Casper

Dispute 1099-C with IRS

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I've been reading up on JDB's filing a 1099-C with the IRS to get even with debtors who don't pay them.  Supposedly, you file some sort of dispute with the IRS in response, claiming the 1099-C is defective or fraudulent.  The information I've found is kind of vague, though.

 

Is there a form you send the IRS, or is it just a dispute letter denying the debt is legit?

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4 minutes ago, Casper said:
 

I've been reading up on JDB's filing a 1099-C with the IRS to get even with debtors who don't pay them.  Supposedly, you file some sort of dispute with the IRS in response, claiming the 1099-C is defective or fraudulent.  The information I've found is kind of vague, though.

 

Is there a form you send the IRS, or is it just a dispute letter denying the debt is legit?

Did a JDB file a 1099-C for a debt you owe.

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If you are insolvent (owe more than you are worth), you can file Form 982 with your tax return and avoid taxes on the 1099-C amount.

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They are not necessarily sending you the 1099-C to "get even."  They are required by law to send it if the cancelled debt is over $600 although many JDB's ignore the law.  You are more likely to receive one from an original creditor. 

If you try to dispute any type of 1099 through the IRS the first thing they will tell you is to take it up with the entity that sent it. 

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@Goody_Ouchless went through this, but the application is limited to cases where there exists a settlement agreement between the consumer and JDB/OC that said neither side was admitting any sort of wrongdoing.  If I'm not mistaken, goody simply left the 1099 'income' out of his tax return. The IRS then said he owed for the 1099 reporting, and then he appealed that finding. He won, but it took a bit of back and forth. 

If there's no settlement agreement, it seems you're SOL since the forgiven debt is in fact "income" under the IRS rules. 

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Hey guys, I’m an accountant. There’s multiple 1099-c exclusions, such as insolvency, you can own a home is it meets certain thresholds etc. the easiest thing to do is report the income and then subtract it back out listing the code section of the exemption you are relying on, leave like a dollar so the form populated.

the other option if you think the 1099-c is flat out wrong is to include it, then subtract it out, saying “see statement”, and then explain why in a statement attached to the tax return.

the irs will pick up mismatches between 1099’s and what is reported on the return and then mail out letters assessing tax on the difference. Basically if you don’t report it, your asking to be contacted. 

Doing it the way I suggested would prevent all that back and forth because the income is being reported so it matches. Just subtract it out in the same other income area, and then leave a dollar so the statement prints.

another option is to have the issuer of the 1099 amend it, but that requires a lot more cooperation from those parties

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Pleasure! This is such a cool community. I just found this site recently after 2 lawsuits, one for my mom and one for my dad for credit card debt. And I learned so much. Been working on my parents stuff trying to resolve. Appreciate everyone’s time in answering questions. Glad I can help in the tax area :)

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