creonxxx

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But the debt collector does not get anything if the debtor insists on not paying and they issue a 1099-C. This only works if they can scare the debtor by lying and hoping that the debtor does not know how income taxes work (which unfortunately in this country is most people).

There's a small amount they make in filing depending on what they claim as a loss but it's a gamble for them. If they file for the amount they paid for the debt the amount they get back is a joke. It would be under a 100.00 dollars.

I'd press for their actual loss as I never contracted with them. The debt was discharged as I understand the definition in 2003. First missed payment? This company began in 2009. If it is proven they've filed a fraudulent amount they suffer a possible audit. From there on out it also becomes questionable if they can continue to try and collect on the debt which was their hopeful bread and butter to begin with. Would they shove it in another portfolio and send it on it's way? It's hard to believe a debt collector wants to take a loss on a debt they can hammer and hammer someone over and sell to the next bidder.

Whats comical to me is if you ask any debtor which amount they'd want to pay if they were forced into paying they'd take the tax. These idiots play the game hinting it's just best to give them a reduced amount against the larger amount they are claiming. The way this woman from DRS set the conversation up she was allegedly finishing up paperwork to file the 1099 but wanted out of the kindness of her heart to allow me to pay 3400 to her that day to avoid tax's on the larger amount of over 8,000. Knowing now what really happens with a 1099 filing even a fourth grader would ask her why she even bothered calling. Just fill the stupid form out and lets see what happens. The tax is less than what she wanted me to give her but I guess I'm suppose to be scared they mentioned the words IRS, wage garnishment, Liens, and Seizures. Of course it's scary but I don't like to be threatened. I'm so beyond through with that tactic. It's a great attempt at extortion but I'm not the type that rolls over. Once she threw out the threats she hung up. Had they intended to file looking at the years of delinquency they would have just tried to file a large amount and see what happened to blindside me. Doing it this way I'm very prepared should they do it.

You are so right about how so many of us have very little knowledge about the IRS and how this game works. This website is golden with so much valuable information and bright individuals. I thought I'd heard every threat and scare tactic by all of these scumbags but this one was new. I am going to file a complaint with the FTC and both my AG and South Carolina's AG based not only on the threat but really focus in on the fact that there was a flat out verbal refusal of DV. Up until that call I'd never heard of this company.

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Only your original creditor (Citibank) can issue a 1099-C, not the collection agency. For her to say that she was going to do so is a FDCPA violation.

"Wagner v. Client Services, Inc., " 08-5546, 2009 U.S. Dist. LEXIS 26604 (E.D. Pa. March 26, 2009).

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We have two dynamics in play here. The first is the JDB trying to pass themselves off as the better of two evils (payig them versus paying the IRS) and the second is actual Tax Law. Neither one works to the JDB's favor.

First of all - you state that the debt is OOS for suit purposes. That means the JDB can only get paid through one of two emotions - fear or sympathy. They tried sympathy (do the right thing, my kids won't have a Christmas unless you pay, think of the starving pygmies in Africa... the whole thing) and it didn't work. Now they are working on fear.

Everyone fears the IRS, but the IRS works only within the laws and within their own procedures as enumerated in the Internal Revenue Manual (IRM). The IRM is posted on the IRS web site. While it is true the IRS has a lot of collection power, there is gobs and gobs of information the JDB is deliberately not telling you, and for good reason - they want you to be more afraid of the IRS than them. They know they are powerless with an OOS debt, so they are trying to shift your fear to the IRS and pass themselves off as the better alternative. Here are the facts:

As to the issuance of a 1099C: Yes, they can issue one and yes, you

have to address it on your tax return... BUT it (a) doesn't happen overnight and (B) owing tax on the 1099C amount is not automatic. If they issue their 1099C today, it will be added to your 2012 income. That tax return isn't due until April 15, 2013 - with extensions to October 15, 2013. Let's assume for the time being you owe money on the 2012 return and it's all because of the 1099C. It would take the IRS, working fast, 6 months after you file to even get close to the lien and levy stage. You will have ample opportunities to work out an Installment agreement with them and pay the tax and that will stop the IRS collection efforts.

