Nicholas C. asked
In February 2013, my employer let me go owing me $20,000 in back wages, which he covered with a personal loan note. He has been repaying this with interest and sends me a 1099-MISC each year. He recently paid off the principal but still owes interest and penalties. The loan was for 2 years at $500 per month with 1% monthly interest and late charges of $40 after the due date. He offered a cash settlement for half the remaining debt, which I accepted and declared as paid. He later sent me a 1099 for the checks and cash given in 2015. I looked online and found that I can only declare the interest on a personal loan and can give him a 1099-C for debt cancellation. Can you clarify my tax obligations?
November 13th, 2023
Kent W. answered
Generally, a business bad debt is a loss from the worthlessness of a debt that was either created or...
November 13th, 2023
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