kmmp Posted April 8, 2008 Report Share Posted April 8, 2008 I just found out that my (ex) husband received a 1099 for a portion of debt settled on by Chase Bank. How can they use this as a write off and still make us report it as income? We don't have this as income and even if we were making payments they would not have added up to over $5,000!!! I thought I read somewhere that this was not legal? But, it must be if Chase is doing it....does anyone have any info on this? Link to comment Share on other sites More sharing options...
whocares Posted April 8, 2008 Report Share Posted April 8, 2008 Contact the IRS, they will advise you Link to comment Share on other sites More sharing options...
fatherof3 Posted April 8, 2008 Report Share Posted April 8, 2008 Better yet, contact an IRS Lawyer. I have heard that the IRS employees are wrong a lot of the times. If it makes you feel better contact them first but then contact a known Tax lawyer. You might even try the NACA.net consumer advocates folks. Link to comment Share on other sites More sharing options...
smurfette in nyc Posted April 8, 2008 Report Share Posted April 8, 2008 A few years ago, I settled a credit card debt-at that point in my life, I knew nothing of this forum, or the FDCPA, FCRA, etc. Anyway, I was thrilled to be able to pay only a small fraction of what I owed, to be rid of the debt forever.Like your ex-husband, I received a 1099 that showed an amount which was the difference between what I actually paid for the settlement, and what was actually owed to the CC bank.Yes, I did have to report this amount as "income" on my tax return, because it is viewed as money in your pocket that you got off the hook from paying. Although I had to pay more in tax because of this, I ultimately think that I still saved money by not having to pay out the full amount of the debt.The downside, of course, is that now I'm stuck with a TL that reads: "settled in full for less...". It will be 4 more years until that TLdrops off. Again, I didn't know then what I know now, and would've asked for a PFD. Link to comment Share on other sites More sharing options...
jasen Posted April 8, 2008 Report Share Posted April 8, 2008 I just found out that my (ex) husband received a 1099 for a portion of debt settled on by Chase Bank. How can they use this as a write off and still make us report it as income? We don't have this as income and even if we were making payments they would not have added up to over $5,000!!! I thought I read somewhere that this was not legal? But, it must be if Chase is doing it....does anyone have any info on this?They're supposed to file the 1099-C. If they gave you money, and you didn't have to pay it back, it was income. They still write it off as a business loss.I don't think the IRS will be sympathetic to your cause, they're the ones who are pushing creditors to do this.If this debt or account is disputed, you might have more of a case. Link to comment Share on other sites More sharing options...
Robert Nashville/Savannah Posted April 8, 2008 Report Share Posted April 8, 2008 They are required to issue 1099s for forgiven debt.Bear in mind that you don't report the receipt of a loan/credit at the time you receive it (or the benefit of it) as by definition, you have to pay it back (which means it would always be a wash for tax purpurses, only a timing issue). So, a "loan" that is partially or fully forgiven IS income in the eyes of the IRS because it's money you no longer have to pay back.Where this logic breaks down is if a debtor is later sued for the "forgiven" amount...one would think that if a debt is forgiven it is forgiven forever but I've been given to understand that creditors (or at least subsequent debt owners) have gone after consumers for debts that previously were issued 1099s...best advice there is to NEVER discard the 1099 form you received.Also as to the "disputed" comment above, you essentialy loose the ability to call a debt "disputed" once you've settled it...if you settle it/pay it you've basically said that you owe it! Link to comment Share on other sites More sharing options...
Debt Guy Posted April 8, 2008 Report Share Posted April 8, 2008 It is possible that you might not be required to pay taxes on the amount forgiven. The IRS will exempt the taxation if you were insolvent at the time of the forgiveness.Go to the www.irs.gov and search on Form 982. Download and read.As an aside and to emphasize previous comments, the creditor has no choice about issuing the 1099C -- it is an IRS requirement. If you wish to complain, you should take it up with your congressweasel. Link to comment Share on other sites More sharing options...
willingtocope Posted April 8, 2008 Report Share Posted April 8, 2008 Technically, the 1099c has two boxes on it. The "amount forgiven"...and "the amount of penalty and interest included in the other box". You only owe taxes on the difference. If the second box is not filled in, then you do have grounds for a dispute...particularly if the 1099c comes from a JDB.And, we've had the Pub 982 discussion before. Technically, again, you only qualify for insolvency if at the time the debt was forgiven, you would have qualified for a BK 7 without any of your states exemptions.IMO, pay the tax... Link to comment Share on other sites More sharing options...
Flyingifr Posted April 8, 2008 Report Share Posted April 8, 2008 I just found out that my (ex) husband received a 1099 for a portion of debt settled on by Chase Bank. How can they use this as a write off and still make us report it as income? We don't have this as income and even if we were making payments they would not have added up to over $5,000!!! I thought I read somewhere that this was not legal? But, it must be if Chase is doing it....does anyone have any info on this?Read Section 108 of the Internal revenue Code - it gives the reason why they can call this income, and what the exceptions your hubby can use. Link to comment Share on other sites More sharing options...
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