1099-C Questions!

[kimball00]

Ok here are some questions regarding 1099-Cs, it has been a while since this topic was chatted about and I need advice.. so here we go.

1) Can they be sent out after the SOL has passed?

2) Do they have to be sent out? Could I get them after any time after the debt has been negotiated/settled/paid?

3) If they debt has been negotiated/settled can they send it out and then try to collect the remaining portion of the debt?

4) Do I assume if I haven't received a 1099-C one hasn't been sent to the IRS? Do I contact the IRS to see if any were filed?

5) Like all other tax forms, are they required to be mailed to me by Jan 31?

6) Just to confirm, the 1099-C can ONLY include the amount that was forgiven?

7) If it is not the original Creditor, rumor has it the CA can only give you a 1099-C for the amount they paid for the debt, true or false?

8) If a Creditor or CA never sends a 1099-C should I continue to worry about it? Could they decide to send it 5 years down the road?

If you were in my shoes, I have negotiated 4 out of 5 accounts over the last 2 years and have not received one, would you worry? Or just deal with it as they come?

Thanks for all the advice and help!

[Jaguars28fan]

I just had one of these.  I'll try to answer as best I can.  I never received it at first, I had to pay back taxes on it.

1.  I received mine in 2010 (sol would have been 2011) so couldn't help you there

2.  I never paid, received in 2010 (although they were showing a balance up until now... I called cap1, and they said they'd send a dispute to the CRA)

3.  I never paid, so it was for the full amount.  I heard if you settle, they will send for the remaining balance.

4.  They sent mine to my old address.  Eventually the IRS give it to me, and said I owe for back tax

5.  Not sure when I should have got it

6.  Mine was for the amount I owe, yes... but lets say you paid half.  I've been told they will send the other half as a 1099-c unless its under 600 (I think thats the limit)

7.  Guess... but i think I read CAs cant send 1099-c... but only a guess from what I thought I read.

8.  I've only received 1 1099-c.  I've owed on probably 10+ accounts.  All my accounts that were sent to CAs, I never received a 1099-c.   The only account I received a 1099-c for was cap1 and they never sold it to anyone else.  FPB still shows a chargeoff balance, but I think since the amountis under 600, they won't send it. 

again, I just received an old one of mine.  I answered from what I learned and read around.... so not all of it may be fact. 

[IOBA]

I am not an expert, but I have had some experience with 1099-C's.

1) Can they be sent out after the SOL has passed?  

****  I believe so.  The creditor SHOULD do it in the year the debt was settled, but have been known to send out 1099-C's years later.  The IRS encourages companies to do it.  I have heard of CA's doing it years later.  I have heard of financial institutions doing it for the tax year the debt was settled directly with them.

2) Do they have to be sent out? Could I get them after any time after the debt has been negotiated/settled/paid?

 **** It depends on who you listen to.  In the old days, they didn't send them out much.  Then the IRS got on their case and said prove you wrote off x amount of debt and that was one of the methods.  It may become a mandatory thing.

3) If they debt has been negotiated/settled can they send it out and then try to collect the remaining portion of the debt?

**** If you have a settlement letter -- something that the creditor provided, and you agree to and meet those terms, then no, they can not send the remaining balance to collections.

4) Do I assume if I haven't received a 1099-C one hasn't been sent to the IRS? Do I contact the IRS to see if any were filed?

**** Never *assume*.  The creditor should send you one by Jan of the following year.  Give it a few extra days.  The IRS wont' know for months if one was filed or not.

5) Like all other tax forms, are they required to be mailed to me by Jan 31?

**** Yes, it should be mailed by the 31st.  Give it several weeks to arrive.

6) Just to confirm, the 1099-C can ONLY include the amount that was forgiven?

**** That is correct.   You should have a settlement letter from the creditor that states what the settlement terms are.  Note - my friend received an incorrect one and fought it.  It's been four years and never resolved in the three year window the IRS lets you amend your tax returns.  So my friend had to bite the  big one and pay taxes on an incorrect 1099-C.  Basically paid on "settled" money and then some.  It should not have happened that way.  So check your paperwork carefully.   In this case, Bank of America is the one who sent the wrong number on the tax form.

7) If it is not the original Creditor, rumor has it the CA can only give you a 1099-C for the amount they paid for the debt, true or false?

**** The CA can issue a 1099-C.  They usually do it for the amount "forgiven" in the settlement.   At best, its arguable.   You know they didn't "loose" that much money.  The figure was inflated for profit.   BUT to the best of my knowledge, the IRS accepts their 1099-C's without question.   And you are stuck paying.

