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We prepare most type of tax returns:

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S Corporation.

C Corporation.

Partnership.

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Amended.

Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

I became totally and permanently disabled after a working for 44 years. I returned to college late in life (while working full-time) to fulfill my dream of becoming an RN and at that time found it necessary to secure student loans. Three years after being declared totally and permanently disabled my student loans were discharged. In January 2013 we received a 1099-C form declaring said student loans that were discharged however that amount could be considered as income for 2012. This was a large amount of money and we live on two pensions and social security income.

I started looking on the internet for information regarding 1099-C and felt that this was something that we could not handle alone. I made phone calls locally to a very reputable tax group in a city near us and they said it would cost $500 for an appointment and that they really prefer to do corporate taxes and they referred me to a local person who had worked for them at one time, we called and explained the situation and an appointment was made and then the comment was made that "I will have to do some research on this" and flags immediately went up and we called back and cancelled that appointment. I had been researching the IRSwebsite and every place else I could think of and I was not comfortable doing our own taxes this year. We called another local tax preparer that we had used in the past and made an appointment, however prior to the appointment, while still seeking information regarding our situation,

I came across a website for Gary l. Bode, MSA, CPA, PC in Wilmington, NC. I called Mr. Bodeand explained our situation and asked if he could help. He spoke very knowledgeably regarding the situation and stated that yes; he felt he could help us. As Mr. Bode was in North Carolina and we were in New York I scanned all of our documents including back-up documents for all of our claims and forwarded all to him. Mr. Bode kept in touch with us via email; we have spoken on the telephone several times and have become very comfortable with his knowledge and professionalism. Also, as I am a true "worrier" I have continued looking into information regarding our tax situation and I came upon another web page for Mr. Bode that included testimonials which spoke of his experience with this type of tax situation as it became prevalent during the recession. This reinforced in our minds that we had made the right decision in hiring this person as our tax preparer.

I share all of this as our taxes are now ready to be filed (we do owe tax for 2012 but not the astronomical figure we thought we were facing), and we are confident that they have been prepared with the utmost care by a gentleman who has an excellent working knowledge of the situation we faced and the tax laws that were applicable to said situation.

 

Bill and Carol

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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Insolvency CPA discusses Qualified Principal Residence Indebtedness on Form 982, Reduction of Tax Attributes | Form 1099-C, Cancellation of Debt and Form 1099-A, Acquisition or Abandonment of Secured Property

Insolvency CPA discusses mortgage debt forgiveness and Form 1099-C.

Losing your home is tough, but paying taxes on forgiven or cancelled debt is devastating. Use the insolvency and/or qualified principal residence indebtedness provision of Form 982 to avoid this double whammy. Our virtual office means we can help you regardless of where you live. We offer a free consult on cancelled debt. (910) 399-2705.

Form 982 CPAs are already fielding calls about 2013 Form 1099-C, Cancellation of Debt. One of the main provisions of Form 982, qualified principal residence indebtedness, disappears after 2013. But Congress extended it once. Maybe they’ll do so again. But once the qualified principal residence indebtedness provision expires, only IRS insolvency can exclude cancelled debt on your primary residence from becoming taxable income.

Up to $2,000,000 of cancelled debt can be excluded on Form 982 through the qualified principal residence indebtedness. The main proviso? The cancelled debt must stem from your home’s decrease in value and/or your personal financial condition.

What is IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)?

Your lender reports all cancelled debt on IRS tax Form 1099-C. The amount in Box 2 becomes taxable income if you can’t exclude it through a provision on Form 982. Insolvency and qualified principal residence indebtedness are just two provisions on Form 982. The Form 982 instructions aren’t great but check out IRS Publication 4681.

Form 1099-C, Cancellation of Debt

The IRS assumes Form 1099-C is correct. But:

  • Sometimes the date is incorrect.
  • Sometimes the amount is incorrect.
  • Sometimes the Fair Market Value is incorrect.

It’s generally up to you to get a corrected Form 1099-C. But if these figures don’t work to your advantage, your CPA can make a case for the correct numbers on the tax return.

“Sale” of your home, Form 1099-A, Acquisition or Abandonment of Secured Property and/or Form 1099-C

Form 1099-A informs the IRS your home’s title got transferred to the bank. No debt cancellation stems directly from Form 1099-A. But a subsequent Form 1099-C is likely. Sometimes it goes to the old address and new Clients call because the IRS sends them a Notice CP2000 proposing tax on the entire sale proceeds. Ouch. In this case we’d file an amended tax return to include the Form 1099-A and/or Form 1099-C. Sometimes we pull the IRS account information to be sure.

Foreclosure may not seem like a “sale.” But both IRS Forms 1099-A and 1099-C can trigger a requirement to calculate the gain or loss on the sale of your home. I’ve only seen a few cases where the gain was taxable. Why? Because of the $25,000 exclusion available. But your Form 982 CPA would report the sale to avoid future IRS questions even though no tax consequences exist.

I’ve had a few cases where the IRS received a Form 1099-S, Proceeds From Real Estate Transactions, but the new Client didn’t report it.

“If your home got foreclosed or abandoned make sure to report the “sale” on your tax return, even though no additional tax was due.”
– Gary Bode, insolvency CPA

Can I file Form 982 myself?

Sure. The qualified principal residence indebtedness provision is straight forward. Except for the Reduction of Tax Attributes aspect. The IRS publishes Form 982 instructions and Publication 4681. New clients sometimes come my way because their tax software doesn’t handle all the Form 982 nuances. I got dozens of calls from tax preparers asking for help in 2013. New clients often say their tax preparer doesn’t seem to know much about the tax consequences of debt cancellation. Try it yourself. If you get uncomfortable consider giving us a call at (910) 399-2705. Our virtual office developed from handling cancelled debt and Form 982 for long distance clients. So no worries about long distance tax work.

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4 comments to Insolvency CPA discusses Qualified Principal Residence Indebtedness on Form 982, Reduction of Tax Attributes | Form 1099-C, Cancellation of Debt and Form 1099-A, Acquisition or Abandonment of Secured Property

  • Bob Agans

    For 2013, I incorrectly received, at my home address, a 1099-c for an S Corp which filed ch. 11 in 2011. I and the majority shareholder were guarantors of the debt. I called the bank and asked them to send the 1099-c to the majority owner who deals with the CPA to file tax returns for the S Corp. It is unlikely that the majority owner will send the 1099-c to the CPA, so I probably will not receive a K-1. It’s my understanding that I would be responsible for my 10% ownership share of the COD income, not the entire debt and that lenders are not required to send a 1099-c to guarantors. So If I don’t receive a K-1 how should I report my share of the COD income? Should I take it upon myself to send the 1099-c to the CPA and ask him to prepare a tax return and K-1s? Remember that if the 1099-c had been sent to the correct corporate address I would never have known about it.
    Thanks.

  • JaneS

    I closed my medical practice in 2014 (did not own the building) and filed Chapter 7 BK both personal and for the S-corp. I received a 1099-C from the bank for the start up loan that was discharged after the BK proceedings ended. Will this be taxes I will have to pay for?!! I’m trying to get a straight answer from my CPA and am not…. I’m about to freak out…. please help with a straight answer? The 1099 is for 400k!!!

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