.55 and the interest is 0.00. However it says "do not report a cancelled debt as income if you did not deduct it but would have been able to do so on you tax return if you had paid it. Also, do not include cancelled debts in your income to the extent you were insolvent." So my question is since I have disputed this debt and it was removed do I have to file taxes on this. I just returned back to work the end of December. I was off work all year and did not make enough in December to file. Any help with this? |
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Joentinc:
If you have been off work for 2005 and currently do not have enough income to file, report the $1,805 as "Other Income" on Form 1040. You will pay no taxes on it (your personal exemption and standard deduction will cover it) and you will be covered in case it comes up in the future. If you use tax software and the addition of this $1,805 makes you eligible for the Earned Income Credit, over-write the value on the software and file your return via the U.S. mail. Claiming the EIC with this income would not be proper. |
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Thank you. Another question... I have spoke with my local IRS office and they said that I needed the actual 1099-C from the company in order to file on it. All I have is a letter for my records showing that they have cancelled this debt. I do not have a 1099-C to actually send with my taxes. I know they have to have it postmarked by 1-31. What happens if I do not receive one from this company?
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