08-02-2012 01:04 PM
08-02-2012 02:09 PM
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.
08-02-2012 02:24 PM
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.
08-02-2012 02:28 PM
08-02-2012 02:33 PM
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).
08-02-2012 05:46 PM
08-02-2012 07:04 PM
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.
08-03-2012 04:59 AM
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.
Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.