But, owing tax on the 1099C income is not automatic - Internal Revenue Code (IRC) Section 108 lists exceptions - one of them being the Continued Insolvency of the debtor. Basically, do a Balance Sheet as of the time the debt was Cancelled. Did the Cancelled debt all of a sudden offset all the other debts you have that exceed your assets? If you are upside down on your mortgage, almost certainly not. In that case you would simply file Form 982 with your 2012 tax return and that's the end of it. You owe the JDB nothing and you owe the IRS nothing.

As to paying the JDB anything... keep in mind that any payment will probably re-set the debt within the SOL for suit and you can expect to be sued.

Now, let's assume you do pay tax on the cancelled debt.... Assuming your tax rate is 28% Federal and 5% State, you would be paying a combined 33% of the debt amount in taxes on the debt versus 100% of the debt amount if you paid the JDB. You save 67% by telling the JDB to go to Hell and issue the 1099C.

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We have two dynamics in play here. The first is the JDB trying to pass themselves off as the better of two evils (payig them versus paying the IRS) and the second is actual Tax Law. Neither one works to the JDB's favor.

First of all - you state that the debt is OOS for suit purposes. That means the JDB can only get paid through one of two emotions - fear or sympathy. They tried sympathy (do the right thing, my kids won't have a Christmas unless you pay, think of the starving pygmies in Africa... the whole thing) and it didn't work. Now they are working on fear.

Everyone fears the IRS, but the IRS works only within the laws and within their own procedures as enumerated in the Internal Revenue Manual (IRM). The IRM is posted on the IRS web site. While it is true the IRS has a lot of collection power, there is gobs and gobs of information the JDB is deliberately not telling you, and for good reason - they want you to be more afraid of the IRS than them. They know they are powerless with an OOS debt, so they are trying to shift your fear to the IRS and pass themselves off as the better alternative. Here are the facts:

As to the issuance of a 1099C: Yes, they can issue one and yes, you

have to address it on your tax return... BUT it (a) doesn't happen overnight and (B) owing tax on the 1099C amount is not automatic. If they issue their 1099C today, it will be added to your 2012 income. That tax return isn't due until April 15, 2013 - with extensions to October 15, 2013. Let's assume for the time being you owe money on the 2012 return and it's all because of the 1099C. It would take the IRS, working fast, 6 months after you file to even get close to the lien and levy stage. You will have ample opportunities to work out an Installment agreement with them and pay the tax and that will stop the IRS collection efforts.

But, owing tax on the 1099C income is not automatic - Internal Revenue Code (IRC) Section 108 lists exceptions - one of them being the Continued Insolvency of the debtor. Basically, do a Balance Sheet as of the time the debt was Cancelled. Did the Cancelled debt all of a sudden offset all the other debts you have that exceed your assets? If you are upside down on your mortgage, almost certainly not. In that case you would simply file Form 982 with your 2012 tax return and that's the end of it. You owe the JDB nothing and you owe the IRS nothing.

As to paying the JDB anything... keep in mind that any payment will probably re-set the debt within the SOL for suit and you can expect to be sued.

Now, let's assume you do pay tax on the cancelled debt.... Assuming your tax rate is 28% Federal and 5% State, you would be paying a combined 33% of the debt amount in taxes on the debt versus 100% of the debt amount if you paid the JDB. You save 67% by telling the JDB to go to Hell and issue the 1099C.

These responses are fantastic! You guys are great. As I said I really had thought I'd dealt with every threat. Until this whole 1099 thing. My most comical moment with a JDB was some woman from Vanderbilt & Associates who told me they were sending a process server over to my home as we were speaking. I started laughing and she started yelling at me. When I told her all that anger was a turn on and wanted to know what color her panties were she hung up on me. Uh, I waited all day for that summons hahahaha. and I'm still waiting!!!

But back to the 1099. You guys have me all set and I feel very prepared should it happen THANK YOU!! If I ever hear this threat again I'm gonna have fun with it.

