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Is it legal ...


HonorableMention
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for a creditor to charge off an account twice in one year, then twice again several years later, and then to go on to write off & sell that same account within that same year of the second wave of charge offs??

To me, this is similar to what you see in the movies/tv where a mob boss/loan shark sells a debt to another street thug, who then threatens to break your thumbs if you don't pay him, or work it off doing his dirty deeds.

It seems like a huge tax loophole for a company to declare a loss, or in the case of lenders/creditors declare multiple losses, gaining the benefits of a having to pay lower taxes, then sell the declared losses at a discounted value.

I'm not suggesting a debtor should get off free, but if a lender/creditor writes off a loss to the IRS, then the debt should technically belong to the IRS, thus collectible through taxes.

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for a creditor to charge off an account twice in one year, then twice again several years later, and then to go on to write off & sell that same account within that same year of the second wave of charge offs??

To me, this is similar to what you see in the movies/tv where a mob boss/loan shark sells a debt to another street thug, who then threatens to break your thumbs if you don't pay him, or work it off doing his dirty deeds.

It seems like a huge tax loophole for a company to declare a loss, or in the case of lenders/creditors declare multiple losses, gaining the benefits of a having to pay lower taxes, then sell the declared losses at a discounted value.

I'm not suggesting a debtor should get off free, but if a lender/creditor writes off a loss to the IRS, then the debt should technically belong to the IRS, thus collectible through taxes.

No disrespect but you don't understand our tax system.

The best a business can EVER do on taxes as it relates to "writing off" an account is break even...they don't make money nor do the get a "tax break"...they simply aren't forced to pay taxes on profits they didn't earn (because when the debtor doesn't pay they don't have a profit and in fact, have a loss).

As to writing off multiple times, I suspect you are misinterpreting what has happened. If you aren't then the only explanation is that trigger events have happened that required the account be written off then returned to their books, etc.

So, to answer your question...yes...it's legal...not only is it legal but it's required by the IRS/SEC/AICPA.

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No disrespect but you don't understand our tax system.

The best a business can EVER do on taxes as it relates to "writing off" an account is break even...they don't make money nor do the get a "tax break"...they simply aren't forced to pay taxes on profits they didn't earn (because when the debtor doesn't pay they don't have a profit and in fact, have a loss).

I think I made it pretty clear that I understand that they pay less in taxes as a result of the write off. If you re-read what I wrote, you'll likely come to the same conclusion. Paying lower taxes is a break in itself in some cases, and while it may not warrant a "profit", it certainly doesn't mean they ate a loss.

As to writing off multiple times, I suspect you are misinterpreting what has happened. If you aren't then the only explanation is that trigger events have happened that required the account be written off then returned to their books, etc.

You know what they say about assumptions. The first instance of charge offs occurred one month apart(oct/05|nov/05), while the second wave occurred six months apart(apr/08|oct/08) ~ two years, eleven months after the first set of charge offs. Generally, a charge off occurs 180 days after an account is overdue.

So what sort of triggers would require a company to charge off an account multiple times, at seemingly random intervals?

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Nash, not only doesn't he inderstand the Tax System, he doesn't understand Accounting principles either.

You only charge off a debt once. At that point you Debit Bad Debt Expense and credit Bad Debt Reserve. Once it is of the balance sheet like that, it stays there until it is paid in part or in full. At that point the company Debits iots bank account and credits that year's Bad Debt Recovery Income account.

OIP - they may be reporting multiple Charge Off dates to a CRA but believe me - it was charged off only once.

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Got to love the subtle insults to newbs from the board warriors. You could just as easily posted helpful information without the snide/smug responses.

What's funny, is Nashville hinted that a company would write off an account multiple times due to triggers, but you don't jab him over his ignorance of the "debts are only charged off once" rule of thumb comment you posted.

Someone comes here looking for help because they want to be informed, and you jolt them with childish jabs, 'Look Bobby, he's ignorant, he doesn't understand the tax code!'

Thanks for the responses.

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Got to love the subtle insults to newbs from the board warriors. You could just as easily posted helpful information without the snide/smug responses.

What's funny, is Nashville hinted that a company would write off an account multiple times due to triggers, but you don't jab him over his ignorance of the "debts are only charged off once" rule of thumb comment you posted.

Someone comes here looking for help because they want to be informed, and you jolt them with childish jabs, 'Look Bobby, he's ignorant, he doesn't understand the tax code!'

Thanks for the responses.

Sometimes those of us who have been around a while (and I'm not just referring to membership on a forum) can come across as insulting when none was actually intended. However, understand that those who have been around a while have probably answered questions like the ones you posed dozens if not multiple dozen's of times...some of us get tired and a bit irritated now and then.

I've made many (and in many cases lengthy) posts and whole threads on the issue of account write-offs and tax consequences because many people simply don't understand them and there are many more posts/threads on the subject besides my own...you would probably benefit by dong a search of the site for those and similar posts.

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So what sort of triggers would require a company to charge off an account multiple times, at seemingly random intervals?

The way information is being transmitted by the data furnisher to the credit reporting agency has more to do with what you are seeing than does the creditor's internal accounting procedures.

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Sometimes giving a simple answer to a newbie is fewer keystrokes than having to go multiple rounds back-and-forth about the finer points of searching...and reults in far less bad attitude coming out.

I will also point out that these discussion groups have been around for over a decade and the tax rules and laws change frequently. What was correct 3 years ago may not be correct today. So relying on searches isn't always the way to get an answer so much as to start a new discussion. Keep that in mind as well.

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Sometimes giving a simple answer to a newbie is fewer keystrokes than having to go multiple rounds back-and-forth about the finer points of searching...and reults in far less bad attitude coming out.

I will also point out that these discussion groups have been around for over a decade and the tax rules and laws change frequently. What was correct 3 years ago may not be correct today. So relying on searches isn't always the way to get an answer so much as to start a new discussion. Keep that in mind as well.

Thank you very much for this timely post,this will help newbies who are at there wit's end,get the help they need.
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