bankruptcy and back taxes

[wayne-o]

What is the name of your state?TN I filed a chapter 13 in august of 2004. About a week ago, I received a notice from the IRS stating that I owed additional taxes for year 2003. The difference was because I did not consider the amount the credit card company forgave in a settlement as income so I did not list. I know now that it was and I am liable for the taxes. The amount of the taxes is approx $1200. Of course, my chapter 13 plan uses all of my disposable income so I don't have $1200 to pay them. And the notice from the IRS says do not sign installment agreement if you are currently in a bk plan. They listed a number to call, which I will, but I was wondering if anyone on the boards with your vast experiences can give me an idea what to expect from this. Thanks

 

[Ladynred]

You may, in fact, NOT owe the IRS anything. If you can show that you were insolvent (more debts than assets) in 2003 at the time you settled this debt, then you would NOT have had to claim the 'forgiven' portion of the debt as income. You need Form 982 to claim insolvency. It may completely void the IRS's claim that you owe them anything.

 

[wayne-o]

thanks ladynred

When figuring out if I was insolvent, do I need to consider my 401k as an asset, or is it exempt in this case?

 

[Ladynred]

I don't know the answer to that question, I've never filled out a Form 982. Better to get the form from the IRS site and see what's entailed.