I just got the mail and in it was a 1099 C from a creditor!! It states date cancelled was 10-00, and the letter says that there was a system problem, and that it was not reported to the IRS during that year, but will be reported this tax year. The amount is just over $600. BTW, I have a CA trying to collect on this now. Will this help me out with them? Thanks, Patti
Of course. The 1099-C is in all estimation saying that the creditor gave you money. This is a slam dunk. I would advise this CA to pound the sand.
What about my tax preparer? I realize the amount is only over by about 50 bucks, but she'll charge me $75 to do an amended return!! It was sent regular mail.
This tax year may mean 2003, not 2002 tax year. Doesn't a 1099 have a tax year on it? BTW, if it IS for 2002, I think you can get them in trouble with the IRS. There are deadlines to mail that kind of thing by.
jlynn, the letter says Please consult with your tax advisor to determine the proper reporting of the debt forgiveness on your return. It doesn't say what year it will be reported. Sounds like this year to me.
I agree with jlynn. I think 1099s have to be mailed by 31 Jan, but it may be 15 Feb. It's been a while since I did them, but I think they're on the same schedule as W-2s, which would mean mail by 31 January. Check the 1099 out. Somewhere at the top it should have the tax year. If it's 2003, then it's income for 2003 and is reported on the 1040 you file next year.
The letter states Enclosed is a Form 1099 C for the year indicated on the form. Due to a systems error, we did not provide either your or the IRS with this info for the calendar year in which it applies. The date debt was cancelled shows 10/00. No tax year at the top of the form, only the cancellation year.
Slapping myself (and Patty)... Who is this from? Who is the CA trying to collect now? A system error of 3 years???????????? No year on the 1099? This smells bogus, in an attempt to get you to pay it.
All the answers here are technically correct but beg the issue. The issue is how can you make the BEST of this situation? Simple - by saving the CA's letter and taking two mutually contradictory positions. To the CA - Show them the 1099C and inform them taht the OC has forgiven the debt, so they have no right to try to collect it. To the IRS - Show them the CA's letter as proof that the debt has NOT been forgiven and you owe no tax ona debt that has not been forgiven. To your Tax Preparer - Shame on him/her for not seeing his. Can you do this? Sure. Is there anything unethical about it? I would say "no" since the OC hasn't figured out whet they are doing yet. Remember, the SOL for tax matters is 3 years.
I slapped myself too, jlynn! The 1099 is from Capital One, and I was waiting to talk to you all before I contacted my tax preparer!!
Since Cap One seems to respond well to PFB, what not write a PFB letter and state that you got this, it doesn't give a tax year, and why have they sold this debt if they have forgiven it? Claim that if they truly forgave it, they couldn't sell it to someone else to collect.
just checked a couple of things...CR's (all 3) show account charged off, not sold. The CA is OSI, and they want $1766. Cap 1 shows $737 on CR plus fees totaling about $1700.
Wait a minute... 1099 is for "income" How would a forgiven debt be classified as income? You paid tax on the money you would have used to pay it... If it was a business expense and you deducted the writeoff for that year, then yes, I see why they sent a 1099correction. BUT...if it was not deducted on your taxes to begin with, why would it be income to you? I guess...lets see...hypothetically...you charge some stuff. The account is charged off. You keep stuff and bill isnt paid. They sent you 1099 for unpaid bill claiming that it is income because they forgave the debt. Under what principal? Maybe because they figure the 600+ woth of stuff as a "gift", lol. I am sorry to sound dense, but I work in this field and I cant figure out WHY they sent a 1099.
me either, NIK!! The more I look at it the more suspicious I am!! I know you can ask for a 1099C if you settle on a debt, so the balance won't be sold to another CA, but this makes no sense at all.
Also, I am looking at a 1099-I from Crap1 right now and it shows a tax year. Maybe because it is a 1099C...I dunno, BUT the tax year should clearly be printed on it. Does it have OMB info or numbers on it?
Four20nik Read This Cancelled debt is income per Internal Rvenue Code. Look at it this way - you got money and never either paid it back or paid taxes on it. Now you get to pay taxes on it witha 1099C. If you work in this field I suggest you re-read IRC Section 108. It never ceases to amaze me how many people work in the field of taxation and don't have even a rudimentary education in that field. I work in the taxation field also - an Enrolled Agent with over 25 years practice.
Re: Four20nik Read This Ya know, I was merely asking a simple question...do I DO taxes for a living? NO...I WORK IN THE FIELD. Just trying to help a friend. Thanks for the flame Mr. Enrolled Agent with over 25 years practice.
Re: Four20nik Read This Thank you, Nikki!! I appreciate the help! flyingifr, is this for this tax year, then? And if so, what kind of BS is it that it is just coming NOW?
Re: Four20nik Read This ok everyone, add this to the mix...this is one of 2 negatives on all my CR's. Do I dispute it as not mine or 0 balance? Showing c/o bal of 1760.
