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I owe $10,000 in taxes from IRS from a $200,000 real estate property which I lost to foreclosure. On top of that I have $3,000 of cancelled debt from a credit card. As for my assets, I have no car, no house, no furniture, or anything significant else under my name, just my personal belongings and $1,000 in my checkings account and I'm staying with family until I'm settled.

So do I have to pay any taxes to the IRS? Can I file insolvency and be forgiven? How do I prove I'm insolvent?

If you are insolvent, then you don't have to pay the tax on the $3000 cancellation of debt. However, if the $10K tax was assessed on income (gain from sale) that you actually reported, I believe you still have to pay it.

Albeit, I'm not a tax expert. You would generally prove your insolvency by listing A) all of your assets, B) all of your liabilities. If A minus B is negative, then you are insolvent. Whether the IRS has a special form, I don't know.

Sub: #1 posted on Sat, 11/07/2009 - 12:20

DebtCruncher DebtCruncher
(Posts: 2296 | Credits: )

Well I don't have anything, I'm pretty much broke. What ever real estate I had was lost to foreclosure. My total assets would be around $1300 with my personal belongings...and my debt is $13,000 so $1300-$13,000 leaves me with -$10, basically I am insolvent but can a tax expert please confirm this. If I have nothing and I want to restart my financial part of my life would I still have to pay something to the IRS once I get more money?

Sub: #2 posted on Sat, 11/07/2009 - 19:14

Aman Das Aman Das

(Posts: 2 | Credits: )

I just went thru this. YOu need to be placed in IRS cnc status. Currentlu not collectable,
YOu need to speak to the irs collection dept and give them your financials IE living expenses, etc. If you outlay more than you bring in they will cease collections for several years and then you requalify,
If you just ignore this it will bring big trouble.
Prior to speaking to them look up the irs national standards so you know how much you can claim for each expense without proof,
For example if rent for your area is 1500.00 allowed and you only pay 900.00 , tell them like 1450.00. You do not have to prove it asa long as it agrees with the national standard

Sub: #3 posted on Tue, 11/17/2009 - 14:05


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