Edited by creonxxx

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Creon - I'm glad to see that you've found some good info on the board about the 1099-C. Speaking from my own personal experience, it's no fun to get one in the mail but they are not nearly as scary when you arm yourself with knowledge. Please keep in mind that there is a lot of misinformation out there about the 1099-C. In her report to Congress, the Taxpayer Advocate identified 1099-Cs as one of the biggest issues facing taxpayers.

Here are some things you might want to do/keep in mind...

  • As one of the other members suggested, look over the IRS's info on 1099-C - you can find this on their website.
  • If you get a 1099-C in the mail, don't ignore it. It may take a while but the IRS will eventually determine that you didn't declare income and send you a letter. If you owe additional taxes because of cancellation of debt income, pay what you can and then work with the IRS on a payment plan - they are usually very reasonable.
  • Complete the IRS Insolvency worksheet (Form 982) to determine to what extent you may be insolvent (your obligations outweigh your assets) as this can reduce the amount of income you have to declare.
  • It is possible that this JDB violated the FDCPA but, even if they did, this is a separate issue from the 1099-C. Because you brought up the SOL, they may have decided to discontinue collection activity on the account (one of the 8 triggers for issuing a 1099-C) so they may actually be intending to issue the 1099-C.
  • Take a look at the recent (2012) Tax Court decision Stewart v Commissioner as it deals with a 1099-C that was issued for a debt that was beyond the statute of limitations. The argument made in this case may or may not apply to your situation but it's an interesting read.
  • Keep in mind that, in many cases, a creditor or junk debt buyer can continue to attempt to collect on a debt that they have issued a 1099-C (some state laws prohibit this) but their continued collection efforts would indicate that the debt was not actually discharged and could be used to support your position that no income was earned.

Good luck!

Edited by mrdoon
Wanted to adjust the formatting of bulleted list to make it easier to read.

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Creon - I'm glad to see that you've found some good info on the board about the 1099-C. Speaking from my own personal experience, it's no fun to get one in the mail but they are not nearly as scary when you arm yourself with knowledge. Please keep in mind that there is a lot of misinformation out there about the 1099-C. In her report to Congress, the Taxpayer Advocate identified 1099-Cs as one of the biggest issues facing taxpayers.

Here are some things you might want to do/keep in mind...

  • As one of the other members suggested, look over the IRS's info on 1099-C - you can find this on their website.
  • If you get a 1099-C in the mail, don't ignore it. It may take a while but the IRS will eventually determine that you didn't declare income and send you a letter. If you owe additional taxes because of cancellation of debt income, pay what you can and then work with the IRS on a payment plan - they are usually very reasonable.
  • Complete the IRS Insolvency worksheet (Form 982) to determine to what extent you may be insolvent (your obligations outweigh your assets) as this can reduce the amount of income you have to declare.
  • It is possible that this JDB violated the FDCPA but, even if they did, this is a separate issue from the 1099-C. Because you brought up the SOL, they may have decided to discontinue collection activity on the account (one of the 8 triggers for issuing a 1099-C) so they may actually be intending to issue the 1099-C.
  • Take a look at the recent (2012) Tax Court decision Stewart v Commissioner as it deals with a 1099-C that was issued for a debt that was beyond the statute of limitations. The argument made in this case may or may not apply to your situation but it's an interesting read.
  • Keep in mind that, in many cases, a creditor or junk debt buyer can continue to attempt to collect on a debt that they have issued a 1099-C (some state laws prohibit this) but their continued collection efforts would indicate that the debt was not actually discharged and could be used to support your position that no income was earned.

Good luck!

Thanks again for all the great advice and information. Haven't gotten any thing and as I pointed out after doing some research on this particular C.A. they are well known for using the 1099c as a threat. If there is a filing I am ready and prepared to deal with it.

