topic Re: 1099-C issues and charge off,Please help!! in Rebuilding Your Credit

1099-C issues and charge off,Please help!!

golo — Thu, 02 Aug 2012 20:04:28 GMT

Hello everyone,I just got a 1099 for a debt that supposedly has been forgiven.Can someone explain me what "forgiven" is suppose to mean,I know its when they forgive the debt and the 1099 is for taxes purposes.My question is, why is in my credit report and included in my utilization? (it was a credit card with sears)

Re: 1099-C issues and charge off,Please help!!

llecs — Thu, 02 Aug 2012 21:09:25 GMT

By law creditors that write off bad debt, and don't resale it, must file a 1099-C. In the eyes of the IRS the amount forgiven is viewed as income and is taxable in certain situations. Check on irs.gov and they have a list of conditions which spell out the tax impact of it all.

If Sears is reporting a balance, then it's possible that Sears is misreporting. They should be reporting $0 if they issued a 1099-C for the full amount. Is the date of the 1099 newer than the reporting date of the Sears TL? If so, you can always GW them asking for a deletion.

Re: 1099-C issues and charge off,Please help!!

RobertEG — Thu, 02 Aug 2012 21:24:57 GMT

When a creditor does a charge-off, it does not "write off" the debt with the consumer. It is a bookeeping measure that shifts the debt on their accounting ledger from a receivable asset to an uncollectible bad debt. Thus, an internal "writeoff" that reduces their tax obligation.

The consumer still owes the entire debt. If ultimately settled for less than the full amount, the IRS views the difference as income to the consumer.

If not settled, I see no forgiving of debt that constitutes income to the consumer.

Re: 1099-C issues and charge off,Please help!!

golo — Thu, 02 Aug 2012 21:28:43 GMT

Thank you for your response llecs,sears it's been reporting it for a long time,faithfully every month for the past years,the 1099 is dated 1/29/2011.What should I say to this clear? Send the 1099 letter to Sears or to the CRAs? Thank you in advance,I appreciate it as I have no ideas how this things work.

Re: 1099-C issues and charge off,Please help!!

golo — Thu, 02 Aug 2012 21:32:25 GMT

Robert,thank you for your input,but why did they give a 1099 then and says that the debt was forgiven?

Re: 1099-C issues and charge off,Please help!!

llecs — Thu, 02 Aug 2012 21:33:06 GMT

You can probably make the argument that it's misreporting, but I'd personally send a GW stating that you had received a 1099-C due to their write-off and forgiveness of the debt and that since they are showing the balance owed on the CR, to delete instead of correcting it (assuming you don't need the age of this Sears).

Re: 1099-C issues and charge off,Please help!!

golo — Thu, 02 Aug 2012 21:46:09 GMT

Thank you llecs,I will do that and post back the results for the newcomers.

Re: 1099-C issues and charge off,Please help!!

CC40 — Fri, 03 Aug 2012 00:46:25 GMT

Also beware that they reported that to the IRS. If you did not claim the forgiven amount on your tax return, you will be getting a bill. This happened to me three years later. They ended up taking the amount out of my next years tax return, and I had to fight hard to get it back. I was billed/paid $903. The good news is there is a possibility of insolvency. The IRS will send you a notice with all of this information. DON'T IGNORE IT. There is an insolvency worksheet you can complete and they might possibly forgive you. So, keep good records during this time so you will have the information when you need it. This same thing happened to a friend of mine.

Re: 1099-C issues and charge off,Please help!!

polarbeardad — Fri, 03 Aug 2012 02:04:54 GMT

CC40 makes a good point, if the 1099 C is dated for January of 2011 you should have included on the tax return you filed this year. The insolvency rules may help you if you ca demonstrate that. If you didn't include it on your return you can be proactive since it just would have been filed a few months ago, go to a local IRS office and get a 1040 for to file amended return, then correct the mistake and refile. The people there can assist you in getting the forms and instructions to complete an amended return.

Did you settle the debt for less than the full amount? My ex wife did that on a lot of her accounts thinking she would be free and save some money until she got a big tax bill. Uncle Sam will come knocking, collections on unpaid taxes are being escalated to help the federal budget. Best of luck.

Re: 1099-C issues and charge off,Please help!!

golo — Fri, 03 Aug 2012 11:59:30 GMT

Wow,what a mess,thank you all for your inputs.,but i didn't know nothing about that 1099C until yesterday that i finally got it in the mail after atempting to settle the account i was told that i couldn't that the debt had been estinguish.I didn't know what they saying by that until i got a letter in the mail about it.They say it was given on 1/29/2011,by then i already had filed,now ya'll got me worry.What should i do in this case? Thanks in advance.

Re: 1099-C issues and charge off,Please help!!

apandabear — Fri, 03 Aug 2012 13:43:46 GMT

There are probably several ways to do this.

