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1099-C's and Credit Reporting. It ain't over 'till it's over.


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I've posted a few times on this topic and came across an interesting article and comments from a leading credit industry expert and directly from Experian on the matter tonight. I had to post this for your thoughts and comments.

 

After receiving an IRS 1099-C form from a creditor, also known as a "Cancellation of Debt" form, there is a debate on the creditor's continued legal right to collect, and how the matter should be reported to the credit bureaus. Regardless of where you (or court opinions) stand on the issue of future debt collection, the secondary issue of credit reporting appears to handled differently by different banks. One bank may report a balance of $0 after issuing a 1099-C, while another will continue to report the full balance as still due and payable.

 

The following article, written by credit expert John Ulzheimer, sides with the position of an account being reported as "Balance Due $0" after the issuance of a 1099-C. Even more interesting, Experian's Vice President of Public Education stated on this topic:  “If the lender agrees to settle the debt for a lesser amount, the account should be reported with a zero balance because the consumer no longer owes anything to the lender. The tax burden is between the consumer and the IRS."

 

Here's the full article:  http://blog.smartcredit.com/2012/11/01/why-did-i-get-irs-form-1099-c-from-my-credit-card-issuer/

 

Has anyone sent a copy of their 1099-C to a credit bureau and successfully had them change a reporting balance to $0 ?

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just a little FYI the article did not mention. If you fill out form 982 to file for insolvent, don't forget to put the amt on line 10a. Do NOT add the 1099 amount into your income. And fill out and send in the insolvency worksheet just to be on the safe side incase of an audit.

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  • 1 month later...

An update on this issue. Good news - I submitted a 1099-C to one of the credit bureaus on a closed credit card account two weeks ago. Today I learned they changed the reporting balance to $0.

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just a little FYI the article did not mention. If you fill out form 982 to file for insolvent, don't forget to put the amt on line 10a. Do NOT add the 1099 amount into your income. And fill out and send in the insolvency worksheet just to be on the safe side incase of an audit.

Don't you mean line 21a, with explanation, '1099C cancelled debt, $X,XXX, Insolvent, see attached'.   Then no entry on line 21b.  Don't add to your total & include a copy of 1099C and 982.  Also if you have no 1099C then you should include that into your total and attached an explanation of your return & include a separate 982 for each. 

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