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Clarification needed on the 1099-C


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Sorry if this has already been asked but I've read for hours and can't find the answer to my question regarding the 1099-C.

I have not recceived one, but may if I can settle with Cap1 who is suing me.

Which amount does the OC go by when issuing a 1099-C?

For instance: (amounts are not actual)

OC sueing for $3000 (past due, int, late fees)

Charged off amount was $1000

Credit limit was $2000

This is where I get confused........

Does the OC get some kind of credit for the charged off amount of the debt on thier taxes?

And if they do, does sending you a 1099-C for any unpaid balance give them credit as well?

Do I need to be specific?

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The 1099c is supposed to have two boxes. One that shows the amount of the "forgiven" debt, the other that show the amount of penalty and interest included in the first. You only pay taxes on the difference. Not all creditors follow that rule however.

As to whether they get a credit for sending you a 1099c...well, sort of. CC companies usually work on the accrual accounting method. They claim income for interest and penalties when it is "earned" as opposed to when it is received. Therefore, they pay taxes on when that income is "earned". When they write off a debt, they back out the "earned" income, and therefore get their taxes back on that amount. (Its not nearly that simple, but that's the general idea).

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