AboutMike Wellman Expertise I was a former Manager with Price Waterhouse, now PricewaterhouseCoopers, the largest accounting firm in the world. I have had clients in almost every industry and of every size.
I will only answer questions dealing with IRS problems such as delinquent tax returns, Offers in Compromise (Tax Settlement), IRS collection matters including installment agreements, liens, levies, seizures, audits, appeals, innocent spouse claims and injured spouse claims. All other will be referred to the question pool.
Experience Over 25 years experience in taxation specializing in IRS collections, examinations and appeals.
Publications New York Times, Wall Street Journal, Your Money.
Education/Credentials BBA, Baylor University.
Awards and Honors IRSOS.com won the Knowledgeweb award for educational excellence for content.
Expert: Mike Wellman Date: 2/7/2008 Subject: charged off loans and taxes
Question I just received a tax statement from a credit card account that has been closed(charged off) for years. I was told I have to pay taxes on it because it was a forgiven loan(taxable income). Is this the law for any loan (car, personal, etc)that has been charged off?
Answer Cancellation of debt is considered income and the lenders are required to send out a 1099-C on those accounts they write-off. Sometimes this can happen years after the account first became delinquent.
The good news is that if you were in bankruptcy at the time of default or if you were insolvent - then you can exclude the debt cancellation from income. Insolvent means that, at the time the account went delinquent, your total liabilities exceeded your assets.
