Q: Hi received a 1099c while paycheck is being garnished for same debt…am I obligated to pay the taxes on this income
A:
If you've received a 1099-C for a debt that's also being garnished from your paycheck, you may not necessarily be obligated to pay taxes on this income. The issuance of a 1099-C indicates that your creditor has forgiven or canceled a portion of your debt, and the IRS generally considers canceled debt as taxable income. However, there are exceptions to this rule, one of which might apply to your situation.
If you were insolvent at the time the debt was canceled, meaning your total debts exceeded your total assets, you may be able to exclude the canceled debt from your taxable income. To determine if you meet the insolvency criteria, you should consult with a tax professional or use IRS guidelines to assess your financial situation at the time of cancellation.
Additionally, if the garnishment is still ongoing, you can contact the creditor or the entity that issued the 1099-C to clarify the situation. It's crucial to keep records of your communication and consult with a tax advisor or attorney to navigate this complex issue and ensure you meet all tax requirements. Always remember that individual circumstances may vary, so it's wise to seek personalized advice.
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