Missing 1099-C

[skund]

I settled 3 old credit cards in 2010 but so far I've only received a 1099c from one of them. Obviously its down to the last minute to include them with a tax return and I really don't want to do anything to trigger an audit with the IRS. Should I contact the OC's or the CA's to ask why I haven't received anything on the other 2?

[willingtocope]

They have 3 years from an "identifiable event" to cancel the debt and issue a 1099c. Settling is not canceling. They may decide to come back at you later for the rest, or sell the balance to a JDB. It may not be over yet.

You could try to be proactive, and write a "Statement in lieu of a 1099c" and include it in your tax return (and pay the taxes) but that still may not be the end of it.

[maggie22]

I'd call, sometimes they'll not record the cancellation until the following year even though your settlement docs show it as a done deal during that year. Only had this problem with Chase.

[jq26]

They only 1099 over a certain amount of imputed income. Were they small debts?

I'd double check the "identifiable event" language by the IRS. One of the identifiable events is that no collection activity has not occurred within three years. I don't think the creditor gets three years after the identifiable event. The event triggers a 1099 for the year in which the identifiable event occurs (I could be wrong, please check).

I think the long form IRS 1099 rules are posted in a thread titled "1099" (how original) where I volunarily traveled down this rabbit hole. It can be confusing, but there are many useful links if you can find that thread. I would look up the language but I just won't have time this week.

[Randall948]

Settling is not canceling. They may decide to come back at you later for the rest, or sell the balance to a JDB.

Um, huh? Not quite sure what you mean here. I did some settlements in 2010 and some this year as well to the tune of around 20k written off so far. More to come.

What do you mean settling is not cancelling? I have settlement letters on bank letterhead and proof of payments to them. You mean to say that despite sending me these letters expressing what our agreed upon deal was that they might renege and come after me? Doubftful. Settling is (almost by definition)

To the OP I also didnt get my 1099c for the one I did in 2010. The settlement was done on 12/31 though and I suspect they might just include it in 2011 business and Ill get one next year. My acct told me to just ignore it unless I get a 1099 this year later and then I can always file an amended return.

The above advice about the letter doesn feel right to me as the 1099 includes what portion of the "forgiven debt" is interest. You would probably end up paying the wrong amount anyway.

[pencil1]

They only 1099 over a certain amount of imputed income. Were they small debts?

I'd double check the "identifiable event" language by the IRS. One of the identifiable events is that no collection activity has not occurred within three years. I don't think the creditor gets three years after the identifiable event. The event triggers a 1099 for the year in which the identifiable event occurs (I could be wrong, please check).

I think the long form IRS 1099 rules are posted in a thread titled "1099" (how original) where I volunarily traveled down this rabbit hole. It can be confusing, but there are many useful links if you can find that thread. I would look up the language but I just won't have time this week.

What is this amount?

[willingtocope]

$600. But...you still owe taxes on it...

[willingtocope]

What do you mean settling is not cancelling? I have settlement letters on bank letterhead and proof of payments to them. You mean to say that despite sending me these letters expressing what our agreed upon deal was that they might renege and come after me?

Does your written agreement specifically say they won't sell the balance to some JDB? Does it say "this hereby cancels your obligation to us"?

"Settlement" is NOT one of the IRS identifiable events that triggers a 1099c. According to the IRS, they have 3 years from the "last attempt at collection" to issue the 1099c...ie., "settlement". You may yet be in for a surprise...

[Randall948]

Does your written agreement specifically say they won't sell the balance to some JDB? Does it say "this hereby cancels your obligation to us"?

It says the second part in somewhat different language. This I would think pretty well implies the first part wont happen.

[options]

Settling is not canceling. They may decide to come back at you later for the rest, or sell the balance to a JDB.

At the risk of being a first-time poster taking on an admin, I registered to point out that this is incorrect. Settling means forgiving a certain unpaid portion of the claim. Since the original creditor cannot sell rights that they don't have, they cannot sell the right to resume collection on the forgiven portion of a debt to a third party, because they don't have that right to begin with -- that is what THEY settled for, i.e., gave in return. A settlement is a contract, and pursing collection of a forgiven amount would give the debtor a cause of action in court for breach of contract.

[willingtocope]

Settling means forgiving a certain unpaid portion of the claim.

Sorry, no...or at least maybe. It all depends on what is said in the letter (assuming there is one) the OC sends to you. First off, a letter IS NOT a contract unless both parties sign it. Second, unless the OC specifically states in their letter "this agreement hereby considered the debt cancelled and releives you of all further obligation", they are free to do whatever they want with the balance. For evidence, search the forum here. You'll find many instances of telephone and/or letter settlements NOT being what you think they are.

[options]

First off, a letter IS NOT a contract unless both parties sign it.

You may want to review some basic contract law. A contract doesn't usually need to be in writing, much less co-signed. A letter just makes it easier to prove. But, for instance, if you legally record them and can evidence oral agreement to settle, that is just as good.

