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1099-C question

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Being tax time I've read several threads about people getting 1099-Cs for "forgiven" debt. I don't have this as an issue, so this is just a curiosity question. What debt are they forgiving?

 

Example...

 

Original debt: $800

Added "fees & interest" by CA: $650

Total: $1450

 

Paid, as part of agreed-upon settlement: $600

 

Would you get a 1099-C for $200, as that was the original debt, or would you get a 1099-C for $850?

 

Personally, I would argue the $200 since I never really owed the CA jack and the rest is just fluff. Of course, something tells me it doesn;t work that way.

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My understanding is it should be for the $850. However, I had an account that was charged off. At the time it was charged off the balance was somewhere around $11,000. The balance stayed at $11,000 for about a year. I settled and paid 50%. The 1099-C should have been for around $5,500 but when it arrived it was for something like $1,300. I'm assuming someone screwed up because I did owe the entire $11,000 in the beginning. No fees or interest added after the charge-off. It's a mystery to me.

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Being tax time I've read several threads about people getting 1099-Cs for "forgiven" debt. I don't have this as an issue, so this is just a curiosity question. What debt are they forgiving?

 

Example...

 

Original debt: $800

Added "fees & interest" by CA: $650

Total: $1450

 

Paid, as part of agreed-upon settlement: $600

 

Would you get a 1099-C for $200, as that was the original debt, or would you get a 1099-C for $850?

 

Personally, I would argue the $200 since I never really owed the CA jack and the rest is just fluff. Of course, something tells me it doesn;t work that way.

 

It wouldn't be for the $200 - 1099C should only issued for over $600. Otherwise, i have no idea, but i'll bet the CA goes for $850 to maximize their deduction and to screw you once again. I do agree it should be the amount charged off - on the other hand, the OC already took a tax credit for that portion...

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Being tax time I've read several threads about people getting 1099-Cs for "forgiven" debt. I don't have this as an issue, so this is just a curiosity question. What debt are they forgiving?

 

Example...

 

Original debt: $800

Added "fees & interest" by CA: $650

Total: $1450

 

Paid, as part of agreed-upon settlement: $600

 

Would you get a 1099-C for $200, as that was the original debt, or would you get a 1099-C for $850?

 

Personally, I would argue the $200 since I never really owed the CA jack and the rest is just fluff. Of course, something tells me it doesn;t work that way.

 

It wouldn't be for the $200 - 1099C should only issued for over $600. Otherwise, i have no idea, but i'll bet the CA goes for $850 to maximize their deduction and to screw you once again. I do agree it should be the amount charged off - on the other hand, the OC already took a tax credit for that portion...

 

And to that that's the House of Cards that A$$hat Acceptance is built....

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Speculation here, but consider this possibility:

 

The whole concept of the "cancelation of debt" that initiates a 1099-C is supposed be for a creditor sustaining a LOSS on unrecoverable credit extension. You borrow $10,000 from OC, something drastic happens, and you end up only able to pay back $4,000. OC eventually gives up hope of ever collecting the balance and chooses to write it off and issues you a 1099-C for the $6,000. See the balance there? You had a gain of $6,000, OC had a loss of $6,000. It increases your tax liability and decreases the bank's accordingly as part of that balance.

 

But when the OC "sells" the right to collect on a charged off account, it's a completely different picture.

 

Let's say OC sells title to the $6,000 debt to a JDB for .02 on the dollar yes, that's a whopping $120. OC isn't "forgiving" the debt - they're selling the rights to it so they can make a little cash at the moment. Thus you don't get a 1099-C from them. The $6,000 loss and the $120 asset sale are accounted for in their Profit & Loss. The OC is done.

 

Now it's between you and the JDB, who mysteriously inflates the "value" of this alleged debt to $12,000, slaps it on your CR, and tries to collect. But you're either still flat broke or not going to pay a dime to these extortionist thugs. Next thing you know, JDB "forgives" the debt and sends you a 1099-C for $12,000.

