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List of CC /others who send in the 1099 to IRS?


rockygirl
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huh ?? NOTHING discharged in bankruptcy needs to be reported to the IRS as income.

Even for settlements where a 1099-C WOULD be issued, if you can prove you were insolvent at the time the debt was forgiven, you do NOT have to report the 1099 amount as income.

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Yes, that was my question, besides Amex, is there any other CC /dept stores, etc that routinely do this? Bk or no BK.

RG

also, if a debt has been charged off by the cc sompany, , do they always send in 1099 to the IRS? I have never filed BK before, and I'm fairly sure most of that cc debt in 98-99 has been charged off. I have not gotten a 1099, however.

is ther any benefit to the cc company by sending in the 1099? I noticed that someone said few actually do this.

RG

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Most creditors do NOT send you a 1099-C when the charge-off a debt. A 1099 generally means the debt is FORGIVEN, that you are no longer liable for it, and that is not the case with a charge-off.
I found just the opposite when I settled my debts in 2002. I did receive 1099's on all the accounts I settled directly with the OCs.
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Having a debt charged-off is different from settling... I'm assuming this has to do with collecting on the debt down the road, whether it be via litigation or selling the debt to a JDB - most creditors aren't willing to 'forgive' a debt right at charge-off...

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Even for settlements where a 1099-C WOULD be issued, if you can prove you were insolvent at the time the debt was forgiven, you do NOT have to report the 1099 amount as income.

Is there a sticky on this or could somebody provide additional information about how one goes about proving insolvency in order to take advantage of this?

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Here it is...straight from the IRS. The Reduction of Tax Attributes part goes on and on and is pretty confusing. But it sounds like if you don't have a good lump of equity in a house or something...the whole forgiven part of the debt will not end up being taxable when all is said and done!!! KEWL!!!

http://www.irs.gov/publications/p908/ar02.html

Insolvency exclusion.

You are insolvent when, and to the extent, your liabilities exceed the fair market value of your assets. Determine your liabilities and the fair market value of your assets immediately before the cancellation of your debt to determine whether or not you are insolvent and the amount by which you are insolvent.

Exclude from your gross income debt canceled when you are insolvent, but only up to the amount by which you are insolvent. However, you must use the amount excluded to reduce certain tax attributes, as explained later under Reduction of Tax Attributes.

Example.

$4000 of the Simpson Corporation's liabilities are cancelled outside bankruptcy. Immediately before the cancellation, the Simpson Corporation's liabilities totaled $21,000 and the fair market value of its assets was $17,500. Because its liabilities were more than its assets, it was insolvent. The amount of the insolvency was $3,500 ($21,000 — $17,500).

The corporation may exclude only $3,500 of the $4,000 debt cancellation from income because that is the amount by which it was insolvent. It must also reduce certain tax attributes by the $3,500 of excluded income. The remaining $500 of canceled debt must be included in income.

Reduction of Tax Attributes

If a debtor excludes canceled debt from income because it is canceled in a bankruptcy case or during insolvency, he or she must use the excluded amount to reduce certain “tax attributes.” Tax attributes include the basis of certain assets and the losses and credits listed next. By reducing these tax attributes, tax on the canceled debt is in part postponed instead of being entirely forgiven. This prevents an excessive tax benefit from the debt cancellation.

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One of the bad news things I mentioned in another thread is when the OC gets around to actually "writing off" the debt (after 2, 3, or 7 years by IRS rules) they may elect to write it off in the year in which it was charged off. In other words, if they CO it after 180 days (say 2005) and then W) after 7 years (2012) they can issues a 1099c for 2005...and you wind up liable to the IRS for 7 years worth of unpaid taxes (with interest and penalty).

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In other words, if they CO it after 180 days (say 2005) and then W) after 7 years (2012) they can issues a 1099c for 2005...and you wind up liable to the IRS for 7 years worth of unpaid taxes (with interest and penalty).
Yikes. Guess every cloud has a silver lining...and glad that I got mine immediately.
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One of the bad news things I mentioned in another thread is when the OC gets around to actually "writing off" the debt (after 2, 3, or 7 years by IRS rules) they may elect to write it off in the year in which it was charged off. In other words, if they CO it after 180 days (say 2005) and then W) after 7 years (2012) they can issues a 1099c for 2005...and you wind up liable to the IRS for 7 years worth of unpaid taxes (with interest and penalty).

You can file an ammended 1040 (1040X) up to 3 years later and still apply the insolvency test.

Willing, are you absolutely certain that the CO can go back 7 years. I believe that they are limited to 3 because that matches up with the 1040x. Do you have any quote in the code for the 7 years?

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Willing, check out:

http://www.irs.gov/instructions/i1099ac/ar02.html#d0e189

When To File

Generally, file Form 1099-C for the year in which an identifiable event occurs. See Exceptions below. If you cancel a debt before an identifiable event occurs, you may choose to file Form 1099-C for the year of cancellation. No further reporting is required even if a second identifiable event occurs on the same debt. Also, you are not required to file an additional or corrected Form 1099-C if you receive payment on a prior year debt.

When Is a Debt Canceled

A debt is canceled on the date an identifiable event occurs. An identifiable event is:

1.A discharge in bankruptcy under Title 11 of the U.S. Code for business or investment debt (see Exceptions on this page).

2. A cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal or state court proceeding.

3.A cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when a debtor's affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.

4.A cancellation or extinguishment when the creditor elects foreclosure remedies that by law end or bar the creditor's right to collect the debt. This event applies to a mortgage lender or holder who is barred by local law from pursuing debt collection after a “power of sale” in the mortgage or deed of trust is exercised.

5.A cancellation or extinguishment due to a probate or similar proceeding.

6.A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration.

7.A discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor's defined policy can be in writing or an established business practice of the creditor. A creditor's practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy.

8.The expiration of nonpayment testing period. This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31 plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law. The creditor can rebut the occurrence of this identifiable event if:

1.The creditor (or a third-party collection agency) has engaged in significant bona fide collection activity during the 12-month period ending on December 31 or

2.Facts and circumstances that exist on January 31 following the end of the 36-month period indicate that the debt was not canceled.

Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.

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Wel I'm more confused now than ever. I have several cc that probably written off or chargedoff(are they the same) backin 99 or so. so now it is 05 and I have heard nothign. I don't own anything except my home. and a 93 toyatoa. with a lot of miles on it. It (home and truck) is paid for, I have sole title to it. That is it. The rest is just personal stuff, junk u would sell at a garage sale.

If iI do a BK as planned as all goes well, am I safe from anyone filling a 1099 on me? except of vourse Amex-i kow they like to do that.

Also, in simple english, does it benefit the creditor to file a 1099 with the IRS on a debt I owed them? Or is it better for them to not do that?

I'm sorry I can't understnd this.

RG

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Look, you have NOTHING to worry about if all that debt was charged-off in 1999, NO ONE is going to send you a 1099-C NOW. Just stop worrying about it.

Same goes for worrying about AMEX and bankruptcy. They *might* send a 1099-C, but even if they do you have NOTHING to worry about. All you'd hav to do is show the IRS your bankruptcy and you owe NOTHING.

Quite frankly, you're making a mountain out of a molehill.

The creditors get their tax benefit from the charge-off itself, when they actually wrote it off their books in 1999. They get NO benefit from filing a 1099 with the IRS AT ALL. IF AMEX sends out a 1099 for a discharged debt, they are just being deliberately nasty, but it means NOTHING as far as costing YOU any money or trouble with the IRS.

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