Helena

1099c from Chase after they lost in court

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Just received a lovely 1099c from chase bank.

They tried to collect from me in 2010 in court and lost.

The amount is for $9800 and am fuming.

The nightmare continues.

Does my winning against them in court help me to prove to the IRS that this debt is wrong?

And if so, what are the steps?

Thank you so much for the help.

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Were you insolvent the year you went into default? If so file a form (Ithink its) 928. Look it up from the irs and write it off. Have a tax person do it for a couple of hundred bucks. Thats what I did for 2008.

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You'll have to dig in the archives to find it...but there was a post back 5-6 years about this very thing.  The creditor lost in court because they couldn't prove who the debt belonged to, issued a 1099c, and the IRS won in tax court.

 

One question though...why did Chase lose/

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If you were insolvent at the time do as @TomnTex suggested. Taking this route will be much easier than trying to prove who is right or wrong. Pay a tax professional a little extra if you are not sure you qualify. 

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Were you insolvent the year you went into default? If so file a form (Ithink its) 928. Look it up from the irs and write it off. Have a tax person do it for a couple of hundred bucks. Thats what I did for 2008.

 

Small correction the form is IRS 982.  The instructions is Publication 4681.    

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Just received a lovely 1099c from chase bank.

They tried to collect from me in 2010 in court and lost.

The amount is for $9800 and am fuming.

The nightmare continues.

Does my winning against them in court help me to prove to the IRS that this debt is wrong?

And if so, what are the steps?

Thank you so much for the help.

 

Maybe.  WHY did Chase lose?  Did the court rule the debt was not yours?  Or did the court rule their evidence was not sufficient to support their case?  

 

Unfortunately tax law is clear than any debt you do not pay over the amount of $600 is to be reported to the IRS as income to you.  Perusing some other forums shows that it is Chase's 1099-c season and they send these out on charged of uncollectable debts during filing time for taxes.  Even if 3 years late.

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@TomnTex

 

Were you insolvent the year you went into default? If so file a form (Ithink its) 928. 

 

 

Hey, all.

 

Sorry to jump in here, but my case is related.  I just received a 1099-C and notice from Chase that they will no longer pursue an alleged account for about 8K .  My understanding is that Chase recently got into big trouble for crooked collection tactics and JDB sales, and has agreed to sanctions from the government.  TomnTex asked the thread originator about insolvency for the year he/she went into default.  However, my understanding is that insolvency status only matters for the period just prior to the debt being forgiven, not the default date (unfortunately).  In other words, if Chase wrote off 8K of my alleged debt on 12/31/13, but I allegedly went into default in 2010, my financial situation for late 2013 is all that will be pertinent on Form 928, correct?

 

Thanks for any insights / input!   :-)

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This is not entirely clear, but, Pub 4681 includes an "Insolvency Worksheet" which has field labeled "Date debt was Cancelled".  The latest 1099c has a "Date of Identifiable Event" field.

 

The implication is, you are responsible for claiming the found income in the tax year in which the debt was canceled...which should correspond to the year in which the identifiable event occurred.  In other words, prove you're insolvent now...not 3 years ago when you stop paying.

 

Of course...this is my attempt to apply logic to the IRS...a complete oxymoronic task.  YMMV.

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You're right, it's 1099c season, they say Chase is sending out millions.

Thanks for all your thoughts. Insolvency sounds like a good idea. Can't imagine I wouldn't qualify for that.

But if I don't, there has to be a way to show to the IRS that the amount is wrong

My situation is so wierd, but the bottom line is, I don't owe chase that much. Not even close.

Here's the back story: in 2008, chase slammed my card from 0% to 28% overnight. After dozens of calls I went into a special payment program with them with 10% interest which I made a few payments on but I never received any statements of payment on the new agreement (it was all done verbally by phone and i paid electronically) and the regular statements kept coming with 28% interest and $39 late fee tacked on. I went into dispute with them and everything stopped. Strange yes? So I try to call them and figure it out but to no avail. I can't even get a balance amount. What can I do at that point? I'd already sent them hundreds of dollars that weren't being recorded, why would I send a penny more? I checked credit report and nothing.

