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How is my crapital one charge-off going up? Already DV'd


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I DV'd Crapital One's collection agency a few months back, CMRRR. The CA wasn't ever on my CR. But why is the amount from the OC going up if they have sent it to a CA and haven't validated with me?

Isn't this illegal somehow? I know its because the interest, but how can they do that when they never validated (The CA, not OC) with me?

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It's probably not legal. Once they charge off the account that means they have closed it and removed it from their accounting books as an asset. Further it means they have reported it as an uncollectable loss to the IRS and taken a tax break on it. Some States allow for the continued levy of interest on a charged off account, while others strictly forbid it. So check your State laws on "usury" for further direction.

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Methus: Sorry, that's not quite right. An OC that's NOT a bank and therefore NOT governed by the FDIC can, according to IRS rules, take a charge against income (a CO) and then continue to keep the account on their books and continue to accrue additional income (i.e., interest and penalties) for 2, 3, or 7 years depending on how they run their accounting.

And, again, depending on their accounting, they can get their tax break in the year in which it was CO'd, or, they can take it later when they do eventually write it off entirely. And then, just for fun, when they do eventually write it off, they can issue a 1099c to the debtor but dated for the year in which the original CO occurred. In other words, the debtor winds up responsible not only for taxes on the orginal balance but also for the IRS penalities for not paying those taxes on time.

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So is Capital One Bank... a bank (FDIC) or not? That would be a question you want to answer.

Also, yes it appears that this is a civil private party way to ExPostFacto you with IRS penalties.... the key item being did YOU the taxpayer act in good faith. If they never sent you a 1099c or any other notice of writeoff, until this year, how can you have reacted to it and reported the correct income? It's also only the principal balance, not interest/fee's that can be 1099'd, since it is INCOME to you being reported, something you had to actually recieve.

How this little IRS penalty trap can exist boggles the mind, some case will drag it up high enough int he courts to get it killed off.

________

Boss engine

Edited by uwackme
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uwackme: Highly unlikely that anything will be done about it. Too many influential people make money off it...and then off course, its a tax that smacks the little guy, so nobody with money is going to get upset.

The CC "banks" get to put phoney accrued income on their books for 7 years...that makes their stock go up, so the stockholders get richer...then when they do write it off, it means less accrued income that year to pay taxes on....but that okay, because the 1099c means us little suckers make up it up to the IRS.

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Wells Fargo got me with that one. I filed a lawsuit against them in 2002 and it was settled. I got a settlement check and they had to abandon a debt that was out of SOL anyway, that they had bought as a junk debt. They issued a 1099c to me and the IRS came after me. I tried everything, but the IRS would not listen. I tried to tell them that the debt was SOL when Wells FArgo got it, and that IRS regs prohibit collecting taxes from more than 3 years in the past. I tried telling them I was insolvent when the debt was abandoned.

Nothing worked. I would up paying taxes on the abandoned principal AND interest. With penalties, I wound up paying about 2 grand.

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I've settled a few accounts and am prepared to pay taxes appropriately.

What do I do if I don't receive a 1099c? Do I report the balance as income? Can I report the forgiven balance if I haven't received a 1099c?

I'll speak to my accountant about this, but you guys seem to always have the real answers.

Gettinout

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There is a way to mitigate some of this.

If it is INCOME, then it was not a lump sum on date X.... it was income over time, as you made charges.

So preemptively go back and AMEND your past tax returns, increasing the income equal to the charges you made that year ont he acct. And pay for each year the increase in tax owed based on the increased income.

Once you do this, you have this action as your positive defense if a 1099c or dime gets dropped later by the creditor to the IRS. And you get to spread the pain across multiple years.

If it is imputed income, then didnt it actually occur when the INCOME CAME IN? Not some point in the future when the accountants got around to calling it imputed income?

That way you avoid the big pain. You may owe for each year a penalty also, but just do it over a few years/months so you amend 3 backyears per quarter till its all complete. Do this BEFORE the IRS comes knocking, etc. When they do send a 1099c, you include the amended paperwork showing you actually already paid it all and owe nothing.

Just a thought.

Yes is seems REALLY illegal to me, somebody will have to fight it to the supreme's.

________

MARIJUANA CARD

Edited by uwackme
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uwackme Nope, sorry, the IRS doesn't see it that way. It was income on the date that the debt was forgiven...period.

And, Gettinout, the only way I know of to be safe is to write (CMrrr OF COURSE) the OC and demand a 1099c for the forgiven portion of the debt. They may not send it, but you will at least have proof that you requested it. Talk it over with your accountant and see if he has any advice, but you're trying to protect yourself from two attackers, here. If they wait to issue a 1099c after 2,3, or 7 years, then you've got the IRS to deal with. Technically, I beleive, as long as they haven't done the 1099c, and they still carry the balance on their books, they can sell it to a JDB.

If, on the other hand, if they sell the balance of the debt to a JDB, then there are some FTC rulings and case law that says its not fair to ask to you to pay a JDB for income on which you've already paid taxes.

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Sorry Josh.

I'd like to know the story on the interest. After charge off how can it keep growing... if they write it off, it is gone, how does it still tick interest?

Doesn't the TILA forbid interest acruing without a monthly statement?

COne keeps ticking mine up... CR bal 3000 on a 1200 coff in 2001. If this is incorrect activity, then I want to pursue acct BAL as well as acct status suit against them (we are in DISPUTE, have been for 8 months, they still report only chargeoff, no dispute on hte CR's). Afterall, clearly a lawsuit IS dispute, not to mention the official DV stating dispute, etc, etc.

One more go-round of the CRA's dispute acct status cycle, and Fed suit is primed.

________

Fourth-Generation Ford Mustang Picture

Edited by uwackme
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Let's start back at the begining....Josh said "...why is the balance on my OC going up..."

My response is...a "charge off" is just an accounting term that means the OC has taken a "charge against accrued income". Unless they happen to be an FDIC insured bank, the account stays on their books and can continue to accrue additional income (charge interest and late fees) for 2, 3, or 7 years according to IRS rules. Therefore, your balance keeps going up.

Again, unless they are an FDIC bank (which does dictate accounting procedures for their members), there are no laws other than IRS regulations that mean anything else.

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