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Titty Bank Wants More Smoke


RehabbingANDBlabbing
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So my DH had a Citi/Best Buy card that was charged off in 2017. After beginning our credit repair process, I noticed the account was reporting the payment history inaccurately on Equifax and Experian. We disputed many times, then ended up suing them for FCRA violations. They settled the case by forgiving the debt and deleting the account from all reports.

 

But now they’re back! In 2020, they sent us a 1099-C for an amount just a little bit shy of the balance. I believe it was just the principal balance, which amounted to $4,600. Well, as you know, it’s tax season. And who decides to send us another 1099-C for the same account/debt? Titty bank. They put the full amount of the debt this time; which was about $600 more than the first 1099-C they sent.
 

I have consulted my lawyer because it seems illegal for them to write off the same debt twice. He has advised we should sue them again. While I’m sure we can win the case, litigation and settlement takes about a year to do, based on our past experiences. It ended up costing us an extra $1,200 in taxes this year. What do y’all think? Should we spend more time and effort on this situation? I’m pretty sure Titty also violated terms in our settlement agreement for the FCRA case as well, in regards to them not pursuing further collection activity.

 

Any advice would be appreciated.

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Talk to a tax person.  There are times when you do not have to claim forgiven debt as income no matter how many 1099-Cs they send you.

 

See here.

 

If they say it is taxable, well, eat the taxes with the IRS for now, sue them, and after you win file an amended return to get your money back.  Bonus points if you can lump the time and expense of doing this into the lawsuit against Citi.

 

Conversely, if they say it shouldn't have been taxable, I think you can still file an amended 2020 return to get that money back.  You'll have to move quickly, it's a three year window.

 

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On 4/10/2023 at 12:27 PM, FoxSamual said:

Talk to a tax person.  There are times when you do not have to claim forgiven debt as income no matter how many 1099-Cs they send you.

 

See here.

 

If they say it is taxable, well, eat the taxes with the IRS for now, sue them, and after you win file an amended return to get your money back.  Bonus points if you can lump the time and expense of doing this into the lawsuit against Citi.

 

Conversely, if they say it shouldn't have been taxable, I think you can still file an amended 2020 return to get that money back.  You'll have to move quickly, it's a three year window.

 

That’s a good point. I should talk to a tax lawyer and maybe the IRS about this situation. To me, it seems like they committed tax fraud by writing this off two times. So I shouldn’t be liable. I didn’t qualify for the insolvency exemption this time, which I did manage to get in 2020. But really, this should have been completely settled the first time they sent the 1099-C.

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On 4/10/2023 at 12:49 AM, RehabbingANDBlabbing said:

What do y’all think? Should we spend more time and effort on this situation? I’m pretty sure Titty also violated terms in our settlement agreement for the FCRA case as well, in regards to them not pursuing further collection activity.

 

I would opt for the path of potential "least resistance":  Call Citi (or, if necessary because it can't be resolved in the course of a phone call) and tell them that you dispute the legitimacy of the 1099-C because one was previously issued against the same debt.

 

While I don't like the turn their credit business has taken over the last decade, I still have respect for their CSR's (based upon past contact).  When I disputed a fraudulent charge, no one postured with an attitude ... it was all "let's review this and put it to bed".

 

I recognize that this likely wasn't the case in the case of your prior dispute.  But I trust you have sufficient documentation in your tax records of the past 1099-C that you should be able to cite date and amount of the 1099-C with sufficient accuracy as to put them in the position to readily confirm what you claim.

 

Fingers crossed for you!

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On 4/10/2023 at 12:49 AM, RehabbingANDBlabbing said:

It ended up costing us an extra $1,200 in taxes this year

Taxes are voluntary. You are under no obligation to submit an inaccurate return simply because they sent you an erroneous 1099. If it's an invalid 1099, ignore it when you file and sue them to fix it. If the IRS ever comes asking about it, you can point to the lawsuit and potential resolution that most likely has long since occurred since the IRS is unlikely to do anything for a few years. 

Edited by shifter
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On 4/10/2023 at 1:27 PM, FoxSamual said:

Talk to a tax person.  There are times when you do not have to claim forgiven debt as income no matter how many 1099-Cs they send you.