Your first option would be to take all of your tax return information and your 1099 to a professional tax person. While you're at it, take documentation on all your debts at that time (loans, collections, credit cards, EVERYTHING). You can try to file an amended return. If you were insolvent (had more debt than assets at the time the debt was forgiven), you probably won't owe anything. This would be my first choice.

You could also wait for the IRS to audit you. I claimed insolvency when my debt was settled and the unpaid amount was forgiven (2010 tax return). But I didn't include the right paperwork. Earlier this year, I got an audit letter in the mail, stating that I owed something like $800 (I had a couple thousand in forgiven debt). All I needed to do was fill out the insolvency worksheet, and the audit was disolved. Just to put it in perspective, I made about $20k that year, and I got audited (unemployment, waitressing, bartending. It was a bad year). They can audit up to 3 years back.

If the 1099C was given to you in Jan 2011, you should have filed that with your 2011 return this year. There's probably still plenty of time to get an amended return filed.

Best of luck!!!

Re: 1099-C issues and charge off,Please help!!

golo — Fri, 03 Aug 2012 14:07:18 GMT

Thank you very much for the input! Blessings!

Re: 1099-C issues and charge off,Please help!!

polarbeardad — Fri, 03 Aug 2012 23:41:52 GMT

Golo did I read correctly that you just now recieved the 1099? By any chance did you keep the envelop and did it have an actual postmark? By law all 1099's and W2's must be mailed by January 31st of the year after they apply, so January 31st 2012 for tax year 2011. If you can prove Sears just now sent it to you waaayyy after the deadline you might avoid any penalties for failing to include in an your return. Let me know what ypu have and I'll comment further.

Re: 1099-C issues and charge off,Please help!!

apandabear — Sat, 04 Aug 2012 01:14:16 GMT

polarbeardad wrote:
Golo did I read correctly that you just now recieved the 1099? By any chance did you keep the envelop and did it have an actual postmark? By law all 1099's and W2's must be mailed by January 31st of the year after they apply, so January 31st 2012 for tax year 2011. If you can prove Sears just now sent it to you waaayyy after the deadline you might avoid any penalties for failing to include in an your return. Let me know what ypu have and I'll comment further.

+1 ... I forgot to mention, if you do wait for the IRS to audit you, you will be hit with CRAZY late fees and penalties. Try to prove they sent it late. If you were insolvent, make sure you can prove that as well. You should end up okay.

Re: 1099-C issues and charge off,Please help!!

golo — Sat, 04 Aug 2012 01:22:54 GMT

Thank you guys,but they claim they sent it,but I don't remember,prolly they sent it to an old address or something.And by 1/29/11 i already filed my taxes(I get a little,so...uknow) :)
Anyhow,the debt was 778,I understand with the IRS it's 600 and up.Do I have to report 178 which it's the amount above 600 or the whole amount? Thank you in advance

Re: 1099-C issues and charge off,Please help!!

pinkbetty — Sat, 04 Aug 2012 02:41:42 GMT

I've had to amend our returns, complete with self-employment for two people , the last two years and it really is not that daunting, and I agree that the IRS is definitely more agreeable if YOU go to THEM rather than if they come after you, especially if you act fast to correct any errors.

Re: 1099-C issues and charge off,Please help!!

golo — Mon, 06 Aug 2012 20:40:41 GMT

Update! I called the the office of the president of sears/Citibank inquired about the why If the debt was forgiven and a 1099 was issued,why was still showing he full balance in the credit reports.The woman was giving me bogus responses couldn't explain why,just kept saying that it was the amount that was charge off,ugh!!! I had to end the call as she wasn't understand nor couldn't explain me why if I got a 1099 as the debt was forgiven and I'm no longer responsable for the debt,why it still showing the full balance on my report? Ugh!!

Re: 1099-C issues and charge off,Please help!!

apandabear — Mon, 06 Aug 2012 21:29:37 GMT

Call back and try to get a different rep. They can't have it both ways.

They can note how much the charge-off was for, but not as the current balance. Maybe as a "high balance" or in the comments section.

Keep at them until you get a definitive answer.

Re: 1099-C issues and charge off,Please help!!

golo — Mon, 06 Aug 2012 23:17:33 GMT

Moderators and gurus,please enlighten us,if they "forgive" the debt and issue a 1099-C,can they still show a current balance? They told me that I no longer have an obligation to pay and there would be no more collection efforts.Isnt reporting on to the credit bureaus collection efforts?

Re: 1099-C issues and charge off,Please help!!

llecs — Tue, 07 Aug 2012 01:04:47 GMT

apandabear wrote:
Call back and try to get a different rep. They can't have it both ways.

They can note how much the charge-off was for, but not as the current balance. Maybe as a "high balance" or in the comments section.

Keep at them until you get a definitive answer.