cancellation of debt

[ayla_3388]

What is the name of your state (only U.S. law)? Maryland

I just received a letter in the mail from the IRS. It says my husband SSN had a cancellation of debt in 2007. Because of this our taxes that needed to be paid went up for that year. I understand the semantics behind why it’s considered income.



My misunderstanding lies in the following. After pulling the history out of my husband I found out the story. Young, and stupid, he bought a car in 1998 and the car was repossessed in 1998. His last communication with the company was in 1998 saying: they sold the car on auction and that the dept, which was left, was forgiven. Unfortunately my husband has lost this paperwork. He never heard from them again. In 2006 he and I get married, I make considerable more money than he does. 2007 was the first year we file taxes together. I find it odd that this company decides to file the cancellation of debt the first year, we filed taxes together. Since we have been married I pull credit reports on both of us once a year just to know what’s on them. I have Never seen this dept on his credit report.



Questions: (1) What is the statue of limitations on something like this? (2) Why did they wait so long? (3) Is this legal for them to wait so long to file this form?



Thank you for any assistance with this matter.

[xylene]

There is nothing odd or nefarious about it.

The creditor gained nothing by this

You owe this valid tax debt.

Forgiven debt is income.

You and your husband need to do some research, seek out some paperwork, and maybe a tax lawyer to see how much you can reduce this ding.

Just so you understand, the irs is collecting the income tax on the forgive debt. They are not collecting anything for the creditor.

[davew128]

Xylene, it wasn't a TAX debt, it was an AUTO LOAN.

OP, none of your questions are really relevant to the issue at hand, although they are normal questions to be asking. Unfortunately, the IRS isn't the one to blame here, nor is the creditor. Your husband is. Ultimately the creditor for whatever reason decided to cancel the debt in 2007. I would question if your husband ever got a 1099-C or ignored it, but the bottom line you owe the money. The credit report has nothing to do with it.

[xylene]

Originally Posted by davew128

Xylene, it wasn't a TAX debt, it was an AUTO LOAN.

OP, none of your questions are really relevant to the issue at hand, although they are normal questions to be asking. Unfortunately, the IRS isn't the one to blame here, nor is the creditor. Your husband is. Ultimately the creditor for whatever reason decided to cancel the debt in 2007. I would question if your husband ever got a 1099-C or ignored it, but the bottom line you owe the money. The credit report has nothing to do with it.

This is a TAX issue. They owe TAX on the INCOME that resulted from the FORGIVENESS of the LOAN.

DIRECT QUOTE FROM THE OP

Because of this our taxes that needed to be paid went up for that year.

That is a tax debt.