3 years later, I get a judgement default in the mail for 9800! I was never even served. They fake served me at my job, I got an affidavit from employee who was named as taking the summons and got reversed in court. And the day they're supposed to show up in court, they dismiss case.

Now the 1099c for 9800. I thought if I show IRS case information, fake summons with affidavit, court reversal, etc., they would know chase was acting fraudulently. But on the other hand, don't know if IRS cares.

Thanks for listening to my strange credit story.

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@Helena  You're right.  The IRS won't care.  But...the good news is...the amounts on the 1099c are supposed to be divided into "principal" and "interest and penalty"...with the interest and penalty reported separately in Box 3.  You only owe taxes on the principal.

 

ETA.  Sorry...just reread the IRS gibberish.  You would not owe taxes on the interest and penalties IF they would have been deductible if you had paid them.  In other words, you probably owe taxes on the whole amount. 

 

You might want to consult with a tax professional.

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Interesting. How do credit card companies do that?

Mine must be 90% interest.

I only received the letter, not the 1099c , which I'm sure is coming soon.

Will be interesting (scuse the pun) to see what they write.

Anyone know the correct way to attach to 1040? Do you put in the amount, then back it out?

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Here's the back story: in 2008, chase slammed my card from 0% to 28% 

 

This is off topic to a certain extent, but what you said really sums it up why many of us are here. For whatever reason after the "Bankruptcy Abuse Prevention and Consumer Protection Act 2005" was passed many credit card companies decided to raise the rates on credit card balances. Many did it within a few months and most did it within a couple years of this law. For some reason those in control decided this legislation allowed them do whatever the wanted. I for one can tell you that if the major banks hadn't taken rates from a reasonable rates to 25% - 30%+ I probably would never have ended up here.

 

My opinion is that those in control looked at some easy bonuses based on short term profits and said to hell with the future. Other than instant profits I still can't understand why they did something so detrimental to the future of their businesses and the overall economy. Since I have been reading forums like CIC this has been a constant cause of people ending up in inescapable debt. A lot of this occurred before the economy crashed and I'm sure played a part in it crashing. 

 

Sorry to get off topic, but this is a subject that has been ignored the past few years. 

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So a question sort of on topic here.  If you pay taxes on an alleged debt that they send you a 1099C and it is later found that the debt was not yours, can you sue the OC/CA/JDB for the amount you had to pay in taxes?  Can you file an amended tax return to get that money back?  Or is it just lost forever because of their shoddy record keeping?

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@schmitzy84 Yep...you can file an amended return, but expect to get audited.  And, if the IRS decides they want to keep your money, you can sue the creditor.

 

Really have no idea what your odds of winning are, in either instance.

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@rink21  Problem is...there are many people involved here.

 

Civil Court:  Creditor prove the debtor owes money.

 

Tax Court:  Debtor prove you don't owe taxes on money the creditor forgave you.

 

Since, in issuing a 1099c for forgiven debt, a creditor takes a charge against income (i.e., loss) for tax purposes, the IRS is hard to convince.

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Sooooooo. After hours of reading, and talking to 3, yes 3 different tax accountants, I have found this to be true: no one knows for sure!

There is IRS law and a case I found, but can't say for sure if another case supersedes it.