Second, unless the OC specifically states in their letter "this agreement hereby considered the debt cancelled and releives you of all further obligation", they are free to do whatever they want with the balance.

If the letter says "settled in full", which a settlement letter always does, they are waiving all rights to further collection. You may want to review a legal dictionary for what a settlement is. A "cancellation of debt" is a tax law issue, not a contract law issue.

For evidence, search the forum here. You'll find many instances of telephone and/or letter settlements NOT being what you think they are.

That evidences misunderstanding (or breach) of settlement terms, not of what the law is, just like the fact that FDCPA violations are fairly common does not make them legal.

[willingtocope]

If the letter says "settled in full", which a settlement letter always does, they are waiving all rights to further collection. You may want to review a legal dictionary for what a settlement is. A "cancellation of debt" is a tax law issue, not a contract law issue.

If the letter says "settled in full", you paid it in full...otherwise, settlement letters normally say "settled for less than the full amount" and that's what will appear on your credit report. The question is....what becomes of the balance. And, a verbal contract or a letter is only valid if a court says it is. Not a done deal.

[ccposter]

If the letter says "settled in full", you paid it in full...otherwise, settlement letters normally say "settled for less than the full amount" and that's what will appear on your credit report. The question is....what becomes of the balance. And, a verbal contract or a letter is only valid if a court says it is. Not a done deal.

Hopefully your posting in this regard is meant to be helpful and not scaremongering. If you have specific examples of a post about a settled debt being pursued further, please provide a link.

These "settlement in full" statements from CAs are being posted all over the internet by settlement firms as examples of the deals they work out. If the OCs were reneging on them both they and the settlement firms would very quickly lose credibility.

I settled recently for 20%. The settlement firms usually get the settlement down to only 30% and then take a fee of about the same size. I called one just to feel them out and asked if any other document was provided involving more specific settlement terms. They said no, what is on the web is what they negotiate. No doubt a true statement.

I had a lawyer review my agreement. He said it is not something a lawyer would draw up but it was strong enough, that in case of ambiguity a contract is construed against the party that creates it and it would mean what a reasonable person thinks it would. Settled means settled.

[voidjudgment]

If the letter says "settled in full", you paid it in full...otherwise, settlement letters normally say "settled for less than the full amount" and that's what will appear on your credit report. The question is....what becomes of the balance. And, a verbal contract or a letter is only valid if a court says it is. Not a done deal.

Agreed, they sell off the remaining balance when settled for less than the full amount quite often.

[ccposter]

f the letter says "settled in full", you paid it in full...

That's what mine says. So it is settled. Thank you for clarifying.

Another thing. These settlement agreements (I got mine before paying) are sent through the mail. If they make a representation to obtain "money or property" by something sent by mail that turns out to be false, it is mail fraud.

Edited May 5, 2011 by ccposter

[willingtocope]

Hopefully your posting in this regard is meant to be helpful and not scaremongering. If you have specific examples of a post about a settled debt being pursued further, please provide a link.

These "settlement in full" statements from CAs are being posted all over the internet by settlement firms as examples of the deals they work out. If the OCs were reneging on them both they and the settlement firms would very quickly lose credibility.

Scaremongering? Well, yes, in a way. I do tend to think of myself as the Paul Harvey type...offering the "rest of the story".

Let's start from here: NONE of these people...CCs, CAs, JDBs, or debt fixers are your friends. NONE of these people give a tinkers damn about YOUR welfare. They make their money by giving you just enough information to "scare" you into giving them money. NONE of them are going to tell you the whole truth or even use words that you think you understand when in fact they mean something different.

Now...here's a scary truth. Debt settlement copmpanies are really collection agencies that use the "more flys with honey" approach to getting you to part with your money. They may or may not have a contract with the OC that says whatever money you give them, the OC will get part of it. Some take your money and run. If they do pay the OC, say 20%, and their fee is 20%, you've "serttled" for 40% (which you could have done on your own), Futhermore, you owe the IRS taxes on 80% (you don't get a break because you used a debt fixer).

Here's another. "Settled in full", from the OC, means you paid them 100% of what they asked...nothing less. If its not on the OC's letterhead, it didn't come from the OC. "Settled in full" from a CA or debt fixer means you paid them what they asked for...they cannot agree to something for the OC. The OC is free to pursue the rest of the debt as they see fit.

Now...if you want examples of the truth of what I just said...learn to use the "search" functions. There are 100's of posts on the board here describing exactly how others were taken in by these companies.

[voidjudgment]

f the letter says "settled in full", you paid it in full...

That's what mine says. So it is settled. Thank you for clarifying.

Another thing. These settlement agreements (I got mine before paying) are sent through the mail. If they make a representation to obtain "money or property" by something sent by mail that turns out to be false, it is mail fraud.

Should be under Frauds & Swindles. I personally would never pay a settlement agreement before I had the documentation authenticating the agreement.