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Burden of Production

Pursuant to section 6201(d), if an information return, such as a Form 1099-C,

serves as the basis for the determination of a deficiency, the burden of production

may shift to the Commissioner. Del Monico v. Commissioner, T.C. Memo. 2004-

92

Section 6201(d) provides that in any court proceeding, if a taxpayer asserts a

reasonable dispute with respect to the income reported on an information return and the taxpayer has fully cooperated with the Commissioner, then the Commissioner has the burden of producing reasonable and probative information in addition to such information return.

see also Kleber v. Commissioner, T.C. Memo.2011-@233.

A debt is deemed discharged the moment it becomes clear that

such debt will never be repaid. Cozzi v. Commissioner, 88 T.C. 435, 445 (1987).

The question as to the year for which a taxpayer realized COI income is one

of fact to be determined based on the evidence. See Policy Holders Agency, Inc. v.- 6 -Commissioner, 41 T.C. 44, 47 (1963); Callan Court Co. v. Commissioner, T.C. Memo. 1965-261.

t a mere bookkeeping entry by a

creditor does not necessarily result in COI income at the time of such entry. See Cozzi v. Commissioner, 88 T.C. 435 (1987).

The tax codes use a 36 month non payment test period to determine discharge date for information purposes. Kleber v. Commissioner, T.C. Memo. 2011-233

In general, a State statute of limitations does not extinguish an underlying

debt obligation, but simply provides an affirmative defense to an action by the

creditor. Miller Trust v. Commissioner, 76 T.C. 191, 195 (1981).

T.C. Summary Opinion 2012-46

UNITED STATES TAX COURT

DAVID SCOTT STEWART AND CARLA ANNETTE STEWART, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10374-11S. Filed May 21, 2012.

David Scott Stewart, pro se.

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Only your original creditor (Citibank) can issue a 1099-C, not the collection agency. For her to say that she was going to do so is a FDCPA violation.

"Wagner v. Client Services, Inc., " 08-5546, 2009 U.S. Dist. LEXIS 26604 (E.D. Pa. March 26, 2009).

Did you download a copy of that or is any content online? I'd like to see it (no access to Lexis) or at least get a reference to applicable tax code regulations. Ya know, something to read (to the collectors).

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When I told her all that anger was a turn on and wanted to know what color her panties were she hung up on me. Uh, I waited all day for that summons hahahaha. and I'm still waiting!!!

But back to the 1099. You guys have me all set and I feel very prepared should it happen THANK YOU!! If I ever hear this threat again I'm gonna have fun with it.

hmm may have something there........she has not validated the color of her panties yet...Not sure what statute that comes under. :lol::lol::lol:

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Did you download a copy of that or is any content online? I'd like to see it (no access to Lexis) or at least get a reference to applicable tax code regulations. Ya know, something to read (to the collectors).

If you google the case name, you will get a link to it.

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If you google the case name, you will get a link to it.

Originally I got the Lexis paywall. But more time at this got a case file. I think your statement is still in error, but for a different reason than I originally thought. This is a case where Citibank is the CURRENT creditor in addition to being the original creditor. When you said "original creditor" my understanding is that you are saying "no JDB can file a 1099-C" and that it must go back to the original creditor who no longer owns the debt. This case does not establish that since there is no difference between current creditor and original creditor. All that this case really shows is that the creditor is not required to report as much as the collection agency stated was required in the letter. I say that it is the current creditor that is required to make the report, but as shown, not required to report all amounts, and that it may even be less than the $600 minimum requirement.

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Yes, JDBs can and do send out 1099-C statements, although it apparently is a FDCPA violation to make a false statement to a debtor about the debtor's tax obligation.

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Yes, JDBs can and do send out 1099-C statements, although it apparently is a FDCPA violation to make a false statement to a debtor about the debtor's tax obligation.

But when is doing that a violation. I've read in the past that if a debt is disputed, they cannot. But that sounds too easy.

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But when is doing that a violation. I've read in the past that if a debt is disputed, they cannot. But that sounds too easy.

This quote is from p. 57 of "Fair Debt Practices Collection Act 2012" by Daniel Edelman, to which there is a link on this website.

