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Jude101

PRA and 1099c Forms

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Was contacted by PRA via letter in the mail back at the end of 2010. They didn't really send me a formal letter as such, but rather an "3 options/plans" to settle form. Seeing as this occurred just within weeks of my checking my credit report (which showed no negative items and a score of roughly 725 or so), this is obviously junk debt that is past the SOL. I sent them a C&D letter after that and heard/received nothing until a few weeks ago when I received the popular 1099c form. They are claiming THEY wrote off/canceled a debt of $1,223.10 on 12/24/10. They were never the original creditor of any of my financial accounts. I did have a card that was charged off years ago (2000 or 2001) and I'm assuming this is where they got it from. I was wondering if anyone has gone through the entire situation with this 1099c stuff and could perhaps advise me on what to do next? I want to file my taxes for this year but don't know if I can until this is taken care of? Can I just go ahead with filing for this year? I was under the impression that only the original creditor could issue this form and it would have to be within the tax year that it was written off, not when JDB buys it from the OC and then re-writes it off. What is my next move here? dntknw.gif I'd really appreciate anyone's insight into this situation. I feel badly about the debt, but do not want to pay some collection agency who bought it for pennies on the dollar. I appreciate everyone's time and any informative/experienced answers you can give. Thanks! biggrin.gif

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Was contacted by PRA via letter in the mail back at the end of 2010. They didn't really send me a formal letter as such, but rather an "3 options/plans" to settle form. Seeing as this occurred just within weeks of my checking my credit report (which showed no negative items and a score of roughly 725 or so), this is obviously junk debt that is past the SOL. I sent them a C&D letter after that and heard/received nothing until a few weeks ago when I received the popular 1099c form. They are claiming THEY wrote off/canceled a debt of $1,223.10 on 12/24/10. They were never the original creditor of any of my financial accounts. I did have a card that was charged off years ago (2000 or 2001) and I'm assuming this is where they got it from. I was wondering if anyone has gone through the entire situation with this 1099c stuff and could perhaps advise me on what to do next? I want to file my taxes for this year but don't know if I can until this is taken care of? Can I just go ahead with filing for this year? I was under the impression that only the original creditor could issue this form and it would have to be within the tax year that it was written off, not when JDB buys it from the OC and then re-writes it off. What is my next move here? dntknw.gif I'd really appreciate anyone's insight into this situation. I feel badly about the debt, but do not want to pay some collection agency who bought it for pennies on the dollar. I appreciate everyone's time and any informative/experienced answers you can give. Thanks! biggrin.gif

 

File your taxes. You don't have to resolve this before filing. You can either include it or not in which case add a copy and explanation that you currently believe it invalid. After it's resolved you will have to pay interest and the tax or file a 1040x for a refund depending on choices and outcome. It is almost certain a tax professional will advise you to include the 1099-C in your 2010 gross income.

 

However.

 

1. The 1099-C is generated and it's imputed income applies to the tax year in which the debt triggers one of the events forcing the 1099-C filing. This would have been in 2010 in your case. These are IRS rules. It has nothing to do with when the OC wrote it off.

 

2. The IRS has rules that waive the tax if you can show insolvency. I'm not current on the details.

 

3. You might also attack this as inaccurate if the JDB aggregates interest/fees and such to the original chargeoff amount. Search CB for what others have done.

 

 

Oh, and there is good news. By providing a date and statement that they canceled the debt they can no longer sell it. If it was simply triggered by elapsed time they could resell it as well as file a 1099-C. Keep that letter.

