IRS & Settling Payments

[OMW2_HighAcheiver]

Evening All!

Can someone explain to me the rule for settling accounts to avoid paying taxes on them?

Thank you to any responders!

[TrueGeminiNC]

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@peaved_about_credit wrote:
Evening All!

Can someone explain to me the rule for settling accounts to avoid paying taxes on them?

Thank you to any responders!

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Any debt that is forgiven in excess of $600 will trigger a 1099-C.  You will be required to report said amounts as income on your tax return.  

Notably, there is a way to get around this.  If you are financially insolvent, (debts exceed assets)  - read IRS publication 4681.  

[Anonymous]

It's a mystery to me, but I did have some CC debts that were settled for less than full and I did not get a 1099c.  The amounts were very much above 600.

My address never changed and I also had reason to check with the IRS trancripts and they just werent sent in.

I did get a couple of them, and I cant make any correlation between the ones I received and the ones I didnt get.  I got about 2 out of 6.

I am not suggesting you rely on not getting a 1099c, just saying there's a slight possibility you might not.

As always, YMMV.

[Anonymous]

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@Anonymous wrote:

It's a mystery to me, but I did have some CC debts that were settled for less than full and I did not get a 1099c.  The amounts were very much above 600.

My address never changed and I also had reason to check with the IRS trancripts and they just werent sent in.

I did get a couple of them, and I cant make any correlation between the ones I received and the ones I didnt get.  I got about 2 out of 6.

I am not suggesting you rely on not getting a 1099c, just saying there's a slight possibility you might not.

As always, YMMV.

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OC's will usually issue the 1099C, but debt collectors seldom do so.

[OMW2_HighAcheiver]

Ok. Thanks!

[Anonymous]

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@Anonymous wrote:

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OC's will usually issue the 1099C, but debt collectors seldom do so.

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That explains it quite a bit, but I did have Citi, Amex, and Dell that I made payments directly to them and settled for less than full, and they didnt issue one.

US Bank sent me one at the end of 2013 for a CO from March of 2009.

Now I'm hoping there is a SOL on filing those things.

[OMW2_HighAcheiver]

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@Anonymous wrote:

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@Anonymous wrote:

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OC's will usually issue the 1099C, but debt collectors seldom do so.

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That explains it quite a bit, but I did have Citi, Amex, and Dell that I made payments directly to them and settled for less than full, and they didnt issue one.

US Bank sent me one at the end of 2013 for a CO from March of 2009.

Now I'm hoping there is a SOL on filing those things.

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I only have 1 account to worry about. I dropped some classes to late. It cost me $2.4K. It is with collections. Hope I can settle very, very low. 

[Anonymous]

If they write off more than $600 they CAN send you a 1099C - but they don't always do so.   You will probably end up filing your taxes on the later side, just because you will need to wait and make sure if they send you one.   I believe the rule is they have to be post-marked by the end of January - just like your W2.