1099-C / IRS / Portfolio Recovery

[Anonymous]

Portfolio Recovery sent me a 1099-C in 2007 on $6000 worth of debt they purchased from 1995 - They still tried to collect on the debt up until they issued the 1099-C.  I never filed it with my taxes.

Now 2 years later the IRS sent me a $1000 bill for that debt. ...Says I have to pay it by July 1st

Besides paying it, are there any other options to take????

How do I know if I am insolvent?

[guiness56]

I think your best option would be to talk to the IRS directly.  This is an issue better dealt with now.  Do not let 1 July come and go without having done anything.

The IRS website has a definition for insolvent I believe.

[Anonymous]

A debt forgiven (aka: not repaid and charged off) is considered income by the IRS and is taxable.  Whether you are insolvent or not may not affect the IRS position on collecting the taxes.

[Itsmeagain]

And even if you are insolvent they will probably charge penalties, interest and place a lien on your home.  Do not fail to contact them before July 1.  They are relentless and unforgiving if ignored.  But, I have found them to be sometimes helpful if you meet them half way.

Good luck

[Lucid08]

So a CA can buy 12 year old debt, for pennies on the dollar, issue a 1099-C and enjoy the benefits of the tax writeoff on their end?

If that's the case, how do I start my own CA?

Edited to add: I know the above sounds sarcastic, but I was under the impression that OC's were required to send out 1099-C's. If CA's can buy junk debt and simply issue 1099-C's to recoup their pennies on the dollar outlay, then this is more than just problematic in my opinion.

Message Edited by Lucid08 on 06-21-2009 05:30 PM

[Anonymous]

Call the IRS and ask. There have been CAs that sent 1099-C to people in order to lower the tax that they(CA) owed. This is against the law.

When talking to the IRS be sure of your facts. You stopped paying CCC in 1995. The CCC sold the debt to PR in approx 1995. You never made any payments. Can the CA legally send you a 1099-C after all these years?

I am unsure but I think that the 1099-C should come from a financial institution ( a CCC falls under this). There also might be a time limit when the 1099-C must be sent.

The IRS will be able to answer all these questions. Be sure to file a complaint with the IRS if the CA should not have sent the 1099-C.

[Lucid08]

According to IRS Publication 4681:

"If an applicable financial entity cancels or forgives a debt you owe of $600 or more, you will receive a 1099-C, cancellation of debt.....<snipped for brevity>

An applicable financial entity includes:

1. A federal government agency,
2. A financial institution,
3. A credit union, or
4. Any organization in which a significant part of its trade or bussiness involves the lending of money."

I honestly dont see how a CA can be seen as a financial entity based on the above information, so I would definately research this and get all pertinent informatin available prior to calling the IRS about this. As suggested, just be certain to call them before July 1st.

Edited to add: I also dont see how a 1099-C can be sent on debt charged off in 1995, when the IRS can only audit returns for the previous 7 years.

Message Edited by Lucid08 on 06-21-2009 06:40 PM

[Anonymous]

According to the IRS (rep on the phone), a CA does fall under the (financial entity) umbrella.

I didn't mention this in my earlier post but the $6000 was from an auto repossession(1995). 

Thank you  for your wonderful posts.  I used the information when I spoke to the IRS rep. The IRS closed my file today and I don't owe anything.  

I filed a complaint with my AG's office against Portfolio Recovery. 

[Itsmeagain]

Camilleandbella . . . . if you don't mind posting the details, it may help someone else in a similar situation.  You said that a CA falls under the "financial entity" umbrella.

Why then, did the IRS decide to close your file and forgive the tax?

What did Portfolio Recovery violate that would allow a complaint to your AG?

Did you file a complaint with the IRS?  Does the IRS even allow complaints to be filed?

BTW . . . Congrats on your success.  It's always refreshing to read about a consumer victory . . .

[Anonymous]

Itsmeagain, The IRS wanted to know the value of the vehicle. Of course there wasn’t any way to prove its value after all these years.  I didn’t file a complaint with the IRS because I’m not sure if that’s possible.  I did plead my case on why I didn’t owe Portfolio the money.  

The original creditor (Ford Motor Credit) had already written off this debt in 1995.  They repossessed my vehicle and then sold it at an auction. There was still a small balanced owed to them but not in the amount that Portfolio was trying to collect.  

Twelve years later In 2007, Portfolio Recovery starting pulling my credit report nonstop (almost every month).  They viciously harassessed me every spare moment of the day (they left 3-4 messages a day).  After being fed up, I finally called them back and  the rep stated that they were going to get their money regardless even if they had to garnish my wages.  They called my home “unknown caller” at 8:58 pm and 8:59 pm on several occasions.  When other family members answered, they informed them of my situation. They even asked my relatives to loan me the money to pay the amount. The cease and desist letters (certified/RR) were returned even though I sent them to their physical address and post office box.   I made the mistake of calling them from my cell phone to order them to cease in their collection efforts.  Out of the blue they started calling my cell phone non stop.  They still tried to collect on the debt even after they issued the 1099-C.    

The IRS didn’t give a specific reason nor did I ask.  I pleaded my case in person at the IRS Office before calling the IRS main telephone number for help submitting supporting documents.  

I’m not sure if this is an isolated case or what but I didn’t not have to pay the tax bill.

 

WoooHooo