First off regarding income, do not include a canceled debt in gross income if any of the following situations apply: The cancellation takes place in a bankruptcy case under the U.S. Bankruptcy Code. The cancellation takes place when the debtor is insolvent, and the amount...
You are insolvent when your liabilities exceed the Fair Market Value (FMV) of your assets. It is important to determine your liabilities and the FMV of your assets immediately before the cancellation of debt to determine whether or not you are insolvent and by how much. Exclude...
According to IRS Publication 908, Bankruptcy Tax Guide, generally the automatic stay rules prevent a creditor from taking actions to collect debts incurred before a bankruptcy petition is filed. However automatic stay rules do not universally apply. Exceptions include an IRS exam to determine tax liability,...
Here is the hard part, to qualify: 1. The corporation must have ceased business operations and must have neither assets nor income for the tax year. 2. The exemption request must be submitted to the local IRS Insolvency office handling the case. For the appropriate address to...
When an individual files a bankruptcy petition under chapter 7 or 11 of the bankruptcy code a bankruptcy estate is established. The bankruptcy estate is treated as a separate taxable entity. If a trustee is appointed, the trustee is responsible for preparing and filing the...
According to IRS Publication 501, Exemptions, Standard Deductions and Filing Information. a dependent qualifying relative can be any person who lives with you all year, is not a qualifying child of another taxpayer, and someone for whom you provided over half of his or her support whose gross...
After it was learned that thousands of identity theft 'Information Referrals' reported on IRS Form 3949‑A were not being processed the Treasury Secretary General for Tax Administration (TIGTA) investigated and published a report (#2012-40-106) essentially stating that the "process for individuals to report suspected tax law violations is...
I have a client who failed to file 1099-misc for contract labor and am dealing with an examiner who denied all contract labor expenses because of a lack of IRS Form 1099-MISC back to 2007 even though an audit trail exists substantiating the expense. So the Service's...
If you are an individual debtor in a chapter 7 or 11 bankruptcy case you may be able to elect to close your tax year for the year in which the bankruptcy petition is filed as of the day before the date on which the...
I've worked with many good people inside the IRS on a wide variety of cases. So please do not get me wrong I'm not bashing ALL IRS employees. However like any big bloated bureaucracy I've also worked with some real shit heads inside the IRS...