My Mom has no income other than SS; she is dual enrolled in Medicare/Medicaid. What is her responsibility with a 1099 C? - AgingCare.com

My Mom has no income other than SS; she is dual enrolled in Medicare/Medicaid. What is her responsibility with a 1099 C?

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My mom has no income other than SS; she is dual enrolled in Medicare/Medicaid. She lives in an ALF.We were able to get the bank to do a DIL with a 1099 C which is going to be issued. She has not filed taxes in years because she is under the income level; she only gets SS. What is her IRS & Medicaid situation here? She can't pay any taxes on phantom money & she has nothing to declare for income from it to Medicaid. She lives in FL

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I would first find out what the income max for medicaid is in your state. In NY where I live, it's over $14,000.
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Mom needs to file taxes to show impoverishment. If she does nothing, then she will own taxes on the phantom income. If she doesn't pay the taxes, the IRS can go after a portion of her SS income - this will snowball as a problem as mom will not have the monthly income from SS to do her required co-pay to the facility. SS is protected income from most creditors with the exception of the IRS.

1099-C are a real issue for Medicaid as well. If your state does an income match-up, the "income" reported on the 1099-C will take her over the income/asset maximums for Medicaid. She could be ineligible for Medicaid due to this.

Mom will need to file IRS form 982 to show impoverishment to get a discharge of indebtedness. The 982 - imho - is not a DIY filing. You need a tax pro to do it for you. For the foreclosure 1099-C income, house expenses can offset some of this.

If mom has other debt she has defaulted on, she may get a 1099 for those as well. Any debt written off that is more than $ 600 can issue a 1099 C. Like credit cards, service provider, doctors who didn't get paid the full amount, etc. Each of those can issue their own 1099's.

For even more fun in all this, 1099 C could be an issue for more than 1 year…..like the DIL 1099 C for tax year 2014, but her CC #1 carries over the debt into 2015 before it is written off, so they dont issue theirs 1099-C till tax year 2015. So think if that could be the situation as well.

There are free tax services done by AARP and then by retired enrolled agents that get coordinated by your local Area of Aging, I'd google to see what is available in your community. You want to get on this asap, as these services have a limited # of slots, Not all will deal with 1099/982 as that is pretty specialized, i'd suggest you clearly ask about the ability to do IRS form 982. A good CPA can do these. The H & R BLock pro tax offices (these are the ones that are open all year round; these tend to do work for business, LLC's, corporations, so have a more specialized tax person working there) can likely do them too.

You have to deal with it one way or another as you can't afford for mom to have her SS reduced or be removed from Medicaid. Good luck.
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If she has a 1099 C related to a deed in lieu of foreclosure, you still have to report to the IRS and fill out form that she is destitute and not able to pay any taxes due. Some states with income tax do not treat this relief of debt as income. Talk with a CPA or other tax professional to make sure it is reported properly and taxing agencies get the right forms or letters/notice so no taxes are considered due. The IRS does not know your mother has no means to pay any taxes due on 1099. You have to show them.
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