Cap-1 debt chgd off 07/2004 $498, just got 1099-C, $983.70, need help understanding this mess

[Bananna]

Cap-1 debt charged off 07/2004 $498, just got 1099-C,need help understanding this mess. I've looked at every post related to 1099-C and cannot find or understand anything related to my specific situation.

 

 

Cap-1 charged off this debt on or around 07/2004 and my Transunion from 2007 indicates debt balance of $498.00. But it seems Cap-1 continued to add fees/interest to this debt and it continued to grow in amount owed on subsequent credit reports. After attempting collection through several different CA and JDC, the trade line eventually aged off my reports around11/2010.

 

Just this week I now receive a 1099-C from Cap-1, with the amount noted as cancelled = $983.70, and cancel date noted on form as 12/31/2011.

 

Is this possible? Since the amount owed at time of charge off = $498.00, how can they post an amount $983.70 on the 1099-C. Additionally, the date of cancellation cannot be correct if charged off 7 years previous to this, can it? After all, if they charged it off their books in 2004 how can they report they cancelled it in 2011?

 

Do I have any recourse on getting this 1099-C eliminated, what with what appears to me to be fraudulent information?

 

By the way, in my effort to clean up credit trade lines, I did receive a letter from Cap-1 back in 2007, verifying the debt and in the letter indicating the debt was charged off (did not indicate exact date of charge off in letter, by CB reports do). All credit bureu entries indicated that date of charge off being in 2004, with the 30 day late as11/2003 (on other reports noted as 30 days late 02/2004). Obviously discrepancies on actual charge off clock, but I can't do anything about that now since the tradeline is no longer reportable, having exceeded both the SOL and time to report on CBs.

 

Any advice and insight is most appreciated. Very close to clearing away any last negs with just a few more to go and first time home buyer here I come. I just want to finally stop this back and forth game playing. Thanks all!

 

 

Edited January 29, 2012 by Bananna

[crtt]

Cap-1 debt charged off 07/2004 $498, just got 1099-C,need help understanding this mess.

 

 

Cap-1 charged off this debt on or around 07/2004 and my Transunion from 2007 indicates debt balance of $498.00. But it seems Cap-1 continued to add fees/interest to this debt and it continued to grow in amount owed on subsequent credit reports. After attempting collection through several different CA and JDC, the trade line eventually aged off my reports around11/2010.

 

Just this week I now receive a 1099-C from Cap-1, with the amount noted ascancelled = $983.70, and cancelled on 12/31/2011.

 

Is this possible? Since the amount owed at time of charge off = $498.00, howcan they post an amount $983.70 on the 1099-C. Additionally, the date of cancellation cannotbe correct is charged off 7 years previous to this, can it?

 

Do I have any recourse on getting this 1099-C eliminated, what with what appearto me to be fraudulent information. By the way, in my effort to clean up credit trade lines, I did receive a letter from Cap-1 back in 2007, verifying the debt and in the letter indicating the debt was charged off (did not indicate exact date of charge off in letter, by CB reports do). All credit bureu entries indicated that date of charge off being in 2004, with the 30 day late as11/2003 (on other reports noted as 30 days late 02/2004). Obviously discrepancies on actual charge off clock, but I can't do anything about that now since the tradeline is no longer reportable, have exceeded bot SOL and time to report of CBs.

 

Any advice and insight is most appreciated. Very close to clearing away any andall negs with just a few more to go and first time home buyer here I come. Ijust want to stop this back and forth game playing finally. Thanks all!

 

 

 

i'm not sure about this one i think just cause its a charge off does not = write off

i know if crap 1 does that with my 2 accounts that will fall off at end of this year i will send them a 1099 for all the letters i sent them

[mk_378]

What they have done is pretty much legit. And with that you can be reasonably assured that this debt is finally dead.

 

Most people will qualify under the IRS insolvency rule to not pay taxes on the amount. Basically since you didn't have the money to pay it anyway, having an old debt forgiven does not put any useful money in your pocket.

Edited January 29, 2012 by mk_378

[nht]

The timing of your 1099-C is probably correct and, moreover, legally required, even if the amount is not.

 

Timing: it's not uncommon for taxpayers to get 1099-C's many years later. IRS Instructions for 1099-C to creditors list 8 "identifiable events" (triggers), when the creditor must issue a 1099-C for canceled debts over $600, by Jan. 31st of the following year. The issuance is optional for under $600 -- that would be you, based on your figures.

 

http://www.irs.gov/p.../i1099ac_10.pdf

 

In your case, it's most likely #3 or #8 on p. 3, "When Is a Debt Canceled."

