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1099c and SOL and JDBs...ouch.


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Hey folks, read this...

http://www.unclefed.com/IRS-Forms/2005/i1099ac.pdf

...assuming that's a bona fide tax form, its saying that OC and CA and JDBs should issue 1099c for their portion of a forgiven debt (if you settle for less than the full balance). It also says that if you use the SOL defense and win, the creditor should issue a 1099c.

Am I reading this right?

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As I understand it- when your debt has been cancelled or settled for a less amount owed, the Original Creditor and/or the Collection agency may then report it to the IRS 1099-C and that cancelled debt, in the eyes of the IRS, becomes income. Also- I would look into seeing if the 1099-c is mandatory for credit card companies and if the irs has any legal right to compel them to do so.

But- I would strongly suggest that you do some research on the definition of "income" and the definition of "taxable income". I am not offering any legal advice- I am simply offering you information that may better educate you in regards to these matters-it is up to you to make your own decisions.

here are a few sites that may help 861.info, givemeliberty.org, taxableincome.net and their links. The internet also allows access to Title 26 codes and regulations and is a great source for information and definitions.

Most people do not realize that words are the major key in all legal matters and have specific meaning therefore they are to be defined by the specific codes and regulations they pertain to.

you may also want to do research in regards to Title 26 861-8 and following and pay close attention to the "operative sections" (f) (i).

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Full amount that they report (1099-c you) it is the remainder that you did not pay.

so if you settled for 1500. on a 3000. debt the other 1500 is what is reported. this is something most people do not know about when they decide to settle for less. The only good thing about settling with them is to make sure that it states Paid as Agreed on your report otherwise the SOL can be one of your best defenses.

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the SOL can be one of your best defenses.

...except that under the new IRS regs, if you use the SOL defense, you get to pay taxes on the amount beyond SOL.

Here's what I see. The IRS wants somebody to pay taxes. The OC will pay taxes on any interest and penalty they charge you (or write off). The CA/JDB will pay taxes on the difference between what they paid OC and what they collect from you. And you will pay taxes on the difference between the original balance (maybe including interest) minus what the CA paid minus what you paid the CA.

Sweet....

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Collection agency may then report it to the IRS 1099-C and that cancelled debt, in the eyes of the IRS, becomes income.

HOWEVER, IF you can show that you were insolvent (owe more than you own) at the time the debt was 'forgiven', then you do NOT have to claim the forgiven amount as taxable income. I believe you file Form 982 to claim insolvency.

I dunno about that SOL mess. The expiratin of the SOL does not extinguish the debt, it merely keeps them from getting a judgment against you for it. Neither does it prevent them from selling off the debt to some other CA/JDB who can still try to collect the debt.

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Please do your research into the definition of 'taxable income' and who is liable for taxable income. Just like we are trying to educate ourselves on the fair credit acts and our rights so should you in regards to who by definition of the law is a 'taxpayer' and who is liable for 'taxable income'.

you may find the following links of some use:

http://www.supremelaw.org/sls/31answers.htm

http://famguardian.org/Subjects/Taxes/Articles/TaxpayerVNontaxpayer.htm

http://famguardian.org/Subjects/Taxes/Articles/NoStatuteLiable.htm

http://famguardian.org/Disks/IRSDVD/Multimedia/Rose,Larken/861Evidence/menu.swf

We are all out here looking for answers to many questions as well as digging to find the truth. After reading some of these links its up to you to decide what the truth is. If you are willing to dig deeper I would suggest you do some cross research with the actual Title 26 USC site and its coordinating Code of Federal Regulations.

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climbingoutofthehole: Sorry...articles from "...the government can't really tax you..." fringe aren't helpful.

In the real world, the IRS has the (at least) perceived power to make life miserable for you.

One question that has just occured to me though is that under the new 1099C rules, and assuming you can't prove insolvency to their satisfaction, does the IRS consider any money you would pay to a "debt handler" to settle your debts for less than the full balance as part of the amount that is taxable?

In other words, if you owe $60k, and pay a debt handler $10k to settle it for $20k...is the 10k deductible?

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I suspect many of these 1099 things will have to be settled in court case precedents as various questions are eventaully raised and settleded in courts.-----the usual fate of all new laws.

Meanwhile many things will go as the IRS scratches its head. But given many of these cases are and will be based on validation issues never properly settled before the debt was later settled, many of these

disputes will turn on documentation no longer available from the OC.

Will the IRS be happy to be placed into that kind of legal limbo?---of being judge, jury, and executioner in regards to debt tax liabilitie amounts they know squat about?------sounds like a good way to being clobbered in court to me.------and its going to put some due diligence responsibilities on collectors also.-----I would not like to be a collector the IRS has put false faith in.

To the old saying its not nice to fool mother nature we may be able to add the IRS--------happy new (tax) year to all.

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