Form 982 reduction of tax for dischg of debt

[schirallicpa]

I have 2 clients this year that received late in 2007 notices that in 2006 1099C's were filed. (Funny, they forgot to mention that before. I think that people don't realize that the 1099C means something to their taxes. Or perhaps they are in denial.)

Anyway - 2006 returns have long been filed, and now the IRS is assessing additional tax and penalty for the 1099C.

Can an amended return be filed, submitting a 982? In reviewing the instructions, it looks like you have to within 6 months if you're making said elections. So is that it? Do it within 6 months, or you're out of luck?

Now, if the debt is discharged in bankruptcy, it is not income at all....Correct?

Just looking for someone elses interpretation on this. I haven't ever filed one of these before.

Thanks for any help.

[joanmcq]

You can just answer the CP2000 with a 982 or a reasonable facsimile; I've either sent in bankruptcy papers if relevant or done a balance sheet with assets & liabilities computing how much, if any, of the cancelled debt is taxable.

Better get on them; the 30 days has passed if they got the CP2000s in December, and Notices of Deficiency may have already been issued. If they have, you only have 90 days to get the thing resolved.