 

See here.

 

If they say it is taxable, well, eat the taxes with the IRS for now, sue them, and after you win file an amended return to get your money back.  Bonus points if you can lump the time and expense of doing this into the lawsuit against Citi.

 

Conversely, if they say it shouldn't have been taxable, I think you can still file an amended 2020 return to get that money back.  You'll have to move quickly, it's a three year window.

 

I am a tax person with over 40 years in the business. First the IRS - I would attach a note to your return stating that this canceled debt was included in income in 2020, the first time you got the 1099C. Attach a copy of that 1099C and the one you just got as well as the 2020 Form 1040 which should have the original 1099C amount as "Additional Income". Circle that amount. If you filed electronically, download Form 8453 from the IRS web site and use that as a cover sheet for your note and accompanying documentation.

 

Now on to the bank. Since it is an OC you don't have a FDCPA Cause of Action against them, but you DO have a Breach of Contract action against them. After all, the debt was settled and you gave up a valuable right (the right to sue for the FCRA violation of mis-reporting) in consideration of that. They issued a 1099C in that year for that debt and now they are trying to harm you again by issuing another 1099C for a debt that legally no longer exists. There is a possibility of a Class Action Suit here, because if they did this to you, how many other people have they done this to? Just the Discovery expenses on that will make them want to settle.

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9 hours ago, shifter said:

Taxes are voluntary. You are under no obligation to submit an inaccurate return simply because they sent you an erroneous 1099. If it's an invalid 1099, ignore it when you file and sue them to fix it. If the IRS ever comes asking about it, you can point to the lawsuit and potential resolution that most likely has long since occurred since the IRS is unlikely to do anything for a few years. 

I think the IRS would dispute your claim that taxes are voluntary,  if push came to shove, they wold probably win that argument in Court. BUT.... no one is required to file a return they know is inaccurate. In this case the OP paid tax on this canceled debt back in 2020, so just an explanatory note with the return showing that will be enough for the IRS.

Edited by Flyingifr
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1 hour ago, Flyingifr said:

In this case the OP paid tax on this canceled debt back in 2020, so just an explanatory note with the return showing that will be enough for the IRS.

 

Perhaps, but from IRS perspective they might presume the possibility that this was a second debt with the same issuer.  The safest route providing the greatest peace of mind is to get the issuer to buy on to the fact that this was a duplicate filing and get them to void the previously submitted 1099-C.

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6 hours ago, hdporter said:

The safest route providing the greatest peace of mind is to get the issuer to buy on to the fact that this was a duplicate filing and get them to void the previously submitted 1099-C.

Yes, but you don't have to do that before filling the return. Or you can file the return with that income and then file an amended return once the issue is cleared up and get your refund but I don't know why anyone would choose to loan the IRS money they don't owe. 

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8 hours ago, Flyingifr said:

I think the IRS would dispute your claim that taxes are voluntary,  if push came to shove, they wold probably win that argument in Court.

I just meant no one is under any compulsion to include some amount as income just because a 1099 was received if that filing was incorrect. You choose what you file. 

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4 hours ago, shifter said:

I just meant no one is under any compulsion to include some amount as income just because a 1099 was received if that filing was incorrect. You choose what you file. 

 

And, to the extent that you neglect to account for reported income in some fashion on your return, without explanation, they can revise your return to add it in, potentially with appropriate penalties and interest for under reported income.

 

Filing a return that excludes the spurious income and attaching an explanatory note would be an unsatisfactory compromise.  They have no way of ascertaining that this income matches to what was previously identified in a 1099-C filing (and thus a duplicate), nor is it there responsibility to do so.

 

I'll admit to there being a certain degree of gray area on this subject.  But I'll continue to assert that the best way to deal with this is to proactively engage the creditor and persuade them to withdraw the duplicate 1099-C.  Simply attaching their statement of intent to withdraw the 1099-C, and excluding the corresponding income from your filing, would likely be sufficient to file a hassle-free return.