 

Now, where is the balance of LOSS vs GAIN between the JDB and you in this equation? At no point did the JDB extend credit to you. At no point did you gain from them. They made a "speculative investment" akin to a gambling loss. There was no agreement between them and YOU. No proof of the validity of their claim has ever been provided to you. No accounting is provided to you - no documentation PROVES that the amount they're "forgiving" is accurate, based on valid contracts, and in compliance with the law. And yet they're issuing you a 1099-C informing you that you have to report this $12,000 "canceled debt" as income on your taxes because THEY are going to report it as a loss.

 

So they avoid the whole issue of having to validate the debt, reduce their tax liability by manipulating their profit margin through Enron-style accounting tactics, and simultaneously screw you, the IRS, and pretty much the whole country over all at once. Not bad, for $120 "investment"...

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The question is: What is the IRS going to do about this scam?

 

 

Or.... is the IRS fully aware and this is another way to get the government some cash?

 

things that make you go hmmmmmmmmm.

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The question is: What is the IRS going to do about this scam?

 

Or.... is the IRS fully aware and this is another way to get the government some cash?

 

things that make you go hmmmmmmmmm.

 

Might depend on how big a ruckus is raised about it by consumers and when some really good consumer law professionals get involved. The JDB's are capitalizing on confusion caused by classifying themselves as "debt buyers". The laws that actually apply to them are "debt collectors" - and there's a BIG difference. True debt buyers purchase current (not CO) debt for a MUCH larger percentage of the face value (80-95%). Anyone purchasing CO's is a debt collector, not a creditor, and again, different laws apply.

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The question is: What is the IRS going to do about this scam?

 

 

Or.... is the IRS fully aware and this is another way to get the government some cash?

 

things that make you go hmmmmmmmmm.

 

I read in the newspaper recently (or, maybe it was a link here, I forget), and this is part of what prompted my curiosity, is that the IRS considers all 1099-Cs to be accurate and valid and that it is up to the consumer to prove otherwise. Mainly because they know they are suspect and don't want to be bothered with sorting them out. There is a whole bunch of hoops to jump through to prove otherwise, also.

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Speculation here, but consider this possibility:

 

The whole concept of the "cancelation of debt" that initiates a 1099-C is supposed be for a creditor sustaining a LOSS on unrecoverable credit extension. You borrow $10,000 from OC, something drastic happens, and you end up only able to pay back $4,000. OC eventually gives up hope of ever collecting the balance and chooses to write it off and issues you a 1099-C for the $6,000. See the balance there? You had a gain of $6,000, OC had a loss of $6,000. It increases your tax liability and decreases the bank's accordingly as part of that balance.

 

But when the OC "sells" the right to collect on a charged off account, it's a completely different picture.

 

Let's say OC sells title to the $6,000 debt to a JDB for .02 on the dollar yes, that's a whopping $120. OC isn't "forgiving" the debt - they're selling the rights to it so they can make a little cash at the moment. Thus you don't get a 1099-C from them. The $6,000 loss and the $120 asset sale are accounted for in their Profit & Loss. The OC is done.

 

Now it's between you and the JDB, who mysteriously inflates the "value" of this alleged debt to $12,000, slaps it on your CR, and tries to collect. But you're either still flat broke or not going to pay a dime to these extortionist thugs. Next thing you know, JDB "forgives" the debt and sends you a 1099-C for $12,000.

 

Now, where is the balance of LOSS vs GAIN between the JDB and you in this equation? At no point did the JDB extend credit to you. At no point did you gain from them. They made a "speculative investment" akin to a gambling loss. There was no agreement between them and YOU. No proof of the validity of their claim has ever been provided to you. No accounting is provided to you - no documentation PROVES that the amount they're "forgiving" is accurate, based on valid contracts, and in compliance with the law. And yet they're issuing you a 1099-C informing you that you have to report this $12,000 "canceled debt" as income on your taxes because THEY are going to report it as a loss.

 

So they avoid the whole issue of having to validate the debt, reduce their tax liability by manipulating their profit margin through Enron-style accounting tactics, and simultaneously screw you, the IRS, and pretty much the whole country over all at once. Not bad, for $120 "investment"...

