Is That 1099-C Correct?

by Kenneth Hoffman in ,

In McCormack v. IRS, T.C.  Memo 2009-239, the Tax Court ruled that the IRS cannot rely on merely the fact that a Form  1099-C has been issued by a creditor, when the taxpayer has  made a good faith dispute of the amount due and owing, and there is then  a settlement reached between the parties to that dispute. 

The IRS must  do more than rely on the amounts set forth in the Form 1099-C.  Under  IRC Section 6201(d), in any court proceeding, if a taxpayer asserts a  reasonable dispute with respect to any item of income reported on an  information return and has fully cooperated with the IRS, the burden is  then on the IRS to produce reasonable and probative information  concerning a deficiency, in addition to the amount identified on the  information return. 

In the case, the taxpayers asserted reasonable  disputes as to the amounts reflected on Forms 1099-C, and the IRS failed  to produce reasonable and probative information independent of the  third party information returns.

While not at issue in the McCormack case, taxpayers need to know that there is a provision in the tax law  providing taxpayers with the right to be protected against the  fraudulent issuance of information returns.  Under Internal Revenue Code Section 7434 of the  Internal Revenue Code, civil damages can be assessed if any person  "willfully files a fraudulent information return with respect to  payments purported to be made to any other person."  Damages recoverable  are equal to the greater of $5,000 or the sum of any actual damages  sustained by the taxpayer as the proximate result of the fraudulent  information return, including any costs attributable to resolving the  deficiencies asserted as a result of such filing, plus the costs of the  action, and in the court's discretion, reasonable attorney's fees

Kenneth Hoffman of K.R. Hoffman & Co., LLC is a highly sought after tax and business counselor. Counseling Entrepreneurs, Professionals and Select Individuals who are struggling with ever changing tax laws and who are paying too much in taxes. All the while he is protecting his clients from the IRS and other taxing authorities using proactive tax planning strategies, ensuring compliance with minimal tax liability.

Discover how I can help you overcome your tax and business challenges. To start the conversation or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday - Friday between 8:30 a.m. to 1:00 p.m. for a no cost consultation, or drop me a note.

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