Q: Ex wife settled a student loan that I cosigned on. IRS chasing me for unpaid tax on 1099. Do I have any remedy with IRS?
Apparently for a debt write off over $10,000, the lender reports SS# of both the borrower and cosigner. The IRS is trying to modify my 2016 tax return to include the 1099 income from the debt write off. I had no part in the settlement, and we weren't married at the time the loan was settled. The IRS is telling me they will only drop this with something in writing from the lender that it was reported to my SS# in error. I have to imagine there is some way to resolve this.
A: The IRS will continue trying to collect on both of you until the taxes are paid. The only way for you to avoid paying the tax on the loan amount discharged is for your ex wife to pay it herself.
A: If the IRS says it will drop it if the creditor sends a letter stating it was an error, try to get that letter. The 1099-C instructions state that a creditor should not 1099 a guarantor for COD income and there is caselaw to that effect as well. The creditor probably can’t cancel that 1099 now but point out the form instructions and the treasury reg under 6050P-1 that says so. And if that doesn’t work, tell the IRS agent the same. The agent may assume the creditor just believes you are a co-debtor and doesn’t want to have to dig through paperwork if the creditor can do so. Your ex should report the full amount from the 1099 and it would be unfair to report that amount twice.
Linda Simmons Campbell agrees with this answer
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