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1 hour ago, hdporter said:

And, to the extent that you neglect to account for reported income in some fashion on your return, without explanation, they can revise your return to add it in, potentially with appropriate penalties and interest for under reported income

Sure and then you can call them and dispute this and send in the documentation that the 1099 has already been canceled or should have been, etc. It's not a one way street. 

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4 hours ago, shifter said:

Sure and then you can call them and dispute this and send in the documentation that the 1099 has already been canceled or should have been, etc. It's not a one way street. 

 

Don't know about you, but I'd walk hot coals barefoot to avoid an IRS phone call, sitting on hold for 45 minutes, and the speaking to one of their clueless, dense as depleted plutonium reps.

 

Granted, it's been 24 years since I was involved in a convoluted resolution of a filing problem.  I don't expect that their phone etiquette has improved.

 

 

Edited by hdporter
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13 hours ago, shifter said:

I just meant no one is under any compulsion to include some amount as income just because a 1099 was received if that filing was incorrect. You choose what you file. 

You choose what you file - correct, but if the IRS finds something that they know about but you did not include or address in your tax return, you will be the recipient of a CP2000 letter from the IRS. I have been doing this for my tax clients for over 40 years, but hey... Google experts know more than I do.

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5 hours ago, hdporter said:

Don't know about you, but I'd walk hot coals barefoot to avoid an IRS phone call, sitting on hold for 45 minutes, and the speaking to one of their clueless, dense as depleted plutonium reps.

I've actually found their reps quite decent and extremely knowledgeable. Nobody should be afraid to talk to the IRS on the phone. It is often the quickest way to a resolution. 

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2 hours ago, Flyingifr said:

you will be the recipient of a CP2000 letter from the IRS

Yes, I already indicated that. I'm not an expert, but I'm speaking from personal experience and am just trying to encourage the OP and others that getting a letter from the IRS and making a phone call are nothing to be afraid of. 

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4 hours ago, Flyingifr said:

You choose what you file - correct, but if the IRS finds something that they know about but you did not include or address in your tax return, you will be the recipient of a CP2000 letter from the IRS. I have been doing this for my tax clients for over 40 years, but hey... Google experts know more than I do.

true but sometimes the IRS simply doesn't care. Pretty much each year we receive a corrected 1099 well after we file and paid taxes and have never been contacted about the additional tax liability or need to amend our returns. of course saying this probably jinxes me now LOL

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On 4/11/2023 at 5:50 PM, RehabbingANDBlabbing said:

I didn’t qualify for the insolvency exemption this time, which I did manage to get in 2020.

 

I'm glad to hear this, at least you won't have to deal with an amended return trying to claw back money paid in error.  I've helped a large number of people go through the insolvency process, including with amended returns.  It's not terribly difficult, but it seems to be something that is not commonly realized.

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On 4/13/2023 at 11:59 AM, hegemony said:

true but sometimes the IRS simply doesn't care. Pretty much each year we receive a corrected 1099 well after we file and paid taxes and have never been contacted about the additional tax liability or need to amend our returns. of course saying this probably jinxes me now LOL

That's because IRS only does the  CP2000 match once per filing year. Your original return passed, then the Amended 1099 came in. There was no additional CP2000 match done. Just think of it - if we could somehow arrange to have all our tax reporting documents under-report our income in the original reporting to the IRS and we file the return using those incorrect documents, and then a year later correct it, we could get away with a LOT of shennanigans. As an IRS licensed Enrolled Agent I am not, of course, endorsing such a scheme, but it is a huge loophole in the IRS enforcement scheme.

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Ok so I decided to file an amended return for now. That netted me a refund of $1,105.00. I’ll file the lawsuit with my lawyer later. Ultimately, all we have to do is file the lawsuit with the original tax return showing I paid the extra taxes, then Titty Bank will settle and pay my extra tax liability and legal fees, at a minimum. But I really don’t have two years to wait for my $1,100 back….. I might call their executive office soon as well.

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  • 2 weeks later...
7 hours ago, swimmingwithsharks said:

I opened this topic because I thought there really was a bank with this name. OK maybe I was just hoping 

I call Citibank Titty Bank because they are acting like boobs. Then you have TD Bank, which is also Titty-adjacent with their naming.

Edited by RehabbingANDBlabbing
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