Reply
Regular Contributor
Hevj1119
Posts: 175
Registered: ‎04-06-2013

OC files 1099C and still collects?

[ Edited ]

Hi All - figured I'd throw my question out there before I do lots of research :smileywink:

 

I am probably on the wrong website but I figured someone might have some experience here :smileyhappy:

 

Last year, around this time - AFTER I HAD FILED MY 2011 TAXES - I recieved a 1099-C from Onyx Acceptance Corp for an auto loan charge off in the amount of $4558.  I - still learning - did a bit of googling and disregarded it.  I figured that since it was still on my credit report, and the OC (Capital One) still wanted their money, and hadn't actually forgiven me of the debt that I wouldn't have to worry about refiling my taxes.

 

Fast forward to this year...  2 weeks ago, I settled with Capital One, paying 30% of the $4558.  They sent me a letter of settlement and explained I would recieve a 1099C for the $3190 remaining.  Fair enough - I understand this.

 

So why pray tell did I just get a notice from the IRS with proposed changes to my 2011 tax return, stating I didn't file the 1099-C from Onyx and I owe them $1200?!  

 

I don't even know what to do :smileysad:  The good news is - one of the many lessons I learned in the past few years is not to ignore this notice.

 

If anyone has any advice on where to begin, that'd be greatly appreciated.  I can file a response with the IRS by the end of May whether I agree or disagree with their proposal.  Obviously I disagree - I mean, how many different people can "forgive me" of the same debt?! :smileysad:

 

Let's see how far we've come...
06/2012 - Mid score 556, BoA Secured Card $300
06/2014 - Mid score 679. Chase Freedom 4.5K | Amex Everyday 2k | Discover IT 2K | BoA Rewards 1K | Ashley Furniture 3K | Amazon Store Card .9K | Closed on our mortgage 07/2013!
Regular Contributor
Hevj1119
Posts: 175
Registered: ‎04-06-2013

Re: 1099C - Cancellation of Debt

[ Edited ]

Also - after more googling - Onyx was acquired by Capital One Financial, so I think they're considered the same.  In any case, how is it fair that they file a 1099C and then proceeded to take a settlement.  

 

Shouldn't Capital One have shown a $0 balance back in January on my credit report if they "forgave me" of the debt and I had to pay the taxes on it?  

 

WHAT CAN I DO?

Let's see how far we've come...
06/2012 - Mid score 556, BoA Secured Card $300
06/2014 - Mid score 679. Chase Freedom 4.5K | Amex Everyday 2k | Discover IT 2K | BoA Rewards 1K | Ashley Furniture 3K | Amazon Store Card .9K | Closed on our mortgage 07/2013!
Mega Contributor
RobertEG
Posts: 17,456
Registered: ‎03-19-2007

Re: 1099C - Cancellation of Debt

The debt collector was presumably the authorized collection agent of the OC, so their sending of a form 1099c is binding on the OC.

 

A 1099c cancels the debt.  Thus, if the 1099c referenced the entire debt, it then no longer existed as of the date you received their notification of such.

Thus, the IRS properly considered it "income" upon which you incurred a tax obligation.

 

It thus appears that the settlement subsequently accepted by the OC was improper, as you had no debt with them upon which they had authority to receive a penny.

It thus appears that the second, not first, 1099c is inaccurate, as they can't cncel non-existent debt.

 

From my understanding of the scenario, you thus are apparently entitled to a full refund of the settlement you made to the OC.

 

As for the tax obligation, I would simply put all the facts into an amended return, paying the tax on the originally cancelled debt, and explaining the facts to the IRS, including your opinion that the second 1099c was in error.  The IRS will figure it out.  Just be forthcomining with all the facts.

Regular Contributor
Hevj1119
Posts: 175
Registered: ‎04-06-2013

Re: 1099C - Cancellation of Debt

[ Edited ]

Thanks Robert.

 

So I should call the OC and ask for a refund on my settlement?

 

How will it then show on my credit report?  Cause it's been showing for the last 6 months (after the date on the 1099C) as an outstanding balance of $4558 and its in the way of our mortgage goals.  That's the only reason I settled in the first place. 

Let's see how far we've come...
06/2012 - Mid score 556, BoA Secured Card $300
06/2014 - Mid score 679. Chase Freedom 4.5K | Amex Everyday 2k | Discover IT 2K | BoA Rewards 1K | Ashley Furniture 3K | Amazon Store Card .9K | Closed on our mortgage 07/2013!
Regular Contributor
Hevj1119
Posts: 175
Registered: ‎04-06-2013

Re: OC files 1099C and still collects?

UPDATE:

Just got off the phone with Capital One and they refuse to retract the original 1099C that was issued back in December, AND they're gonna issue ANOTHER one for the difference of the settled debt.  HOW IS IT LEGAL to take $1500 from me to settle a $4500 debt and then make me pay taxes on $7500 of "income" ?!?!?!? :smileysad:

Let's see how far we've come...
06/2012 - Mid score 556, BoA Secured Card $300
06/2014 - Mid score 679. Chase Freedom 4.5K | Amex Everyday 2k | Discover IT 2K | BoA Rewards 1K | Ashley Furniture 3K | Amazon Store Card .9K | Closed on our mortgage 07/2013!
Moderator
guiness56
Posts: 22,408
Registered: ‎01-17-2008

Re: OC files 1099C and still collects?

Regular Contributor
Hevj1119
Posts: 175
Registered: ‎04-06-2013

Re: OC files 1099C and still collects?

Thank you :smileyhappy: I will get right on that :smileyhappy:
Let's see how far we've come...
06/2012 - Mid score 556, BoA Secured Card $300
06/2014 - Mid score 679. Chase Freedom 4.5K | Amex Everyday 2k | Discover IT 2K | BoA Rewards 1K | Ashley Furniture 3K | Amazon Store Card .9K | Closed on our mortgage 07/2013!
Regular Contributor
reckedhim
Posts: 206
Registered: ‎03-29-2013

Re: OC files 1099C and still collects?

Appeal the notice you got from the IRS.  Send them the original 1099-C, the new one you get from Capital One, and the settlement letter from Capital One.

Regular Contributor
reckedhim
Posts: 206
Registered: ‎03-29-2013

Re: OC files 1099C and still collects?

Also, if the IRS doesn't abate the adjustments and you live in a state with an income tax, make sure you amend your state tax return as well.  The IRS sends adjustment information to state taxing agencies and it may take a couple of years for them to adjust your return resulting in even more interest and/or penalties.


myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
FICO Score - The Score that matters
Fair Isaac Corporation is a BBB Accredited Financial Service in San Rafael, CA
FOLLOW US Social Media Facebook Twitter Pinterest Google+