Here it is:

XVII. VIOLATIONS: AMOUNT OF INTEREST IN DEBT

The Internal Revenue Code treats cancellation of debt as income under specified circumstances. 26 U.S.C. �6050P; 26 C.F.R. �1.6050P. The owner of a debt who cancels it must file an informational form 1099-C if the amount cancelled exceeds $600. Generally, cancellation of debt is income unless (a) there is a bona fide dispute concerning the debtor’s obligation to pay, (B) the debtor is insolvent, © the debt is discharged in bankruptcy. The amount that might constitute income is only the principal amount. On a credit card debt this is the purchases and cash advances. The failure to collect interest, finance charges, penalties, and fees is not income and has no tax consequence. See Debt Buyers’ a$$’n v. Snow, 06-101, 2006 U.S.Dist. LEXIS 6527 (D.D.C., Jan. 30, 2006). Because of this, the portion of the debt that consists of “principal” as opposed to “interest” is material, and falsely stating the amounts should violate 15 U.S.C. 1692e. Debt buyers traditionally have not obtained the requisite information from the owner of the debt to make an accurate report. See Debt Buyer’ a$$’n v. Snow, 06-101, 2006 U.S.Dist. LEXIS 6527 (D.D.C., Jan. 30, 2006). They are obligated to do so if it is available.

So, they're talking about debt buyers but same should go for Original Creditor. They're adding on interest.

I cannot believe it's another case of big banks getting away with millions of tax write offs while consumers pay taxes on millions of bulls**t interest tacked onto credit card statements. Wait, what am I saying? Of course I can imagine it! That's why I'm here in the first place!

Guess I will have a long letter and lots of papers clipped to my tax return.

I hope this is helpful and I pray IRS looks at my returns and stamps them approved.

If not, I guess I would see Chase in tax court? Oi vey.

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Chase has been under heavy scrutiny in their credit card and collections departments. They spent years suing over debts they could not prove existed. Eventually, the United States Office of the Comptroller of the Currency issued a Cease and Desist Order, fined them, and is carefully monitoring their actions. Please see:  http://www.bankrate.com/financing/credit-cards/occ-slams-chase-debt-collection/

 

In addition, the Consumer Financial Protection Bureau caught Chase in charging its credit card customers for credit monitoring services they did not request and/or receive.  Please see:  http://www.consumerfinance.gov/newsroom/cfpb-orders-chase-and-jpmorgan-chase-to-pay-309-million-refund-for-illegal-credit-card-practices/

 

If two separate government regulatory agencies have said Chase credit card accounts contain invalid charges, or cannot be proven in a court of law, why assume what they report to the IRS is accurate? I think a valid course of action is to file a complaint with the Comptroller of the Currency if you feel the 1099-C represents any portion of a debt you do not owe. If they tacked on non contractual fees, inflated interest, or you don't believe all or part of the charges are not yours, then you have a fair complaint.  After all, they reported you to the government, two can play at that game...

 

Please see:  http://www2.helpwithmybank.gov/complaints/index-file-a-bank-complaint.html

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Soooooo, guess I will attach all the documentation I have (chases fake service, judgment reversed by judge, next case dismissed, third try chase bowed out, plus statements showing payment to them while they were suing me, and a looooong letter explaining things) and not put the 9k as income and cross my fingers.

At worst, irs will laugh at me and say I owe taxes (plus interst and penalties) and I need to sue chase and I'll pretty much where I am now.

At best, they will approve my dispute, the nightmare will be over. Unless chase can come back at me and say yes, you do owe that?

How would that work? If they issued the 1099c saying they wouldn't collect anymore.....

I'm starting to lean towards just paying the damn thing just to make this over.

But, if we little guys don't start standing up, when will this ever change?

Thanks for all your thoughts and comments.

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Helena you could just pay the tax fill out a 982 insolvancy and check your credit reopts from all 3 credit agencies to see if the OC JBD reportedit all correctly that falls under the FCRA if they reported anything wrong the violations rack up fast also you probably have a claim with the FDCPA violations. you can sue under those and in the settlement get them to correct the 1099c and void it maybe put some money in your pocket also.

 

If not you still might be more wise to claim the 1099c and sue for maybe breech of settlement and l believe you would have damages because of the 1099c tax you paid, you have a few strategies. Remember did they ever validate the debt to prove you ever owed it?

The FDCPA is not relevant here. The OP is dealing with an OC(Chase). 

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