AICPA Comments on IRS Changes in Cancellation of Debt Reporting
by Terri Eyden on
By Frank Byrt
The American Institute of CPAs (AICPA) said it supports the IRS' proposed guidance governing the reporting of the cancellation of debt by lenders, but asks for some changes.
"We support the Internal Revenue Service's efforts to address issues surrounding Form 1099-C, Cancellation of Debt," Jeffrey A. Porter, CPA, chair of the AICPA Tax Executive Committee, wrote in an April 1 letter to the IRS. "We strongly believe changes are needed to the filing requirements for Form 1099-C. Specifically, we suggest that IRS require lenders to issue Form 1099-C only upon the legal discharge of a debt, which will occur at the earlier of the expiration of the applicable statute of limitations or when all collection efforts by the lender or surrogate collection organizations have ceased."
The AICPA said "confusion and misreporting occur because the thirty-six-month nonpayment testing period can result in a Form 1099-C being issued several years after the debt is legally discharged."
Therefore, the AICPA has recommended that the IRS amend the applicable regulations so that a Form 1099-C is issued only for the year that a debt is legally discharged, which would solve the timing problem created by the thirty-six-month testing period.
The regulation applies to a discharge of indebtedness of $600 or more.
The AICPA also asked the IRS to collaborate with other government agencies involved with the oversight of credit card and other debts to ensure that the rules for legal discharge of debt are applied so that borrowers do not receive a Form 1099-C if the lender or third-party purchaser of the debt intends to continue collection efforts.
The comments to the IRS were developed by the AICPA Individual Income Taxation Technical Resource Panel and approved by the AICPA Tax Executive Committee.
You may like these other stories...
Accounting group pushes back against retirement age scrutinyMichael Rapoport of the Wall Street Journal reported that the American Institute of CPAs (AICPA) on Monday pushed back against federal regulators who are again...
There's still time to take advantage of last-minute, tax-saving moves for dependency exemptions. For 2014, there are bigger dependency exemptions, as well as rules that, in some cases, are dauntingly complex.The 2014...
Tesco accounting probe finds “inappropriate behavior” by staff – reportsClare Hutchison of Reuters wrote on Sunday that an investigation into a 250 million-pound ($402 million) profit overstatement at...