"Misrepresentation of a debtor's rights or liabilities under the Internal Revenue Code in connection with the collection of a debt is an FDCPA violation.

"Kuehn v. Cadle Co., 2007 U.S. Dist. LEXIS 25764 (M.D. Fla. April 6, 2007).

This includes a statement that a 1099 must be issued when a 1099 is not required. "Wagner v. Client Services," (The case I previously cited) "Sledge v. Sands, 182 F.R.D. 255 (N.D. Ill. 1998).

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My daughter was contacted by this company this week about an aledged credit card debt which was incurred between 1993 and 2003. She lives in North carolina which has a fairly strict Fair Debt Collection Act. She was threatened with an IRS audit, the sending of a 1099c and garnishment of her income tax return. When asked why the IRS was involved she was told that they were cracking down on people who owed money because the federal Government was almost broke. What a credit card debt has to do with the IRS was lost on us. After researching Dynamic recovery Solutions she discovered that a number of other people have been threatened with IRS audits, etc. as well. Her research indicated that this clearly violated North Carolina's Fair Debt Collection Act as well as the Federal Fair Debt Collection Practices Act. (FDCPA) She immediately emailed and mailed a "cease and desist" letter pursuant to to the FDCPA and she is filing a complaint with the NC Attorney General's Office, the Federal Trade Commission and the BBB . Her research has shown that this company has used this tactic to get people to make a payment thereby re-opening the statute of limitations for filing an action in the court system to collect the alledged debt. By the way, her research shows that a number of people have had similar contact for debts that they had never even occurred. Beware of this company! They will use any means possible, including illegal ones, to scare people into paying them money. I have no idea how they manage to have an A- rating with the BBB

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There is no doubt. In fact that's pretty much a given. I'd do it as my starting point not expecting one ounce of help or support from them but as the time moves on dealing with the one who issued it they could see a time line that immediately included my complaint. I'm sure a tax lawyer would ask me if I had contacted the IRS yet to have it on some record that I know the filing was improper.

The more that I have read about this particular agency ( Dynamic Resolution ) the more I can see it is part of their game to threaten with the whole IRS is going to crush you. I don't know how big of a company they are but I'd imagine they'd have to attempt what portfolio tried and send in tons all at once if they wanted to make some money. Noting it's a growing issue with some JDB they may want to not even go there.

The CFPB has taken over duties from the FTC for Credit Card Debt. I think some complaints to them will maybe help.

They are trying to get you to pay. I think you should counter with "I know your boss is listening and their failure to stop you from making these statements shows they have procedures to willfully harrass and violate the FDCPA. If you submit a false 1099 to the IRS you could be liable to penalties outlined in the IRS statutes. What is your name for the record? and then transfer me to your compliance coordinator." Maybe that will help also get a recorder it may actually pay for itself.

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My daughter was contacted by this company this week about an aledged credit card debt which was incurred between 1993 and 2003. She lives in North carolina which has a fairly strict Fair Debt Collection Act. She was threatened with an IRS audit, the sending of a 1099c and garnishment of her income tax return. When asked why the IRS was involved she was told that they were cracking down on people who owed money because the federal Government was almost broke. What a credit card debt has to do with the IRS was lost on us. After researching Dynamic recovery Solutions she discovered that a number of other people have been threatened with IRS audits, etc. as well. Her research indicated that this clearly violated North Carolina's Fair Debt Collection Act as well as the Federal Fair Debt Collection Practices Act. (FDCPA) She immediately emailed and mailed a "cease and desist" letter pursuant to to the FDCPA and she is filing a complaint with the NC Attorney General's Office, the Federal Trade Commission and the BBB . Her research has shown that this company has used this tactic to get people to make a payment thereby re-opening the statute of limitations for filing an action in the court system to collect the alledged debt. By the way, her research shows that a number of people have had similar contact for debts that they had never even occurred. Beware of this company! They will use any means possible, including illegal ones, to scare people into paying them money. I have no idea how they manage to have an A- rating with the BBB

WOW! Lets see, where to begin:

"they were cracking down on people who owed money because the federal Government was almost broke"

Really! How is cracking down on debt owed to corporations who use the tax loopholes to avoid taxes going to make them not broke? The IRS nor the Federal Government is in the business of collecting consumer debts. They only collect government debts and taxes and are only interested when a debt is forgiven and hence, considered as income.

