by steve | Oct 18, 2011 | IRS Tax Problem, Tax News, Uncategorized
With so much canceled debt going around, questions arise about which canceled debt is taxable and which debt is not. Here are the general rules regarding debt cancellation in regard to taxable income.
IN GENERAL:
If you are liable for a debt that is canceled, forgiven, or discharged, you must include the canceled amount in gross income unless you meet an exclusion or exception. However, canceled or forgiven debt is not considered income if it is intended as a gift or bequest.
A debt includes any indebtedness for which you are personally liable or for which you are liable only to the extent of the property securing the debt. Cancellation of all or part of a debt that is secured by property may occur because of a foreclosure, a repossession, a voluntary return of the property to the lender, abandonment of the property, or a principal residence loan modification.
You must report any taxable amount of a debt that is canceled, as ordinary income from the cancellation of debt, on Form 1040 or Form 1040NR and associated sub-schedules, as advised in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonment (for Individuals).
Caution: If your debt is secured by property and that property is taken by the lender in full or partial satisfaction of your debt, you will be treated as having sold that property and may have a reportable gain or loss. The gain or loss on such a deemed sale of your property is a separate issue from whether any canceled debt also associated with that same property is includable in gross income.
See IRS Publication 544, Sales and Other Dispositions of Assets, for detailed information on reporting gain or loss from repossession, foreclosure or abandonment of property.
If a federal government agency or an applicable financial entity cancels or forgives a debt you owe of $600 or more, you should receive a Form 1099-C (PDF), Cancellation of Debt, showing amounts and other information relating to the cancellation. The amount of canceled debt is shown in Box 2 of the form.
Canceled Debts that meet the requirements for any of the following exceptions or exclusions are not taxable.
Canceled Debt that Qualifies for Exception to Inclusion in Gross Income:
Amounts specifically excluded from income by law such as gifts or bequests
Cancellation of certain qualified student loans
Canceled debt that if paid by a cash basis taxpayer is otherwise deductible
A qualified purchase price reduction given by a seller
Canceled Debt that Qualifies for Exclusion from Gross Income:
Cancellation of qualified principal residence indebtedness
Debt canceled in a Title 11 bankruptcy case
Debt canceled due to insolvency
Cancellation of qualified farm indebtedness
Cancellation of qualified real property business indebtedness
The exclusion for “qualified principal residence indebtedness,” provides canceled debt tax relief for many American home owners involved in the mortgage foreclosure crisis currently affecting much of the country. The exclusion allows taxpayers to exclude up to $2,000,000 ($1,000,000 if married filing separately) of “qualified principal residence indebtedness”.
Generally, if you exclude canceled debt from income under one of the exclusions listed above, you must also reduce your tax attributes (certain credits, losses, and basis of assets) by the amount excluded. You must file Form 982 (PDF), Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the exclusion and the corresponding reduction of certain tax attributes.
by steve | Oct 18, 2011 | IRS Tax Problem
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by steve | Oct 18, 2011 | IRS Tax Debt, Tax Levy and Wage Garnishments
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(1) the examiner made a mistake interpreting the law,
(2) the examiner failed to consider the taxpayer’s evidence or
(3) the taxpayer has new evidence.
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To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
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by steve | Oct 18, 2011 | IRS Tax Problem, Tax Levy and Wage Garnishments
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We not only will get your levy released we will also settle your case.
Our Company Resume: ( Since 1982 )
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- We taught Tax Law in the IRS Regional Training Center
- Former IRS Agents, Managers and Instructors with over 60 years experience in the local, district and regional IRS offices.
- Highest Rating by the Better Business Bureau “A”
- Fast, affordable, and economical
- Licensed and certified to practice in all 50 States
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As former IRS Agents, Managers and Instructors we have issued thousands of IRS Wage/Garnishment and Bank Levies. We know exactly how to quickly get them released. We have what it takes.
1. We immediately send a power of attorney to the IRS letting them know we are now your representative. You will never have to speak to them.
2. We will make sure all your tax returns are filed and current. If your tax returns are not up to date, the IRS will refuse to work your case. This is leverage that they use to get you compliant. We can pull tax transcripts, file and prepare your tax returns within days, even if you have lost your tax records.
