What To Do With a 1099c?

As we approach the end of the year, it becomes a common occurrence for the IRS to send our office a flurry of forms known as 1099c. These are intended for people who have had debt forgiven during the preceding year. 

Oftentimes, these forms can be intimidating as is nearly any communication received from the IRS. In fact, as strange as it may seem, collection agencies may use the threat of debt cancellation as a collection tactic; telling you that if you don’t pay them they will cancel the debt and then you will have to deal with the IRS. This is scary! The idea behind form (1099c) is that you would normally be responsible for paying taxes on the canceled debt amount which could possibly be significant.

Here is where we can all pause and take a deep breath. Six years ago, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which also covers debt cancellation for persons who are considered to be insolvent. This is great news for our HELPS clients and more generally people on a limited income. For amounts forgiven prior to January 1, 2014, the law states that as long as a person is insolvent (their total debts are more than their total assets); they may submit form 982 with their tax return which will allow this money to be exempt from being taxed.

What happens if you do not normally file a tax return? You can simply send form 982 to the IRS along with a very simple form that lists your debts and your assets. Be aware that if the amount to be forgiven is significant, the IRS may request that you submit a simple tax return for that year.

HELPS staff is available to answer your questions regarding form 1099c. Remember, this is a good thing! It means that your debt is truly being canceled and as long as you qualify (nearly everyone we work with does) you will not be paying taxes on the amount listed.

HELPS is Here

Many seniors today are in debt. We, at HELPS Nonprofit Law Firm, have learned from years of experience that many people don't know about their financial rights.  This can put them at a significant disadvantage when dealing with collectors. We have found that people don't know what resources exist to help them; the goal of this blog is to share resources and information that can help make life easier and a little bit more bearable for seniors and disabled people who may be experiencing harassment from creditors. We would like to help peace to return to their lives!

What Is HELPS (and what does it mean?)

HELPS is an acronym that stands for Help Eliminate Legal Problems for Seniors and disabled. We were founded by attorney Eric Olsen, president of OlsenDaines; the largest bankruptcy firm in the Pacific Northwest. HELPS was created to assist a significant number of OlsenDaines clients who didn't need to file bankruptcy.

Why didn't they need to file bankruptcy?                       

Most seniors receive income which is exempt from collection by bill collectors. The most common example of protected income is Social Security. Other retirement income is usually protected as well. Seniors may also wish to have a part time job, if the income is small enough (the amount depends on your state), it is not garnishable by creditors either.

Why would seniors be tempted to file bankruptcy?

Simple answer: collectors. Just because a senior’s income was not collectable (new information to many) didn't mean that the bill collectors would stop contacting them, often calling multiple times each day causing large amounts of stress. Often bill collectors will tell people that they will garnish their pension or Social Security, even when they know it is not true.

HELPS was created to stop the harassment of seniors by collectors.

Once a collector receives a letter from an attorney representing the senior the collectors are no longer allowed to contact them. All contact must be made through the attorney. HELPS represents seniors from all across the country, allowing our clients peace of mind. We always encourage questions, and do not feel that we have done our job unless our client can sleep at night. We are always happy to have a trusted friend or family member you may want to invite sit in on any conversation and can arrange for conference calls as needed.

We are dedicated to helping seniors and disabled persons who are unable to pay old debt that is weighing them down, often making it difficult to pay for housing, food and medicine. As scary as it can be to consider, these situations can happen to anybody!  We are hoping to share a variety of resources and answer some frequently asked questions here. Almost everyone knows someone who could use this information, and everybody should be informed on their legal rights. Please feel free to share with your friends and family members who may be in need of some help. Our motto is “Sharing the Burden.”