Edited by cashnocredit

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Was contacted by PRA via letter in the mail back at the end of 2010. They didn't really send me a formal letter as such, but rather an "3 options/plans" to settle form. Seeing as this occurred just within weeks of my checking my credit report (which showed no negative items and a score of roughly 725 or so), this is obviously junk debt that is past the SOL. I sent them a C&D letter after that and heard/received nothing until a few weeks ago when I received the popular 1099c form. They are claiming THEY wrote off/canceled a debt of $1,223.10 on 12/24/10. They were never the original creditor of any of my financial accounts. I did have a card that was charged off years ago (2000 or 2001) and I'm assuming this is where they got it from. I was wondering if anyone has gone through the entire situation with this 1099c stuff and could perhaps advise me on what to do next? I want to file my taxes for this year but don't know if I can until this is taken care of? Can I just go ahead with filing for this year? I was under the impression that only the original creditor could issue this form and it would have to be within the tax year that it was written off, not when JDB buys it from the OC and then re-writes it off. What is my next move here? dntknw.gif I'd really appreciate anyone's insight into this situation. I feel badly about the debt, but do not want to pay some collection agency who bought it for pennies on the dollar. I appreciate everyone's time and any informative/experienced answers you can give. Thanks! biggrin.gif

 

File your taxes. You don't have to resolve this before filing. You can either include it or not in which case add a copy and explanation that you currently believe it invalid. After it's resolved you will have to pay interest and the tax or file a 1040x for a refund depending on choices and outcome. It is almost certain a tax professional will advise you to include the 1099-C in your 2010 gross income.

 

However.

 

1. The 1099-C is generated and it's imputed income applies to the tax year in which the debt triggers one of the events forcing the 1099-C filing. This would have been in 2010 in your case. These are IRS rules. It has nothing to do with when the OC wrote it off.

 

2. The IRS has rules that waive the tax if you can show insolvency. I'm not current on the details.

 

3. You might also attack this as inaccurate if the JDB aggregates interest/fees and such to the original chargeoff amount. Search CB for what others have done.

 

 

Oh, and there is good news. By providing a date and statement that they canceled the debt they can no longer sell it. If it was simply triggered by elapsed time they could resell it as well as file a 1099-C. Keep that letter.

 

Clarifying questions: So once the debt is charged off and a 1099 C is issued, then thats it the debt cannot be resold or assigned to a collection agency, right?

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Clarifying questions: So once the debt is charged off and a 1099 C is issued, then thats it the debt cannot be resold or assigned to a collection agency, right?

In your case, yes, it cannot be resold. It is canceled.

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Ok, so I sent PRA a validation of debt letter on March 8th 2011. I got the green card return receipt in the mail signed by a "Steve Danner" with no date on it. That was about a week later, March 15th or 16th. As of today, April 23, I have heard nothing from them. What is my next step here? They had 30 days to supply me with something and not a peep. Not that I expected anything as this is completely past the SOL but it'd be nice to get a voided 1099c form. Any advice on what to possibly do next about this? Thanks and Happy Easter!

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Ok, so I sent PRA a validation of debt letter on March 8th 2011. I got the green card return receipt in the mail signed by a "Steve Danner" with no date on it. That was about a week later, March 15th or 16th. As of today, April 23, I have heard nothing from them. What is my next step here? They had 30 days to supply me with something and not a peep. Not that I expected anything as this is completely past the SOL but it'd be nice to get a voided 1099c form. Any advice on what to possibly do next about this? Thanks and Happy Easter!

There is no debt as it's been canceled and is not reported. They are not required to validate this.

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If the JDB only paid three cents on the dollar for the original debt, are they allowed to issue a 1099-C for the entire original amount? Do they intend to take a deduction on their corporate taxes for the original amount?

 

In other words, is it legal for a company to generate a 1,200 tax loss via a $36 dollar debt purchase? Doesn't seem right, based on my limited knowledge of tax accounting...

 

RCJ

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If the JDB only paid three cents on the dollar for the original debt, are they allowed to issue a 1099-C for the entire original amount?

They are not only allowed to do this, the IRS requires them to do this when debts are canceled or under certain other circumstances such as when a SOL defense succeeds in court and the court ruling the debt is not collectable is finalized

 

Do they intend to take a deduction on their corporate taxes for the original amount?

No

 

In other words, is it legal for a company to generate a 1,200 tax loss via a $36 dollar debt purchase?

It would be if they did but they don't. The maximum amount they can deduct is what they paid to buy the debt.

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PRA is very proactive in issuing 1099C's, when compared to other major JDB's.

 

1099C's are the downside of sending C&D letters.

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