Beware 1099 C threat AFTER CA falls of credit report

[Anonymous]

I received a call from CRA saying that they were going to send a 1099C (forgiveness of debt) to the IRS for a discover card that fell off my credit report 2 years ago.  Long story short....the idiot was beyond rude.  Apparently, this means the debt you owed is now considered income for the current year and is  taxable income.   I am surprised this isn't happening more often.  

Just when you thought it was safe....sounds like they can haunt you forever.

[Anonymous]

This usually happens in a settlement situation, but definitely can happen in situations like yours as well.  There was a thread on here a few months ago from someone who had been sued by Capital One, and won the case, the judge stated that the debt did not belong to that person, but Cap One STILL sent a 1099-C for their accounting purposes.

I think as the banks are held to higher and higher accounting standards, we will see more 1099s on accounts where the creditor decides not to pursue payment or collection.

[Anonymous]

I just got a 1099C from GE Capital. I disputed a debt from a Gap card that I never had.  The credit bureaus removed it from my report after they verified it wasn't mine.  Then today I got a 1099 C in the mail.....  Anyone know the best way to handle this?   I do NOT own this debt and already sent in my tax but my accountant said if they reported this to the IRS I will get audited as it won't match up.

[Anonymous]

This also brings to my mind a good question.    Is everyone that had SOL debt that they never paid getting 1099 C's and having to pay taxes on all of that?  I've never heard of this before until I got this 1099C.   Have all of you been getting 1099C forms from creditors?   

[Anonymous]

scum.  utter scum.  petty petty scum.  i apologize for not adding anything to this thread, but the information relayed here about these aholes tactics sickens me.  thank you all for bringing this new b.s. to everyone's attention.  they'll keep doing it until they're stopped, hoping no one is informed.

[llecs]

By law they have to send the 1099-C after forgiving the debt. They then can write off that debt with the IRS as bad debt and get a healthy deduction. There are some on here who have been successful in talking to the IRS and explaining that the debt wasn't theirs and had the 1099-C voided.

[Anonymous]

Llecs,

Yes, I read that they are forced by law to do this.  How come we don't hear more about this on these boards?  Does this mean that once it hits SOL or 7 years when it will come off credit reports that people get flooded with 1099C forms?   Does anyone have any input or experience on this? 

What about creditors that don't "forgive the debt" and sold it to a collection agency?  Can the original creditor later try to "forgive the debt" and take the write off with the IRS and then send out the 1099C?

Also, can a collection agency send a 1099C.  How do they value it as they probably paid pennies on the dollar NOT the original amount?   I've never heard of these 1099C's nor known anyone that has received one.

I assume when the 7 year date is up and they will fall off the credit reports people are flooded with 1099C's? 

Message Edited by uwishyouwereme on 02-05-2010 04:20 PM

[Cotton_Britches]

Depending on the amount forgiven, the taxes may not amount to much. Plus, the debt is gone and you'll never have to worry about it again.

I'd rather pay the IRS once than continue to deal with a stupid collection agency.

[llecs]

From time to time you'll read cases on here. If you search for 1099-C on myFICO you'll find quite a few posts. I don't have any experience so I'll defer to others, but I do know, and in my experience, not every cerditor sends a 1099. The 1099-C must be sent if the amount is over $600.

[Anonymous]

Llecs,

Thanks for your good information.  I just talked to an accountant friend and he told me that definitely if you get a 1099-C form that you MUST report it on your tax return on line 21.  He said failing to do this will result in an audit by the IRS.

He also said that you should start seeing more and more people getting these 1099-C forms.  Even people that have out of SOL or the debt is as old as 7 years.  He said that many collection agencies and creditors will start notifying the IRS once it is going to fall off the report and that they give up and take the write off for a small gain.

Does anyone know if once the creditor sends out a 1099-C form and they "cancelled the debt" if they remove it from your credit report or does it stay there until the 7 year mark?