 

Excellent thoughts. :good:

 

Maybe you do two tax returns. One for the IRS at the moment to keep them out of your hair, and one showing what your tax liability really should have been and then sue the CA for civil damages and make them produce the documentation that supports their claim.

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Speculation here, but consider this possibility:

 

The whole concept of the "cancelation of debt" that initiates a 1099-C is supposed be for a creditor sustaining a LOSS on unrecoverable credit extension. You borrow $10,000 from OC, something drastic happens, and you end up only able to pay back $4,000. OC eventually gives up hope of ever collecting the balance and chooses to write it off and issues you a 1099-C for the $6,000. See the balance there? You had a gain of $6,000, OC had a loss of $6,000. It increases your tax liability and decreases the bank's accordingly as part of that balance.

 

But when the OC "sells" the right to collect on a charged off account, it's a completely different picture.

 

Let's say OC sells title to the $6,000 debt to a JDB for .02 on the dollar yes, that's a whopping $120. OC isn't "forgiving" the debt - they're selling the rights to it so they can make a little cash at the moment. Thus you don't get a 1099-C from them. The $6,000 loss and the $120 asset sale are accounted for in their Profit & Loss. The OC is done.

 

Now it's between you and the JDB, who mysteriously inflates the "value" of this alleged debt to $12,000, slaps it on your CR, and tries to collect. But you're either still flat broke or not going to pay a dime to these extortionist thugs. Next thing you know, JDB "forgives" the debt and sends you a 1099-C for $12,000.

 

Now, where is the balance of LOSS vs GAIN between the JDB and you in this equation? At no point did the JDB extend credit to you. At no point did you gain from them. They made a "speculative investment" akin to a gambling loss. There was no agreement between them and YOU. No proof of the validity of their claim has ever been provided to you. No accounting is provided to you - no documentation PROVES that the amount they're "forgiving" is accurate, based on valid contracts, and in compliance with the law. And yet they're issuing you a 1099-C informing you that you have to report this $12,000 "canceled debt" as income on your taxes because THEY are going to report it as a loss.

 

So they avoid the whole issue of having to validate the debt, reduce their tax liability by manipulating their profit margin through Enron-style accounting tactics, and simultaneously screw you, the IRS, and pretty much the whole country over all at once. Not bad, for $120 "investment"...

 

Excellent thoughts. :)

 

Maybe you do two tax returns. One for the IRS at the moment to keep them out of your hair, and one showing what your tax liability really should have been and then sue the CA for civil damages and make them produce the documentation that supports their claim.

 

Yep. That's what needs to happen.

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I Dare,

 

The case for sending validation letters {CMMR of course} is now pretty solid {for old debts where the chance of proving this is yours is remote}. I'd think 2 trys at validation plus the CRA disputes and you have to sue the JDB. Nothing like a lawsuit to prove you have the thing in dispute!

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I Dare,

 

The case for sending validation letters {CMMR of course} is now pretty solid {for old debts where the chance of proving this is yours is remote}. I'd think 2 trys at validation plus the CRA disputes and you have to sue the JDB. Nothing like a lawsuit to prove you have the thing in dispute!

 

You know it!!!

 

This has made it more important than ever for people to demand validation and stick to that purpose like a pitbull on steroids. Insist that they provide the DOCUMENTATION to prove every single penny of their claim. "Account Verification Statements" and "affidavits" from JDB "company officers" are merely restated claims, not PROOF to support their claims. If they claim they bought title to a debt, make them produce the documents that PROVE chain of title from the OC to the JDB. Make them PROVE how much they paid for it. Most of them will drop it and run rather than reveal that info.

 

The other problem I expect to see springing from this new tactic with the 1099-C's is that the JDB will in some cases not even attempt to collect from the consumer. Watch them hold certain accounts for 2-3 years, inflate the "value" of the claim with usurious interest charges and illegal fees, never contact the consumer, then "forgive the debt" and issue a 1099-C at their convenience.

 

The consumer then has to deal with an unexpected tax problem and will have to sue the JDB in order to get it straightened out. I think the JDB's are quite confident that not many consumers will fight them. Only time will tell.

