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ANOTHER 1099 C Question


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Okay guys and gals. I’ve done some searching on here for 1099-Cs and can’t seem to find my answer. I hope that some of you that are pretty sharp would be willing to give me the benefit of your knowledge.

Please bear with me, besides being old, near sited, I’ve also lost the use of one hand in a long ago war, thus my typing skills are not up to par.

Back in 2008 I had a repo after a business failure and bad health (Quadruple bypass surgery). Now! Nearly three years later, I get a 1099 C in the mail. Normal mail, no sig required. Though this happened in 2008, they show date canceled as of 10-18-11

This is what it says: Account type= PLS Discharge - IRS FORM: 1099C

Date canceled: 10/18/11 - 1

Amount of debit canceled - 2 $26,500.00

Borrower was personally Liable - 5

For repayment of debt

Statement summary = Total amount of debt cancelled - 2 $26,500.00

Does this mean that I have been relieved of this debt? If not, then am I suppose to pay the full $26,500 or a portion there off?

My exwife and I were joint on this account and I have a divorce decree saying that she was suppose to pay it!

Also, in my research on here, I have found two schools of thought. One is if you get a 1099 C, they can no longer come after you or sell to another JDB etc. Which is true?

If I want to refute this to the IRS, how do I go about it? If I don’t, what can I expect? I am a hundred per cent disabled and receive SSDI directly into a bank.

I don’t believe their figures are correct, and after the repo, they NEVER notified me of selling the vehicle, nor what the balance was at the time. If I understand correctly, there was a possible UC or UCL law that they violated by not notifying me of the sale or balance.

I own a house I just bought last year, but of course there is no equity in the home and it takes most of my money as well as my heart medication. My wife owns a van that is in her name that she had before we were married, I have an 06 Dodge pickup that I am upside down on, and owe more than its worth. Plus it cost over a hundred dollars to fill the diesel tank every time. I think I could be considered insolvent bearley living month to month on SSDI. The home is homesteaded if that helps.

I would appreciate if any of you could tear this apart and make sence of it for me, what to expect etc. How long before the IRS would try to come after me and what they might try. Thanks again for all the great help.

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You are required to file the 1099-C with your 2011 income tax return. The IRS will consider all the cancelled debt as income for that tax year unless you file Form 982 to get some, or all, of the cancelled debt excluded.

You can do a search for Form 982 and for IRS Publication 4681 (explanation of exclusions) at the IRS web site.

The good news is that the debt has been cancelled, and no one can come back and sue you for it.

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Thanks for the input guys. Being that my income is none taxable, I never file yearly taxes. Also, question. Am I expected to pay the full amount or just a portion there off?

Hopefully, I can find a way to over turn this mess. It was a repo, they got their vehicl back, so, what am I paying on? Plus, I think they violated some kind of law by not notifying me of the sale or the balance afterwards. Again, thanks for the iput.

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I think if you contact your income tax preparer/accountant, you might get a nice surprise. From what I understand, if you are low income "enough" AND have substantial debt that you owe in your life (ie: your home, truck, etc.) the IRS will consider the amount you would have owed in taxes on that 1099'ed amount "null and void" in the eyes of the government.

But, like I said, talk to your income tax preparer/accountant (you can probably find free advice through local community groups or the VA, like another poster said...) .... you might get a nice surprise.

Other than that, I'm sorry I cannot give you more information. And if I'm wrong, please post and let us know. I'm just here for the food anyways... ;)

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You need to speak to a tax pro ASAP...this could have some bad implications for your SSDI...the 1099 is treated as income, which could put you over the income limits under SSDI.

By tax pro, I mean a CPA, EA or tax attorney - not the guys that hang out at Wal-Mart.

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You don't OWE one penny of the $26,000. That debt has been cancelled. No one can try to collect it again. The problem is that the IRS looks at the $26,000 as INCOME you received in 2011. You say you don't file taxes because your income from SSDI is below the standard for filing. This $26,000 that the IRS will consider INCOME will probably put you into a tax bracket that REQUIRES filing a return. You need to talk to someone who can advise you on your filing requirements. The IRS has already been given notice; so they will come after you if you are required to file and you don't.

Your SSDI probably won't be affected, as Social Security doesn't look at this as INCOME that you received, just the IRS and our wonderful tax code.

Edited by tinimic
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Thanks 1st Step. Guess my other question is, does that mean that I have to pay the whole $26,000 + or just interest on that amount or a portion there of. Thanks again guys, you have all been a great help.