8) If a Creditor or CA never sends a 1099-C should I continue to worry about it? Could they decide to send it 5 years down the road?

****  Always worry about it.  Sometimes the 1099-C's are sent out years after settlement OR charge off.

If you were in my shoes, I have negotiated 4 out of 5 accounts over the last 2 years and have not received one, would you worry?

*** YES.

Or just deal with it as they come?

*** Keep your paperwork so you can compare it to the 1099-C if it comes.  Make sure the numbers are correct.  

Just because a creditor reports it as charged off does not mean that they have internally moved it to the IRS write off column.  But when they do, they usually send out the 1099-C.  Most creditors do not send them out for less than $599.

Once you receive a 1099-C then the creditor can never come after you for the debt ever again.  Nor can they sell it.

[RobertEG]

A 1099c is based on the interpretation by IRS that excused debt does not excuse obligation for someone to pay tax on the debt.

They consider debt accrued by a consumer that is ultimately excused by a creditor as "income" to the consumer, even though the consumer did not receive any $$.

IRS doesnt care about expiration of a creditor's ability to sue for the debt, so SOL is not relevant.

When a creditor excuses a debt, yes, they are required to notify both the IRS and the consumer, by way of a 1099c, of the tax liability, provided the excused debt is above the threshold limit, which I believe is still $600. 

I would send a letter to the creditor, and ask if they have excused the debt and followed their required notification to IRS.  They may be the cuprit due to non-notification, but in the eyes of IRS, you are the obligated taxpayer.

Obligation to pay tax on the excused debt is not absolute.  The tax code provides for showing of insolvency at the time of the excused debt, which involves providing a statement of assets and liabilities.  If debts, including the excused debt, exceed assets, the tax obligation can be excused due to insolvency.

[kimball00]

So should I wait until I file my taxes and get my 1099-Cs to file the letter of insolvency? I have/had zero assets and a list of liabilities that far exceeded my income at the time. Is there a specific for I should try and find? Should I hire a lawyer at the time to help? Or just contact the IRS and tell them, and fill out what they tell me to file?

Thanks for the info!

[KnewBee]

Hi if you go on to the IRSes website and read IRS publication 4681 this will explain how to handle these in a lot of detail straight from the horses mouth! 

Just as an FYI, I did a lot of research on these and one of the reasons 1099C s can be  confusing is because there are conflicting case laws currently around how they are handled (not so much on the tax treatment, but on the other issues like when they can or should be sent out etc.) so specifically YMMV on receiving these, but generally publication 4681 will tell you how the IRS currently handles. Best to have a really good tax person when the issue comes up. 

[kimball00]

Thank you for the information. I am working with my lawyer to calculate insolvency and right now it appears I can claim insolvency. So once my lawyer confirms this I will work with an accountant in the spring to file the proper paperwork... Now this only matters if a 1099-C is actually sent to me. In 2 years of negotiations and what not I have yet to receive one. Any other information/experiences anyone has had will help me in this process!

Thank you!

[KnewBee]

Yes, whether you will get one or not and when really varies widely by lender. I believe the official guidelines are they have to send one once they either officially forgive or settle the debt for less, or if According to their normal policies and procedures they give up on trying to collect the debt. I know some people that have never gotten them due to they never settled and the debt keeps getting sold to different collection agencies so technically it is not forgiven, and then I know other people that get it as soon as the debt is charged off and or the SOL goes out. Since many lenders never officially forgive the debt and just keep selling it to CAs or JDBs, I think the majority of the time it is more common not to get them when the debts have not been settled. 

One thing I found that is kind of a bummer is you can be insolvent now, but then if they don't do the 1099c for say 3 years and you solvent at that time, it goes by whenever they do the 1099c not by when the debt was first defaulted on. 

I don't want to give you bad advice, because these situations vary so much by lender and specific situation, and also different lawyers and tax people can have completely different interpretations on how to handle these, but one thing you may want to try is if you think you will be solvent in the future, you may want to try triggering the 1099c now while you are insolvent by either settling for very small amounts or if no money to settle in some cases a cease and desist letter to the CAs could potentially trigger the 1099c. Just some tips, don't take my advice or any other advice on the web as bible (not because the advice here is bad or wrong, only since these situations vary so much) consult with your lawyer and tax person and maybe do some web searches on your specific creditors to see what others have experienced in terms of their 1099c issuing triggers.

I hope this helps and best of luck to you.