3. The IRS requires a current financial statement. We will secure a required 433-F (IRS financial statement), verify the income and expenses and work out a settlement agreement. The IRS will require a closing settlement method for each case.
4. We review with our clients how they want to settle their case. We get them an agreement based on their current financial needs.
IRS Tax Settlement Agreements can be in different forms:
a. Hardship Settlements. Cases usually go into a 3 year suspended status because of an inability to pay. This is also called currently noncollectable. Your case will go into a hardship status because you do not have the income coming in to meet your current expenses. The IRS will use the National Standards Program to assess hardship.
b. Payment Agreements. Cases can be closed with agreed upon monthly installment payments to the IRS. We will review the different programs the IRS uses for the lowest possible amount required.
c. Offer in Compromise. There are three types of OICs:
The IRS may accept an Offer in Compromise based on three grounds:
1. Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.
2. Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include:
(1) the examiner made a mistake interpreting the law,
(2) the examiner failed to consider the taxpayer’s evidence or
(3) the taxpayer has new evidence.
3. Effective Tax Administration/ Exceptional Circumstances – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
See our home page for more details Thank you
by steve | Oct 17, 2011 | IRS Tax Problem, Tax Levy and Wage Garnishments
Fresh Start Tax LLC Since 1982 Affordable IRS Tax Experts Get your money back from the IRS “A” Rated by the BBB
We know the system and we get fast / affordable results. We do what we say!
Get your money back from the IRS today. Call us for a no cost professional tax consult. Get the most sound advice.
We can not only get your tax levy released, we can also settle your tax case at the same time.
We have over 60 years of experience working directly for the IRS in the local, district and regional offices of the IRS.
Do not be ripped off by companies that sell your information.
Our Company Resume: ( Since 1982 )
- Our staff has collectively over 205 years of Professional IRS Tax Representation Experience
- On staff, Board Certified Tax Attorney’s, IRS Tax Lawyers, Certified Public Accountants, Enrolled Agents,
- We taught Tax Law in the IRS Regional Training Center
- Former IRS Agents, Managers and Instructors with over 60 years experience in the local, district and regional IRS offices.
- Highest Rating by the Better Business Bureau “A”
- Fast, affordable, and economical
- Licensed and certified to practice in all 50 States
- Nationally Recognized Veteran /Published Former IRS Agent
- Nationally Recognized Published EZINE Tax Expert
- As heard on GRACE 90.3 FM Monthly Radio Show-Business Weekly
How we can immediately get Notices of Bank Levy and Wage Garnishment Released.
As former IRS Agents, Managers and Instructors we have issued thousands of IRS Wage/Garnishment and Bank Levies. We know exactly how to quickly get them released. We have what it takes.
1. We immediately send a power of attorney to the IRS letting them know we are now your representative. You will never have to speak to them.
2. We will make sure all your tax returns are filed and current. If your tax returns are not up to date, the IRS will refuse to work your case. This is leverage that they use to get you compliant. We can pull tax transcripts, file and prepare your tax returns within days, even if you have lost your tax records.
3. The IRS requires a current financial statement. We will secure a required 433-F (IRS financial statement), verify the income and expenses and work out a settlement agreement. The IRS will require a closing settlement method for each case.
4. We review with our clients how they want to settle their case. We get them an agreement based on their current financial needs.
IRS Tax Settlement Agreements can be in different forms:
a. Hardship Settlements. Cases usually go into a 3 year suspended status because of an inability to pay. This is also called currently noncollectable. Your case will go into a hardship status because you do not have the income coming in to meet your current expenses. The IRS will use the National Standards Program to assess hardship.
b. Payment Agreements. Cases can be closed with agreed upon monthly installment payments to the IRS. We will review the different programs the IRS uses for the lowest possible amount required.
c. Offer in Compromise. There are three types of OICs:
The IRS may accept an Offer in Compromise based on three grounds:
1. Doubt as to Collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection.
2. Doubt as to Liability – A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include:
(1) the examiner made a mistake interpreting the law,
(2) the examiner failed to consider the taxpayer’s evidence or
(3) the taxpayer has new evidence.
3. Effective Tax Administration/ Exceptional Circumstances – There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable.
See our home page for more details Thank you
