Legal Question in Tax Law in Florida

I had a Bankruptcy discharged on Mar 28.2010. One Creditor filed a form 1099C with the IRS as a cancellation of Debt. The creditor was legally responsible to send a copy of the 1099C to me also. Because they failed to do so, I was audited for the tax year of 2009 as a cancellation of debt can be taxable. I am convinced this was not an oversight. The Creditor Maliciously filed false tax information with the IRS to generate an audit. This was a purely malicious action as any accountant knows that it the debt is discharged by bankruptcy, it is not taxable and therefore you DO NOT file a form 1099C. This action has been troublesome for me. QUESTION: Is the Creditor who filed the false tax statement of income as a debt cancellation on form 1099C, (which it was not a voluntary action of the Creditor, but actually a non taxable bankruptcy discharge), liable for their actions in the form of punitive actions ???


Asked on 5/31/11, 10:50 am

1 Answer from Attorneys
Sanford M. Martin Sanford M. Martin, P.A.

The filing of the 1099c regarding the debt cancellation caused you to the costs and time involved in an IRS audit. Whether the filing was merely negligent or malicious is difficult to prove. Your complaint to the IRS or other govt agency may get little attention. If the creditor is a large bank or financial institution which should issue such1099's in a responsible manner, you may a cause of action but you still must show economic loss due to the mistake. The creditor is not likely to suffer punitive actions because such careless handling of 1099's too common.

Read more
Answered on 5/31/11, 12:40 pm


Related Questions & Answers

More Tax and Taxation Law questions and answers in Florida