JDB and 1099c

[RSB]

If a JDB issues a 1099c, for a debt that was disputed and not verified/validated, is there an IRS dispute form or process?

Can the JDB issue a 1099c for the entire amount they are claiming is owed, which includes charge off balance, and years of fees and interest?

Can a JDB issue a 1099c for a debt, to a person who is a resident, in a state where JDB has not got a state collection license?

[jq26]

1) If a JDB issues a 1099c, for a debt that was disputed and not verified/validated, is there an IRS dispute form or process?

2) Can the JDB issue a 1099c for the entire amount they are claiming is owed, which includes charge off balance, and years of fees and interest?

3) Can a JDB issue a 1099c for a debt, to a person who is a resident, in a state where JDB has not got a state collection license?

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In order:

1) No there is no dispute form. If the debt isn't legitimate, then you would not include the 1099 income on your 1040. If I were you, I'd write an explanation letter and attach to your tax return to cover my bases and head off a deficiency letter but that's just me.

2) Yes. They are required by federal law (treasury regulations) to issue you a 1099 on the amount of principal debt. But the law is expressly permissive (not required but clearly allowed) on adding the fees and interest to the 1099 amount. If they do that, they must break out the principal obligation from the fees and interest and place them in a different box on the 1099 form so you can differentiate the two.

3) This is a matter of federal tax law between you and the IRS. State licensing of the JDB plays no part. The IRS cares about your income, not about state licensing issues. If they did not 1099 you, the JDB would be in violation of federal law.

A little research was done on this subject here: http://www.debt-consolidation-credit-repair-service.com/forums/showthread.php?t=301713&highlight=1099C

[KentWA]

A disputed debt can not have a 1099c filed for it as they must istablish the true owner.

First step is file a tax fraud report with the IRS. You have a private right of action for an false 1099c with a penalty of $5000. Most of the JDBs that issue these willy nilly, will send you a voided 1099c as soon as they get an ITS letter.

USC Title 26, Subtitle F, Chapter 76, Subchapter B, § 7434:

http://www.law.cornell.edu/uscode/26/usc_sec_26_00007434----000-.html

[jq26]

Please post case law. Until I see one case where a JDB or CA has been held liable for 1099ing for a disputed debt, I think this is bogus. This statute is for filing fraudulent information returns. Everyone disputes what they owe. That's pretty standard.

Furthermore, this statute doesn't even apply. This is specifically for information returns submitted by Party A where they claim to have made payments to Party B (you the taxpayer) that never occurred. With a JDB, they are not claiming to have made a payment to party B. So Party B has no cause of action under this statute. The JDBs and CAs are never claiming to have made payment to the "other person" (you) as required.

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(a) In general

If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return.

Edited July 28, 2010 by jq26

[RSB]

I had an old credit card charged off. The sol expired. During the last few years I have disputed this debt and asked for validation. JDB just said it was mine.

I worry the JDB will send me a 1099c for that extreme balance with the fees and interest, added in.

Edited September 11, 2010 by RSB

[RSB]

The 1099c must list the interest and fees, separately, from the original principal, at charge off....right?

Does the taxpayer pay taxes on the interests and fees stated on a 1009c?

[Massive]

JDB issues 1099C for $15,000 on a debt they paid $200 for and you call that legitimate?? lol Also they can't even prove they own the debt, what a joke.

[jq26]

It is the law. A 1099 is required in the full amount. It is about the IRS being notified of income.

The JDB is not getting a $15k write off on a debt they paid $200 for. That's tax fraud and the IRS would shut their doors in 20 minutes. They can only write off to the extent of cost basis.

RSB: yes the 1099C needs to separate out the principal and the interest & fees. They're in different boxes on the 1099C. Off the top of my head, I believe you pay taxes on the full amount unless the interest would have been deductible. If the interest would have been deductible had it been paid, then it isn't considered income and you exclude that portion for tax purposes. That makes sense because tax deductible interest would "zero itself out" when deducted against this income so it makes sense to collapse the transaction into one step and just ignore it.