She was threatened with an IRS audit

I would have asked how they planned on doing that without violating the FDCPA. As per IRS rules, the debt is not considered income until a 1099-C triggering event has passed and hence, a 1099-C has to be issued. Hence, there is nothing to audit and if they make a claim to the IRS that there is, I would like to be the fly on the courtroom wall when the judge smacks this company back to next week.

An IRS audit occurs either through a computer program that determines if the return has a high enough threshold to be able to bring in more money for the IRS, if the IRS has credible information that someone is cheating, or if you qualify for one of the programs designed to make the computer algorithms. They can only audit less than 1% of the returns filed due to manpower. Hence, they have to make every audit count. That is why if a audit in the last 2 years produced no extra tax due and you get another audit notice, they want to hear about it and put a stop to it. They do not have the resources to be chasing wild claims from a JDB.

Not only that, but to get to audit stage, they first have to issue the 1099-C and your daughter would have had to not reported the income or filed a form 982. Most likely, if that happened, they would do a mail audit to inform you of the added tax and the reason.

This company is going to find itself on the wrong end of a class action FDCPA lawsuit one of these days for its claims on what the IRS can and cannot do if it keeps this crap up.

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WOW! Lets see, where to begin:

"they were cracking down on people who owed money because the federal Government was almost broke"

Really! How is cracking down on debt owed to corporations who use the tax loopholes to avoid taxes going to make them not broke? The IRS nor the Federal Government is in the business of collecting consumer debts. They only collect government debts and taxes and are only interested when a debt is forgiven and hence, considered as income.

She was threatened with an IRS audit

I would have asked how they planned on doing that without violating the FDCPA. As per IRS rules, the debt is not considered income until a 1099-C triggering event has passed and hence, a 1099-C has to be issued. Hence, there is nothing to audit and if they make a claim to the IRS that there is, I would like to be the fly on the courtroom wall when the judge smacks this company back to next week.

An IRS audit occurs either through a computer program that determines if the return has a high enough threshold to be able to bring in more money for the IRS, if the IRS has credible information that someone is cheating, or if you qualify for one of the programs designed to make the computer algorithms. They can only audit less than 1% of the returns filed due to manpower. Hence, they have to make every audit count. That is why if a audit in the last 2 years produced no extra tax due and you get another audit notice, they want to hear about it and put a stop to it. They do not have the resources to be chasing wild claims from a JDB.

Not only that, but to get to audit stage, they first have to issue the 1099-C and your daughter would have had to not reported the income or filed a form 982. Most likely, if that happened, they would do a mail audit to inform you of the added tax and the reason.

This company is going to find itself on the wrong end of a class action FDCPA lawsuit one of these days for its claims on what the IRS can and cannot do if it keeps this crap up.

Ok Coltfan down boy, down. Just calm down, we all know you'd love to have them after you!!:mrgreen:

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It's just too bad they make all these threats verbally and not in writing. If anyone has a tape of this I am sure the IRS Inspector General would gt a kick out of listening to it.

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It's just too bad they make all these threats verbally and not in writing. If anyone has a tape of this I am sure the IRS Inspector General would gt a kick out of listening to it.

Send um my way.............I record all collections calls.:twisted:

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My experience with this dirtball company taught me a lot when it comes to the 1099c threat. It would have been great to get them recorded or to even bait them into a corner about the threat but the way it was presented to me the caller quickly tossed the threat out there and then she slammed the phone down. I don't know who talks these callers into pulling this knowing it's illegal. You'd think the person making the call would at least ask if it's legal to say that but then again :roll:

At this point if you haven't gotten the 1099c threat as of yet just make a note about this company being one of them that will add that little gem in all their nonsense so you can get it recorded.

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