I filed a bankruptcy and received a discharge and one of my creditors sent me a 1099-C. Do I need to
I am not an accountant or a CPA or a tax attorney. However, my understanding is that you do not need to report your discharged debts as taxable income.
Often times a creditor who decides to write off some of the debt you owe to them will send you a 1099-C to report as income. While you might have to include this amount as taxable income in certain circumstances, the United States code (26 U.S. Code § 108 - Income from discharge of indebtedness) states that you do not need to include discharged debts as taxable income.
(a) Exclusion from gross income (1) In general Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if— (A) the discharge occurs in a title 11 case, [OR] (B) the discharge occurs when the taxpayer is insolvent.,
A title 11 case refers to the US Code section that deals with bankruptcy so this does not mean a chapter 11 bankruptcy. It simply refers to any chapter of bankruptcy. Furthermore, those who file bankruptcy, particularly chapter 7 bankruptcy, are presumed to be insolvent at the time of filing.
To be safe, you should probably consult with your accountant.
Posted by Sean Wood