The Spector of 1099-C After Credit Rebuild?

[Anonymous]

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@Remedios wrote:

This forum is supportive, but also offers an opportunity for wide variety of opinions, as long as they are done in respectful manner. 

Instead of instructing each other on how to behave, please use report inappropriate content link,  and someone will take a look. 

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I guess it just does not seem to expand on the topic and is more of a statement than even an opinion.

[LegalTender]

Can a debtor preemptively pay taxes on defaulted debt that's past the SOL and without having received a 1099-c from the creditor? If yes, what are the steps for doing so?

One scenario appears that could - hypothetically - benefit the debtor is:  if the debtor has a sizable combined sum of untaxed default amounts which are past the SOL,  and the debtor finds themself in a low annual tax bracket (or even zero tax bracket if their income qualifies) it could perhaps be beneficial to voluntarily(?) pay taxes on the debt in that year ... to lock in a lower tax rate on a portion of the remaining debt  vs. an alternative worst case scenario wherein during a single tax year when the debtor has a higher income and in which one, or more, 1099-C form(s) are received ... representing a large sum, and wherein the debtor faces a considerably higher tax rate on the debt, due to being assessed at a higher income tax bracket.

Anyone knowlegable of the tax code, or have experience or info on the above scenario?

[joeyv1985]

All,

I received a 1099-C from Chase today. It was for a credit card that was closed by them years ago due to a charge off. I ran into some issues during the last recession and let the account go past due($3700). Since then I've bounced back and my scores are not only knocking on 800, but I was able to get a Chase Sapphire Preferred card from them. Albeit it was done through their re-con and they gave me the credit card  with a $5K CL. A couple of questions: 
Should I be concerned?

How does this affect my relationship with Chase, in particular my CSP CC?
Can I get a credit increase from them now that it's "officially" off their books?
Will a "baddy" reappear on my CR?

I've never dealt with this before, so the fear of the unknown is bugging me. Any input would help. Thanks. 

[Anonymous]

They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them. 

The only thing this will effect is that you must now pay taxes on the debt they cancelled. 

[joeyv1985]

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@Anonymous wrote:

They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them. 

The only thing this will effect is that you must now pay taxes on the debt they cancelled. 

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Gotcha. If I recall correctly, to get a credit limit increase with Chase, they'll have to do a Hard Pull. By chance do they give auto increases like Citi? It would be nice to get the CL on my CSP to $10K. That's all I would need. My Amex Plat is the most active of my credit/charge cards, with my CSP a distant 2nd. The other 3 CC's all have zero balances and I use them maybe once every 2 months for menial purchases like groceries or gas just so the banks don't close those cards or decrease their respective CL's. 

[FinStar]

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@joeyv1985 wrote:

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@Anonymous wrote:

They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them. 

The only thing this will effect is that you must now pay taxes on the debt they cancelled. 

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Gotcha. If I recall correctly, to get a credit limit increase with Chase, they'll have to do a Hard Pull. By chance do they give auto increases like Citi? It would be nice to get the CL on my CSP to $10K. That's all I would need. My Amex Plat is the most active of my credit/charge cards, with my CSP a distant 2nd. The other 3 CC's all have zero balances and I use them maybe once every 2 months for menial purchases like groceries or gas just so the banks don't close those cards or decrease their respective CL's. 

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Yes, Chase CLI requests are HP (sometimes a double pull).  Auto-CLIs are not as frequent (based on a variety of reported DPs), but they do happen.

[Credit4Growth]

@WannaBcreditNerd wrote:

@RobertEG wrote:

This is a very controversial topic.

Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

That is absolutely horrible. They make you pay taxes on the income. They right off the debt and get a tax break. Then if you pay the debt (CO, or collection) they have double if not tripled dipped. There must be transperancy and better regulations of the matter. Many families and individuals are being hunted with this scenario.

I believe that once a 1099-c is issued that the account should be forgiven, deleted and or paid in full displayed on credit reports.

Thank you for sharing the info.

I side with you on this and at the same time I try to look at this from a GAAP perspective.

1099 C informational form filed with the individual's tax return (1040# what ever version you file) counts as income to the individual ...from the company writing off the debt or forgiving /cancelling the debt in such a way as I already stated.  It is pictured as if they gave you the monies, ie. for a CC you made purchases using the cc but never paid the balance of the card off.

It seems to be a form of redress or grievance for them to receive fund as a tax credit and the individual borrower does not have to pay the balance off but of course the damage to a credit report ( a separate party/body not involved n the monetary transaction) shows a form of accounting for it, publicly.

This all sucks MOD CUT - LANGUAGE  and I am dealing with this as well.  My comprehension of the situation had keep me from moving on in a positive way by immediately settling or paying PIF the debt and allowing my score to heal/recover sooner than later

Then it hit me just about a month ago.  Not to negative but to be correct and compliant with accounting procedures.  Pay the CC delinquent amount (PIF) and if accepted by the company, also send a 1099 form to them as well (informational form by January 31, of the following year) if and only if it meets all of the IRS compliance guidelines and rules, ie. amounts over six hundred dollars.  I believe this would have them as receiving the funds, updating the credit reports to a zero balance (in the individual's favor) and that company will have to pay taxes on the income.

I was poor at the french language so excuse me when I say this all may seem to be a part of a big MOD CUT - PROFANITIES ARENT ALLOWED, AND REPLACING ONE LETTER WITH A NUMBER DOESNT MAKE THEM ANY MORE ACCEPTABLE. 

REMEDIOS

I have not actually done this as I would have just missed the dated deadline but that was my opinion.

[gdale6]

Not all 1099-C debt cancellation results in taxes due, if you are insolvent at the time the 1099-C is issued then there are no taxes due, there is a form to figure out if taxes are due or not.

[FinStar]

The thread has been locked to new messages as the initial topic started >1 year ago and has run its course.