1099-C from unknown agency for unknown debt!

Anonymous · ‎01-20-2010

My father just called me and said I received a tax statement today for me at their house. He opens all my mail since I haven't lived there for 7 years and 99.9% is junk. He said it 's a 1099-C from a Skyline Enterprises Inc of Kansas (where I lived when my credit took a dive bomb). It's for over $10K.

I have several charged off CC from 02-04 which are all falling off my record. I'm was happy about this (obviously) until I realized that I was going to live in CA hell forever!

I have no idea who this company is, have never dealt with them. I have copies of my CR from EX and TU from last week and see A) nothing in the inquiries from this company (two from other CA however) and B) nothing on my report that matches up with this amount. I have one account that was CO in the amount of $12.5K and one that is ~$5K.

Is this totally bogus? I haven't seen the form myself but if it's an official tax document, what do I do?

newstart2010 · ‎01-20-2010

Its possbile one of the accounts that charged off in the past sold the debt to them, and now they are charging it off. The bad part is with them sending you a 1099-C you have to claim the income of you can get in trouble with the IRS. They have filed it, so you need to file it as well. Don't ignore it. Send a debt verification letter to them and figure out what it is for, who the original creditor was, and if you do in fact owe the debt.

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bicknar · ‎01-20-2010

Wow,

OK, I had to look it up, and the 1099-C is a cancellation of debt form. From what I read on the form I'd say check the IRS site for instructions. You may or may not have to claim it. You know, IRS rules and such. I'd validate the debt just to find who and under what circumstances they wrote it off. That way you (or a tax preparer) can figure out what to do about it.

I'm NOT an expert at all, but the way my mind works. If creditor A wrote off the debt, and You have to claim it as income, then CA B doesn't have a leg to stand on.

Just guessing, But very curious.

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Anonymous · ‎01-20-2010

Ok, well after reading about this I'm not worried about the 1099C any more believe it or not. I make so little (I'm a grad student) and have essentially no assets besides my old Toyota so I could easily get out of it by pleading insolvency. It looks like as long as your assets are less than the debt for the length of collections you qualify and I've been a grad student making no more than $25K a year with no assets (besides trading one old car for another ) for the past 8 years and before that I was an undergrad with no income.

I'm annoyed now since I'm thinking this is a bogus debt and it's going to take time to deal with. No google search or list of CAs and Junk Debt Buyers list this company. I was planning on e-filing my taxes this weekend since I can really use the the $500 refund to hold me over until student loans come out but now I have to wait until I get this straightened out now. Argh!!! So frustrating!

Anonymous · ‎01-20-2010

@bicknar wrote:
Wow,

OK, I had to look it up, and the 1099-C is a cancellation of debt form. From what I read on the form I'd say check the IRS site for instructions. You may or may not have to claim it. You know, IRS rules and such. I'd validate the debt just to find who and under what circumstances they wrote it off. That way you (or a tax preparer) can figure out what to do about it.

I'm NOT an expert at all, but the way my mind works. If creditor A wrote off the debt, and You have to claim it as income, then CA B doesn't have a leg to stand on.

Just guessing, But very curious.

A

I'm not a tax attorney, but there seems something strange about this situation. I may be wrong, but I do not think you have tax liability on a debt that the creditor just gives up on unless you have agreed to a settlement.

In any event, if the CA owns the debt and issues a 1099, my opinion would be that it erases the debt completely.

Anonymous · ‎01-20-2010

I looked into this and they can only send in the amount for the original debt, not all the added fees and interest and the like. I dont think they can send in a 1099c if the debt is in disbute--so let them know the debt is in dispute. I would call the IRS, too. If you search through posts on this forum, most the people who have called the IRS with this type of matter have gotten good responses from the IRS.

A lot of companies do this to get out of paying income taxes of their own. From what I have read, the IRS is not too keen on this, because a lot of times they will report the whole debt with the interest and fees added on which they are not allowed to do.

If you do have to claim it, all you have to report is the original debt.

Message Edited by mbush12 on 01-20-2010 05:52 PM

Anonymous · ‎01-20-2010

Unfortunately it looks like CA can send in a 1099-C and as long as they've written off the debt they can send one. You don't even need to know about it and it seems to be common practice to do this years after the original debt was written off. So much for 'consumer protection'!

I will definitely validate as soon as I get the letter from my parent's house, actually I'm tempted to make the drive to my parents tomorrow because i'm practically foaming at the mouth to get it taken of!

Anonymous · ‎01-20-2010

@Anonymous wrote:
I looked into this and they can only send in the amount for the original debt, not all the added fees and interest and the like. I dont think they can send in a 1099c if the debt is in disbute--so let them know the debt is in dispute. I would call the IRS, too. If you search through posts on this forum, most the people who have called the IRS with this type of matter have gotten good responses from the IRS.

A lot of companies do this to get out of paying income taxes of their own. From what I have read, the IRS is not too keen on this, because a lot of times they will report the whole debt with the interest and fees added on which they are not allowed to do.

If you do have to claim it, all you have to report is the original debt.
Message Edited by mbush12 on 01-20-2010 05:52 PM

That's what seems to screwy about this. I don't understand how a company that likely paid a very small amount for a debt can write off the full amount and the amount is so far off from all of my old debts. I can't imagine that a junk debt agency paid $10K for a $12K account and there's no way a $5K account (which as of my credit reports from last week was listed with a different CA with interest at $7K) can jump to $10K. I would think the IRS would be all over them for that. Something is telling me that something is very wrong with this!!

Message Edited by KristenM on 01-20-2010 06:01 PM

Anonymous · ‎01-20-2010

http://www.irs.gov/pub/irs-pdf/p4681.pdf

At first glance, it does seem like interest is included.

I have never heard of a creditor doing this unless you've settled on a debt. However, looking at the IRS publication it seems like it can be done any time a creditor decides to give up. I would think that when they decide to give you a 1099 it makes the debt go completely away.

Message Edited by O6 on 01-20-2010 06:14 PM

Anonymous · ‎01-20-2010

Thank you!! Glad my 12 years of higher education can now pay off while I attempt to read through this.

Why can't they write these things simply?!