 

Note: these are 2010 and 2011 Instructions (revised 11/10/10). Don't use 2012 version (rev. 12/21/11), because Form 1099-C has changed for 2012.

 

Amount: your best course of action is to contact Cap 1 with the documentation you have, showing the correct amount. For a credit card -- most certainly a lending transaction -- interest and fees should not be included, only principal (p. 3):

 

"Debt Defined

 

A debt is any amount owed to you including stated principal, stated interest, fees, penalties, administrative costs, and fines. The amount of debt canceled may be all or only part of the total amount owed. However, for a lending transaction, you are required to report only the stated principal. See Exceptions on this page."

 

Hypothetically, should you have a hard time getting Cap 1 to issue a corrected 1099-C in time for the tax filing deadline, you'll need to weigh how much your time and energy are worth vs. saving something like $100-$200 on your Federal and state taxes for 2011 ($486 times your combined Fed. / state marginal rate, to be exact).

 

At least, that 1099-C in your hands means than no one can ever again attempt any collection efforts on that debt... good for you.

[Bananna]

What they have done is pretty much legit. And with that you can be reasonably assured that this debt is finally dead.

 

Most people will qualify under the IRS insolvency rule to not pay taxes on the amount. Basically since you didn't have the money to pay it anyway, having an old debt forgiven does not put any useful money in your pocket.

 

Thanks! I know many have asked this before in this section, so my apologies ahead of time for asking again. But hopefully someone else reading this may gain knowledge and insight from all of it, as I am.

 

Which dates are the dates the IRS consider with regard to insolvency? I am not insolvent now, but yes I was back in 2003/04. In fact on disability and my 1040's show that trail.

Thanks again!

[Bananna]

The timing of your 1099-C is probably correct and, moreover, legally required, even if the amount is not.

This actually showed up around the time it dropped from the CB reports. Crap-1 just dogged me to the bitter end. Fortunately the requirement was for debts from 2004 forward, so I have no worry about any previous issues with them coming back to haunt me.

In your case, it's most likely #3 or #8 on p. 3, "When Is a Debt Canceled."

Yes I read this statute before posting my question (I'm weird. I actually enjoy digging into the tax codes) and agree with you. #3 wording seems a little dicey regardless. Statute of limitations in Cal = 4 yrs, so they should have filed it with me by 2008/09, I suspect. But it also states there has to be a qualifying event for that to stand up (like a judgment vacancy due to SOL). Oh well...

Amount: your best course of action is to contact Cap 1 with the documentation you have, showing the correct amount. For a credit card -- most certainly a lending transaction -- interest and fees should not be included, only principal (p. 3):

The time it would take to speak to some Crap-1 rep who would simply parrot a script designed to not be helpful wouldn't be worth the aggravation alone, let alone the $ I would lose spending time over it.

Hypothetically, should you have a hard time getting Cap 1 to issue a corrected 1099-C in time for the tax filing deadline, you'll need to weigh how much your time and energy are worth vs. saving something like $100-$200 on your Federal and state taxes for 2011 ($486 times your combined Fed. / state marginal rate, to be exact).

 

At least, that 1099-C in your hands means than no one can ever again attempt any collection efforts on that debt... good for you.

You're right! Simply not worth the time ($$) and effort to ding-a-ling over a couple hundred. It'll still be far less to pay the tax and be done with them once and for all.

So I guess I can say WooHoo! Finally got Cap-1 off my back.

 

By the way, thanks for the great details and advice you provided. Especially also putting the tax aspect into perspective. I guess I really knew what the outcome would be, but was hoping it could be different. I hate paying any more tax than I need to, let alone deal with old debtors.

Edited February 1, 2012 by Bananna

[hdporter]

"Debt Defined

 

A debt is any amount owed to you including stated principal, stated interest, fees, penalties, administrative costs, and fines. The amount of debt canceled may be all or only part of the total amount owed. However, for a lending transaction, you are required to report only the stated principal. See Exceptions on this page."

 

This needs some clarification. The full guidance is that reporting of "only" the stated principal is "required" (emphasis mine). The guidance separately continues, "if you choose to report interest as part of the cancelled debt in box 2, you must show the interest separately in box 3."

 

The implication is that the debt holder may, at their election, reported interest (though it's not required).

 

If C1 neglected to separately identify the included interest, I'm not sure that provides an out for the debtor by which to exclude it from the debt. 1099-C guidance for the taxpayer is they may exclude reported interest if a payment of the interest would be tax deductible (such as mortgage interest). However, cancelled debt on consumer loans must be reported as income, including any interest.