When Kim Thompson was diagnosed with a tumor that resulted in "the removal of most of her small intestine, a pulmonary embolism, and 12-hour-a-day IV feeding sessions" she had to quit her job and go on total disability. Her $91,000 student loan was forgiven, but the IRS hit her up with a $26,000 tax bill. From an article at credit.com:
As a former social worker with a Master's degree, Thompson says she's not intimidated by government forms. She filled out all her paperwork to file for disability on her own, for example. However, even though she spent hours researching the rules surrounding cancellation of debt income, she found no relief for her situation. She tried calling the IRS for assistance. The first time she called, she says the IRS representative hung up on her. The second time, she says she waited on hold for over an hour and was then told to call back [after] she filed her tax return. She claims that ultimately she was warned that if she couldn't pay the amount due, the IRS would put a tax lien on her house and report her to the credit reporting agencies. (We've reached out to the IRS a number of times on this and other issues relating to the 1099-C, but to date haven't gotten a response.)
Cancelled student loan debt creates tax nightmare
