Debt Reuction Unexpected Tax Isssue - PeachParts Mercedes-Benz Forum

Diesel911 · #1 03-24-2018, 01:55 PM

My Wife used a debt reduction service and got here debt reduced on her loans.
However, the IRS now tells here she owes $1,000 and the State said she owes $500 on top of what here normal tax burden would be.

Don't know for sure but my best guess is when my Wife's debt was reduced by the Court the Money on her loans she dose not have to pay back became Income.

sloride · #2 03-24-2018, 03:32 PM

Quote:

Originally Posted by Diesel911

My Wife used a debt reduction service and got here debt reduced on her loans.
However, the IRS now tells here she owes $1,000 and the State said she owes $500 on top of what here normal tax burden would be.

Don't know for sure but my best guess is when my Wife's debt was reduced by the Court the Money on her loans she dose not have to pay back became Income.

Hello, that was income.
I borrow a million dollars and pay zero back, claim BK, court says you are BK. Guess what I owe taxes for that income of one million, plain and simple.

Volvo Diesel · #3 03-24-2018, 04:15 PM

Yes, the amount of cancelled debt is income. Frequently the creditor forgiving the debt will send a 1099-C, so that the creditor and the treasury are aware of the amount. Unfortunately, the debt reduction services often fail to inform their clients about this.

okyoureabeast · #4 03-24-2018, 04:35 PM

Been there done that... well with bad withholding settings.

Give the irs a call and set up a payment plan. They're generally understanding and are interest free.

Diesel911 · #5 03-24-2018, 09:00 PM

Note only a portion of the debt was canceled.

My Wife and I had a fanancial falling out over 1 year ago and we seperated our finances and my Wife insisted on filing seperately for this past year.

My only income for last year was mainlyfrom a Life term life Insurance Policy I cashed in. About $1200 tax was taken out of it. Filed jointly that would have all gone to pay off my Wife's tax. Because she demended filing seperately I got all of the Tax I paid back.

sloride · #6 03-24-2018, 09:18 PM

Quote:

Originally Posted by okyoureabeast

Been there done that... well with bad withholding settings.

Give the irs a call and set up a payment plan. They're generally understanding and are interest free.

Are they interest free now, and penalty free? Thats great news! I will not pay my quarterlies for a few years, then agree to any repay plan they have that is interest and penalty free. That would be my first free use of my own earned money, I doubt it.

t walgamuth · #7 03-24-2018, 10:26 PM

Quote:

Originally Posted by sloride

Are they interest free now, and penalty free? Thats great news! I will not pay my quarterlies for a few years, then agree to any repay plan they have that is interest and penalty free. That would be my first free use of my own earned money, I doubt it.

I've never negotiated a late tax payment. If late I have just paid the penalty and moved on. As for interest free, the IRS can negotiate just about anything, so if its a burden don't hesitate to ask for a work out deal....sooner rather than later.

They'll be much more willing to work with you if you come forward right away. Heck I imagine they get plenty of folks who have gone 10 years with out filing.

If you don't, it will catch up with you eventually unless you happen to die first I suppose. If you have a large estate I'm sure they'll be in line to get their share of it.

oldsinner111 · #8 03-25-2018, 08:05 AM

best to file complete bankruptcy on loans,instead of those companies

dynalow · #9 03-30-2018, 06:47 PM

Tax advice on the web is worth what you pay for it.

The IRS' advice is a little better. Only it's not authoritative.

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver

HuskyMan · #10 03-31-2018, 08:51 AM

Quote:

Originally Posted by sloride

Hello, that was income.
I borrow a million dollars and pay zero back, claim BK, court says you are BK. Guess what I owe taxes for that income of one million, plain and simple.

Please provide us with the legal authority, either a court case, law dictionary, American Jurisprudence, Corpus Juris Secundum, etc. where it defines the term income.

I know I've been looking for years and have yet to locate it. BTW, the so-called "code" is not law. law is not code and code is not law. a chevrolet is not a ford.

sloride · #11 03-31-2018, 09:27 AM

Quote:

Originally Posted by HuskyMan

Please provide us with the legal authority, either a court case, law dictionary, American Jurisprudence, Corpus Juris Secundum, etc. where it defines the term income.

I know I've been looking for years and have yet to locate it. BTW, the so-called "code" is not law. law is not code and code is not law. a chevrolet is not a ford.

Call the IRS and ask for their definition of income. I am sure it would be close to, any funds earned, found, won, stolen, or inherited. Yes if you find or steal money you should report it to the IRS

HuskyMan · #12 03-31-2018, 09:54 AM

Quote:

Originally Posted by sloride

Call the IRS and ask for their definition of income. I am sure it would be close to, any funds earned, found, won, stolen, or inherited. Yes if you find or steal money you should report it to the IRS

This. Call all 33 district offices of the IRS and ask to speak with the supervisor in charge. Get their full legal name and mailing address.

Now, prepare 33 letters asking for them to please respond to you in writing. Ask them to please provide the legal authority they rely upon for their definition of the term income. Send the letters REGISTERED MAIL ONLY. Ask for them to respond to your letter via registered mail.

I realize doing this requires WORK. That said, their responses may prove surprising to both you and everyone here on the forum. I'd suggest scanning in their responses and posting them here for all to see.