I quote tinimic as they have the answer for you:

You don't OWE one penny of the $26,000. That debt has been cancelled. No one can try to collect it again.

I repeat what tinimic said: The debt has been CANCELLED. You do not owe one penny of the $26,000.

The problem is that the IRS looks at the $26,000 as INCOME you received in 2011.

That's correct! Because you DIDN'T pay that debt, the IRS looks at that $26K AS IF you pocketed it--otherwise known as "income"!! Thus, the IRS wants the tax you should pay from that "income".

You say you don't file taxes because your income from SSDI is below the standard for filing. This $26,000 that the IRS will consider INCOME will probably put you into a tax bracket that REQUIRES filing a return. You need to talk to someone who can advise you on your filing requirements. The IRS has already been given notice; so they will come after you if you are required to file and you don't.

This is also correct. You will need to file for 2011, because they filed the 1099 the IRS will be looking for your tax return to reflect that 1099 "income". You really need to call and consult with someone knowledgeable.

Your SSDI probably won't be affected, as Social Security doesn't look at this as INCOME that you received, just the IRS and our wonderful tax code.

As for that, I bow out.... and say again-- contact a professional. You should be fine though, so try not to worry too much about it....

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Thanks Mamma and the rest of you guys. I will be contacting someone in the next few days. I understand that I won'y owe a JDB or anyone else. But, as far as the IRS is concerned is what I have been trying to figure out how it comes into play.

I didn't know if the IRS was going to try to get the full amount from me or just a portion of it. That is my biggest concern right now, that plus figuring out how to refute this 1099C or get it thrown out. I've been trying to research some of the IRS forms that you guys told me about. Just not sure.

I just know that since my income has been non taxable in past years, I never filed because I was told that I didn't have to. I wouldn't get anything back if I did and there was the cost of filing. Thanks again all.

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26 grand? What did you have, a Rolls Royce? At some point this had to be adjudicated in a court to establish any liability on your part. Did they sue you? I think that would be required to prove the amount. There are specific laws concerning repo, and they have to jump through a lot of hoops. Take a look:

Texas Vehicle Repossession Laws | eHow.com

If they did not conform to every one of these steps, they will have a hard time making this legit. That opens them up to a lawsuit for attempting to collect an invalid debt. Could be an FDCPA violation or state. Again, i think you should contact your congresspeople.

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Thanks Legal. It was a truck and an RV. So far, the 1099C is on the truck. Don't know what the other OC is going to do on the RV. The SOL in TX is up on both in June or July of this year. Problem is I am now in OR where the SOL is six years, but I still claim TX as my residence as I owna home there and still have my TX DL.

Talked to CPA today, he told me that his cost was $250.00 and I would have to pay roughly $600.00 to state and federal if I end up paying them. And that is if I don't get a second 1099C.

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Thanks 1st Step. Guess my other question is, does that mean that I have to pay the whole $26,000 + or just interest on that amount or a portion there of. Thanks again guys, you have all been a great help.

The $26k would become misc income (Line 21 on the Form 1040).

You would then have to figure out what your income tax rate after taking standard or itemized deductions, credits, etc. What ever is left ends up being the tax you owe to the IRS.

$600 seems about right, but again I don't know the uniqueness of your tax situation.

FYI - the lowest tax bracket is 10% this year...

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Thanks 1st step. Because my income on disability is non taxable, I've been told that I don't have to pay taxes, so, I don't. Now this 1099C shows up and you know they inflated it and added interest and whatever else they could to help them.

I moved out West last year for health reasons, I am hoping I can do an itimeized deduction and claim moving expenses etc. to help knock some of this down. Any other suggestions are greatly appreciated, thanks again to you all.

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I moved out West last year for health reasons, I am hoping I can do an itimeized deduction and claim moving expenses etc. to help knock some of this down. Any other suggestions are greatly appreciated, thanks again to you all.

This is kind of a shot in the dark but do you have any dependent children you can claim?

If so you could ask your CPA if the income is considered earned income for the purposes of the Earned Income Credit (EIC). If it is you would actually get money back.

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Yes PC1978, as a matter of fact I do have. I have a new wife and a 16 month old baby girl. Thought I was to old to have kids, but, we ended up with one and I wouldn't change a thing. She has given me a new lease on life. You guys are all giving me some hope here, thought I might be sunk. I just hope I don't get that second 1099C. But then I guess a judgement could be worse. Thanks for the advice

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