Do CC COs have to send the 1099?

[2steve 10]

Can I negotiate them not sending the 1099 ahead of time?

[easystreet 10]

it's not negotiable...by law they have to send the 1099 out. uncle sam has all his bases covered.

[2steve 10]

Thanks I am getting that from several sources...but it does creates a negotiating point to lower their offer a bit more inorder to pay the taxes on the amount forgiven.

[easystreet 10]

Thanks I am getting that from several sources...but it does creates a negotiating point to lower their offer a bit more inorder to pay the taxes on the amount forgiven.

no doubt; i'm in the same boat. my remaining creditors will have to take less to make up for the interest, fees, & taxes.

[willingtocope 1,336]

Technically, the 1099c has two boxes. One that say "Balance owed", the other that says "Interest and penalty included in the other". You only owe taxes on the difference.

Since the CCs "profit" is the interest and penalty, they MAY be willing to forgo that depending on their own tax situation.

[fivetwos 10]

I've been out of the loop for a while. I hope you're right on only owing tax on the difference, and I've seen other people here say the same thing, but in reading Pub 525 I see that it should only be excluded if it were deductable if paid.

That said, I certainly agree that only the principle should be taxable. I recall this being a big topic some time back.

[Recovering Attorney 78]

They have to report if it is $600+ in principal. But for most, particularly JDBs, they have no way of really knowing, so they simply report.

That being said, two points:

1. You can contest the assessment with the IRS by filing form 972 ( or thereabouts). I am not sure how effective it is in the Obama era, but I have been told the IRS does honor your request from time to time.

2. It has been said that a claim under the FDCPA iis stated if the collector offers a discount without also disclosing they will have to report the discount as income.

[jq26 862]

I've been out of the loop for a while. I hope you're right on only owing tax on the difference, and I've seen other people here say the same thing, but in reading Pub 525 I see that it should only be excluded if it were deductable if paid.

That said, I certainly agree that only the principle should be taxable. I recall this being a big topic some time back.

You stated the law correctly. The entire amount is taxable unless the interest was deductible. In that case, you subtract the amount of interest- this is done because you would just deduct the amount of interest you paid anyway in the same tax year, which would lead to a NET amount of income equal to the full amount less the deductible interest anyway (ie you come to the same end result anyway just takes two steps instead of one).

[westdebt 11]

Typically, after accounts charge off and are placed with CA's, you will not get a 1099. Should you? Yes, of course it is required by the IRS however in my experience, charged off accounts and sold accounts usually do not receive a 1099.

[willingtocope 1,336]

Typically, after accounts charge off and are placed with CA's, you will not get a 1099. Should you? Yes, of course it is required by the IRS however in my experience, charged off accounts and sold accounts usually do not receive a 1099.

Not exactly. CO does not mean sold. And, CAs don't buy debts...JDB buy debts. Cas just do the hassling for either an OC or JDB. The "owner" of the debt has 3 years from an "identifiable" event to issue the 1099c.

[esterlydsl1 10]

I visited here to be able to provide an answer to the question, but now I realize that I have actually get an answer to many questions which were a bit confusing to me. Thank you everyone for enhancing my knowledge.