quick debt question

[Roscoe]

The IRS is good for something every now and then.

We had an employee steal around $2500 in fuel over a weekend with his fuel card and disappear. Cops didn't care, so we just sent him a 1099 for the $2500 so he would have to pay tax on it. The genius sent us a letter with his new address requesting his W-2, I wish I could have seen the look on his face when he opened it and found the 1099 along with it.

He was probably too stupid to know what it was and just threw it in the trash........... Until the IRS said "hey, what about that 1099 for $2500?" after he filed his taxes....

[Chili]

Yep, so if you got a 1099C or whatever, it means they probably wrote off/discharged the debt. Your credit is going to be total crap now and you will have to pay tax on the amount they wrote off. You'll probably have to deal with debt collectors too as I'm sure they'll sell the debt for pennies on the dollar to a shady debt collection agency.

Have fun.

Well, if they issued a 1099 on it then they should no longer be pursuing that debt. That would indicate it is "forgiven". At least that is my understanding.

[aggie97]

This was a few years ago but you used to be able to claim insolvency without filing bankruptcy and the IRS would not consider the charge off of unsecured debt as income. If your total debt exceeded your assets on the date of the charge off, you qualified.

There is a specific process you follow using IRS forms when you file. This may have been a loop hole that got closed but do look into it.