Hopefully, you have filed your taxes by now, but if you haven’t, you could still file for an extension to October 15th. (By the way, the extension doesn’t extend the due date for the payments!)

Many times people who file for bankruptcy get 1099-C “Cancellation of Debt” forms from some of the companies that they included in their bankruptcy. Normally, if someone settles a debt, the company cancels the debt, and sends the 1099-C to them and to the IRS. Some credit card companies or mortgage companies send these forms to you and to the IRS, even though the debt was discharged in bankruptcy. In reality, the debt wasn’t cancelled, it was discharged in bankruptcy.

If you get one of these forms, you should give it to your tax preparer, and he or she will then be able to add IRS Form 982 to your return, to show that the debt was discharged in a Bankruptcy case. It is also possible that if you didn’t know that the IRS was going to charge you for the cancellation of debt, and didn’t include it in your tax forms, that the IRS could audit your return and say you owe more in taxes. You’d need to talk to your tax preparer about how to respond to the IRS, to show them you don’t owe taxes on debts that were included in your bankruptcy case.

If you have more questions about your situation, we can help you.

Daniel J. Winter
BankruptcyLawChicago.com
djw@DWinterLaw.com
312-789-9999
Offices in Chicago, Gurnee, Oak Lawn, Skokie, and Waukegan, Illinois