1099-C? Anyone else have this issue with paid debt?

[qtssima]

I had this happen a few years ago. I had to show the IRS I was insolvent that year - that is, my debts exceeded my assets. If this is the case, you would not have to pay additional tax, and that is probably what your tax preparer was going to show. Google 1099-c insolvency exclusion and the IRS info will come up. There is a worksheet you have to do and include with your taxes. For 80% of the people that get this form, that is easier than going back to whoever is reporting it and saying they are wrong. It doesn't mean you declared bankruptcy either, just that your debts exceed your assets.

[qtssima]

also, I just re-read your original post and a bank or cc company will absolutely write off debts - since 2008, that has been the norm. I work in the financial services industry and there is definitely an increase in the # of people receiving these as a result of 2008-2009 foreclosures.

The same thing happened to me - I paid a collection agency and the original cc company sent me the 1099-c.

[guiness56]

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@qtssima wrote:

also, I just re-read your original post and a bank or cc company will absolutely write off debts - since 2008, that has been the norm. I work in the financial services industry and there is definitely an increase in the # of people receiving these as a result of 2008-2009 foreclosures.

The same thing happened to me - I paid a collection agency and the original cc company sent me the 1099-c.

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Yes it does happen all the time.  However, when the OC no longer owns the debt, it is illegal for them to attempt any collection of the debt, including a 1099-C.

If the OC still owned the debt and not the CA, yes, then the OC could send you a 1099-C.

[RobertEG]

I believe that what the article was trying to say is that a charge-off by an OC is not basis for issuing a 1099c.

A charge-off does not cancel the debt, it is simply an accounting measure that permits them to alter their books, and thus receive a tax writeoff.

The entire debt is still owed to and collectible by the OC or their heirs.

However, upon satisfaction of a debt, whoever the owner might be, if they settle for less than the full amount of the debt, the debt is legally satisfied.

They are thus cancelling any obligation to pay the difference between the amount of the debt and the amount they accepted.

The IRS considers that income to the consumer, and if more than $600, requires the settling party to notify them and the consumer of the tax obligation.

A 1099c.  They dont make distinction between who the debt originated with, they want their cut.

[llecs]

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@jcstarkey8826 wrote:

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@guiness56 wrote:

Any time you settle a debt, without it saying the debt was considered paid in full,  they can come after you for the rest.

If the 1099-C is for that amount, then, yes, it is possible.  If it for the entire amount they can't do that.

A CA can give a 1099-C but they do need to own the debt.

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thats the weird part. the debt was sold to a CA (for sure sold, could not pay OC, I tried) but the 1099-c was from the OC and the original amount.

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Some OC-CA collection agreements forbid the OC from collecting on the debt and if they receive funds, must forward it to the CA. It's not uncommon for an OC to deny any request for a payment. In your scenario, it's possible that the OC still owned the debt and the CA assigned to collect. In paying for some of my past mistakes, I had OCs deny any payment attempt telling me I had to call the CA. It sounds like the CA owns it but it is the OC that owns it. Slightly not related, I hired a CA to collect on a commercial customer. Part of the agreement stated that after X months of collection attempts by the CA (think it was 2 or 3), they would notify me and I was not allowed to accept any payments from the debtor. It was that point the agreement stated that the CA took over everything, including attempts to sue, but would take a bigger cut. Any payments mailed to me in that time I had to endorse over to the CA.