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This has made it more important than ever for people to demand validation and stick to that purpose like a pitbull on steroids. Insist that they provide the DOCUMENTATION to prove every single penny of their claim. "Account Verification Statements" and "affidavits" from JDB "company officers" are merely restated claims, not PROOF to support their claims. If they claim they bought title to a debt, make them produce the documents that PROVE chain of title from the OC to the JDB. Make them PROVE how much they paid for it. Most of them will drop it and run rather than reveal that info.

 

The other problem I expect to see springing from this new tactic with the 1099-C's is that the JDB will in some cases not even attempt to collect from the consumer. Watch them hold certain accounts for 2-3 years, inflate the "value" of the claim with usurious interest charges and illegal fees, never contact the consumer, then "forgive the debt" and issue a 1099-C at their convenience.

 

The consumer then has to deal with an unexpected tax problem and will have to sue the JDB in order to get it straightened out. I think the JDB's are quite confident that not many consumers will fight them. Only time will tell.

 

I agree completely. They know that the majority of people will lemonade and moan and complain... to their spouses and friends. Nothing else. When it comes right down to it, most peolle will do nothing significant.

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I still say ... fight fire with fire.

 

Send A$$hat bogus 1099's to match their bogus 1099-C's. Get enough of them and cause a paperstorm that'll take 10 years to straighten out.

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I still say ... fight fire with fire.

 

Send A$$hat bogus 1099's to match their bogus 1099-C's. Get enough of them and cause a paperstorm that'll take 10 years to straighten out.

 

Unfortunately, you would end up being charged with filing a false information return.

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I still say ... fight fire with fire.

 

Send A$$hat bogus 1099's to match their bogus 1099-C's. Get enough of them and cause a paperstorm that'll take 10 years to straighten out.

 

NO! The same thing I read (that I can't remember where) also mentioned that people have gotten in serious trouble for doing just that. It's not kosher and the IRS takes a very dim view of it.

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Send A$$hat bogus 1099's to match their bogus 1099-C's. Get enough of them and cause a paperstorm that'll take 10 years to straighten out

 

Don't do that. This was a tactic some of those tax protests groups in the 70's and 80's used. Filing false 1099C's in the name of public officals. Some of those guys got some serious jailtime.

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So what exactly is going on with the 1099-c's? Just read this on CI.com:

 

But I do note the new 1099-c regulations might soon provide an end to junk debt buyers. As the whole stupid scheme of junk debt buying CA's come under increased scutiny when the IRS finds they are caught in bed with unreliable pirates and are losing large numbers of lawsuits. I already see the trade associations representing junk debt buyers are asking for exemtion from that regulation and are admitting they can't validate their required 1099-c.

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So what exactly is going on with the 1099-c's? Just read this on CI.com:

 

But I do note the new 1099-c regulations might soon provide an end to junk debt buyers. As the whole stupid scheme of junk debt buying CA's come under increased scutiny when the IRS finds they are caught in bed with unreliable pirates and are losing large numbers of lawsuits. I already see the trade associations representing junk debt buyers are asking for exemtion from that regulation and are admitting they can't validate their required 1099-c.

 

Well then they're salamanders who deserve an flowers-kicking. Collection agencies *are* exempt from issuing 1099-C's - they're not SUPPOSED to issue them, because THEY aren't the ones who suffered the LOSS. JDB's *are* CA's. Oh wait... they don't want to think that... They want everyone to believe that they're CREDITORS... They're in a Catch-22 because they put THEMSELVES there. Dumbuns.

 

Link to very informative thread with excellent research by Shawnee: http://creditboards.com/forums/index.php?s...opic=154751&hl=

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I still say ... fight fire with fire.

 

Send A$$hat bogus 1099's to match their bogus 1099-C's. Get enough of them and cause a paperstorm that'll take 10 years to straighten out.

 

Unfortunately, you would end up being charged with filing a false information return.

 

And the difference between filing a false return and what A$$hat is doing is ............... ?????????

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And the difference between filing a false return and what A$$hat is doing is ............... ?????????

 

 

They are complying with an IRS regulation that seems to require they issue a 1099C. The IRS is not requiring a consumer to issue anything.

This is an instant where getting a little hot-headed could have some signficant downside.

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