msteve0000 Posted April 8, 2008 Report Share Posted April 8, 2008 Hi Forum,I've read a few past posts regarding CA forwarding 1099c's, and have a question about my situation. I recently settled a debt in court for less than the CA was seeking. The OC debt was $1000. and the CA was seeking over $2,000. in fees and costs. I argued before the court and settled on the original balance. On my CR the CA left a statement saying "settled for less than amount". Is this fair? Can they still send me a 1099c? If yes, does it pay to settle the difference? Or should I just pay the taxes on the difference, which would be less than the remaiming balance?Thanks Link to comment Share on other sites More sharing options...
whocares Posted April 8, 2008 Report Share Posted April 8, 2008 Contact the IRS, I don't think the 1099 is legal... Link to comment Share on other sites More sharing options...
TheRoadBack Posted April 8, 2008 Report Share Posted April 8, 2008 im not sure if 1099 is legal however check out irs form 982 in regards to insolvency, if you can prove this you don't have to pay the 1099 anyway. Good luck! Link to comment Share on other sites More sharing options...
whocares Posted April 8, 2008 Report Share Posted April 8, 2008 I would think a 1099 would be illegal, the reason being...I do not owe the debt to the CA that is trying to collect...The debt was written off by the OC and of this happened before this year then the 1099 should be for the correct year, 1991 in my case...it's too late Link to comment Share on other sites More sharing options...
Debt Guy Posted April 8, 2008 Report Share Posted April 8, 2008 I would think a 1099 would be illegal, the reason being...I do not owe the debt to the CA that is trying to collect...The debt was written off by the OC and of this happened before this year then the 1099 should be for the correct year, 1991 in my case...it's too lateUmmm. I'm not sure this is accurate. A write off by the OC is nothing more than an accounting transaction. It does not modify your legal liability for the debt. Otherwise, you could have and should have told the CA to take a hike.The IRS requires the creditor to send a 1099C in certain situations. It is not optional and the creditor is subject to fine if they fail to do so.You might want to go to the IRS website and read about 1099C. Knowing what you are talking about would be very helpful if you decide to "contest" the 1099C to the IRS.As to the OP's question: Paying the taxes on the amount forgiven is considerably less than paying the creditor. Take an example of $1000 forgiven. If your marginal tax rate is 20% then your taxes would be $200 -- which is a lot less than the $1000 you could have paid to the creditor if paid in full. Make sense? Link to comment Share on other sites More sharing options...
lostindebtinVT Posted May 23, 2008 Report Share Posted May 23, 2008 The IRS will use the date of the 1099C - even it is years later and your situation has improved. In order to be insolvent you have to look at your assets and liabilities the day before the 1099C date - I have been over this with the IRS a few times, their stance is firm on that one. So if you were in a bad way when you settled with the CA, you still have to use the date of the 1099C. This can be a real problem when the creditor doesn't issue the 1099C timely and they date it at the end of the year or something. After settling all my credit card debt by July, if my 1099c's come and are dated Dec 31st - I won't be insolvent any more; something else to worry about. Link to comment Share on other sites More sharing options...
willingtocope Posted May 23, 2008 Report Share Posted May 23, 2008 Just to further clarify...CAs don't buy debts. Junk debt buyers buy debts. Therefore, CAs can't issued 1099c's...period.Now, if it truly was a CA you paid (a lawyer, acting as a CA?) they had to be representing someone. If it was the OC, you may get a 1099c from them. OCs tend to be more up on the IRS rules, and need the documentation for their own taxes. However, there are two boxes on the 1099c. One says "amount forgiven"...the other says "penalty and interest included in the first". You only owe taxes on the difference. Again, OCs are pretty good about following those rules.On the other hand, if it was a JDB who owned the debt, and the CA was acting on their behalf, you might not get a 1099c. In general, JDB's are not interested in paperwork. Link to comment Share on other sites More sharing options...
Flyingifr Posted May 23, 2008 Report Share Posted May 23, 2008 Hi Forum,I've read a few past posts regarding CA forwarding 1099c's, and have a question about my situation. I recently settled a debt in court for less than the CA was seeking. The OC debt was $1000. and the CA was seeking over $2,000. in fees and costs. I argued before the court and settled on the original balance. On my CR the CA left a statement saying "settled for less than amount". Is this fair? Can they still send me a 1099c? If yes, does it pay to settle the difference? Or should I just pay the taxes on the difference, which would be less than the remaiming balance?Thanks1099C can only be issued for settling for less than the full PRINCIPAL balance. Interest and fees do not count. Link to comment Share on other sites More sharing options...
gator944 Posted May 23, 2008 Report Share Posted May 23, 2008 Aside from 1099 issue, it sounds like the court determined that $2000 was not the legitimate debt, but $1000 was. That being the case, the "settled for less" statement is misrepresenting the account's entry on your reports. You should dispute it with the CRA's. If they verify it, then dispute it again with your supporting documentation.A similar process would hold true with the IRS. Contest the 1099 with your supporting court documentation.All of the above would apply if the $1000 was the legitimate debt. If it was "settled" for $1000, then their CRA reporting and 1099 would be accurate. Link to comment Share on other sites More sharing options...
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