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Goody_Ouchless

1099-C for old debt

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A few years ago I got a 1099-C from a debt buyer over a "settled" debt. I was able to argue that the language in my settlement agreement specifically said the agreement in no way recognized, or was "settling" any "debt," but was merely the most cost-effective way to resolve a case without further litigation.

Today I received a 1099-C from an OC for an alleged debt that was charged off almost 10 years ago. I'm not sure if there's anything that can be done - I believe objecting to the 1099 gets it kicked back to the issuer for clarification. One thing that's interesting is that, prior to a statute change in 2016, creditors were supposed to send a 1099 after 36 months of non-payment - the debt was basically automatically classified as "this ain't getting paid." The statute was changed because there were cases of 1099s being sent for debts that weren't really cancelled. My thought is that if the "law of the land," 36 months after this alleged debt went bad, said that they were supposed to have sent a 1099, then the tax on that "forgiven debt" may have been lower (or non-existent, in the event of insolvency) than it would be today. Essentially the OC would be put in the position of proving exactly when they ceased collection efforts. Ultimately sorting it out may be more complicated than the tax is worth and the whole thing gets dropped.

Thoughts? Any experience with getting a 1099-C so long after a debt was written off?

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Yes. So the question is whether they were "required" to send a 1099 at that time, or whether the law was more of a "suggestion."

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