April 17Apr 17 So, MIL with some dementia had a credit card. She kept getting charges on it that she didn't understand or remember and was forgetting to make monthly payments. Also, at some point, her ne'er do well daughter and grandchildren had got hold of the number and put it in their phones. Long story short, she wound up racking up about $5000 in charges that the card co contended were authorized and we contended were fraudulent, because a) permission to use revoked and b) card company didn't cancel the card when told to do so. So, this past year they gave her a forgiveness of debt 1099 of not quite the $5k. She has no assets, but about $3000/month in SS and a pension, but assisted living bill of more than $5k/month, which I make up the difference on. She normally doesn't pay tax or file a return because her income is just below the threshold. But, this 1099 thing will put her over. It's a defense to forgiveness of debt income that you were insolvent when incurred. From a balance sheet standpoint, she is insolvent. From an income statement standpoint, it depends on what day of the month it is, that is, for some days between the time she gets her SS and pension, she has some money, but it is "spoken for" by her rent, and then some. I do leave a couple hundred dollar cushion in there, so she's "solvent" to that extent. Anyone have any experience or advice on this scenario?
April 17Apr 17 7 minutes ago, immamac said: Just don't file the 1099 and say she forgot. 1099s are sent to the IRS as well as the recipient. This is bad advice.
April 17Apr 17 Just now, Chewbacca said: 1099s are sent to the IRS as well as the recipient. This is bad advice. It was a joke, obviously I'm not a tax attorney lmao. But also https://www.cnbc.com/2025/04/17/irs-staff-cuts-fewer-audits-of-wealthy.html
April 17Apr 17 5 minutes ago, immamac said: It was a joke, obviously I'm not a tax attorney lmao. But also https://www.cnbc.com/2025/04/17/irs-staff-cuts-fewer-audits-of-wealthy.html Not filing the 1099 would result in an automatic letter of deficiency from the IRS. Not a full audit, but they'd still have to sort it out.
April 17Apr 17 As with most things IRS, I would suppose the easiest thing to do would be to file and pay whatever minimal tax there is even out of your own pocket. In fact, if she hasn't been required to file there may be a credit or deduction somewhere out there you could claim to wash it. Medical expense threshold if her income is low and it can exceed the standard deduction by $5k would be an offset??? Keeping that slate clean and them out of her hair would probably be worth an hour of time to file and a few hundred dollars out of pocket for a SIL caregiver. I'd consider the cost in your time and having an anxious MIL if she got a letter after not filing. Might be an easy trade.
April 17Apr 17 4 hours ago, TwiceHorn said: So, MIL with some dementia had a credit card. She kept getting charges on it that she didn't understand or remember and was forgetting to make monthly payments. Also, at some point, her ne'er do well daughter and grandchildren had got hold of the number and put it in their phones. Long story short, she wound up racking up about $5000 in charges that the card co contended were authorized and we contended were fraudulent, because a) permission to use revoked and b) card company didn't cancel the card when told to do so. So, this past year they gave her a forgiveness of debt 1099 of not quite the $5k. She has no assets, but about $3000/month in SS and a pension, but assisted living bill of more than $5k/month, which I make up the difference on. She normally doesn't pay tax or file a return because her income is just below the threshold. But, this 1099 thing will put her over. It's a defense to forgiveness of debt income that you were insolvent when incurred. From a balance sheet standpoint, she is insolvent. From an income statement standpoint, it depends on what day of the month it is, that is, for some days between the time she gets her SS and pension, she has some money, but it is "spoken for" by her rent, and then some. I do leave a couple hundred dollar cushion in there, so she's "solvent" to that extent. Anyone have any experience or advice on this scenario? I’d file. Sounds like she’s at a very low tax rate. $5K extra income won’t matter much- I assume you’re probably paying it. Filing and paying today might simplify your life a year from now.
April 18Apr 18 Author 1 hour ago, Kennythetiger said: I’d file. Sounds like she’s at a very low tax rate. $5K extra income won’t matter much- I assume you’re probably paying it. Filing and paying today might simplify your life a year from now. True. I'm sitting here thinking about it in terms of my tax rate and it's probably not anywhere close to that.
April 18Apr 18 11 minutes ago, TwiceHorn said: True. I'm sitting here thinking about it in terms of my tax rate and it's probably not anywhere close to that. I think you could probably ignore the whole thing and there’s a really good chance nothing happens. But, if the IRS does take an interest, they’ll compute a tax due and send her a demand letter. Still not the end of the world, but now you’re in it for your time negotiating/preparing a correct return. My mother-in-law situation is similar to yours- her tax and legal problems are soon my problems. I prepare a decent amount of tax returns every year, and enjoy it. My advice to you is 50% professional and 50% social. My wife bought a house for her mom just to keep her from moving in with us…..
April 18Apr 18 3 hours ago, Nice Guy Eddie said: You don’t have to file a tax return even with $36k of income per year? I am assuming the $36K was literal income, not taxable income. Most of her social security income might not be included as taxable income.
April 20Apr 20 Author On 4/18/2025 at 8:40 AM, Nice Guy Eddie said: You don’t have to file a tax return even with $36k of income per year? When your income is social security and any income beyond that is insufficient to render the SSI taxable, you do not have to either pay tax or file a return over 65.
April 22Apr 22 On 4/20/2025 at 3:12 PM, TwiceHorn said: When your income is social security and any income beyond that is insufficient to render the SSI taxable, you do not have to either pay tax or file a return over 65. My mom was in that situation, however she was always worried about getting a huge tax bill. She paid income taxes out of her social security and pension - got it all back with the tax return in the following year.
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