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Posted: Mon Nov 19, 2007 9:21 am Subject: 1099 on a settlement?

I am working on a settlement with a CA and hope to come to an agreement this week. I stated that I would pay the agreed amount in return for a PIF letter.
With a PIF can the CA turn around an issue 1099 for the balance? Should I negotiate for no 1099’s to be filed? I would hate to get surprised with extra tax burden after trying to take care of the mess.

Posted: Mon Nov 19, 2007 9:24 am Subject:

Yes they can and most DO send out a 1099, i think it's for anything over $600 but i will have to check to be sure of the amt.
I'd "try" to make that part of the settlement.
Hope this helps,
Ang

Posted: Mon Nov 19, 2007 9:25 am Subject:

1099 issuance is controlled by US tax code and is not really up for neg. If they write off more than $600,they can issue one. Go to irs.gov to read up on all the circumstances regarding one.

Posted: Mon Nov 19, 2007 9:26 am Subject:

Thanks Ang
Does anyone have any thoughts on how to word that in my offer?

Posted: Mon Nov 19, 2007 9:27 am Subject:

Ahh well looks like it's not an option mom! Sad

Ang

Posted: Mon Nov 19, 2007 9:31 am Subject:

The CA has an outrages amount of interest tacked on to the account and they have not showed me how they came up with the amount. But they are willing to settle for what they say is less then 30%…..by my view it’s closer to 50%

Posted: Mon Nov 19, 2007 6:00 pm Subject:

*Technically* they should be sending a 1099-C for ANY cancellation of debt over $600. For them not to report it would be like your employer not reporting your W2s to the IRS at the end of the year. If IRS ever audited them and found out they don't send 1099-C's, I think they could get into some legal troubles.

In reality, most companies don't really send them out because I don't think the IRS really cares that much.

I know in your head it is all a made-up number anyway, and half of a made-up number is still made up. Maybe if they do file one, you can call the IRS to see how to dispute the amount they claim cancelled.

I have settled 3 cards over $600 and never got a 1099. It just depends on the company, I think.

Guest · Posted: Mon Nov 19, 2007 6:33 pm Subject:

Thanks for you input, Debtcruncher, however I am dealing with several thousands of dollars. A large amount on a 1099-C would be as bad as a large debt. Maybe worse as I will have to deal with the IRS (scary) Twisted Evil

Maybe I should work on getting the interest and fee’s waived on the account to bring down the balance to the amount the CC was charged off at. What do you guys think?

Posted: Mon Nov 19, 2007 6:35 pm Subject:

Sorry that was me...forgot to sign in
Laughing

Posted: Mon Nov 19, 2007 6:52 pm Subject:

Whenever you settle a large debt and have settled for less than you owe technically the difference betem the debt and the settlement is income even if it does not feel that way to you. I settled a debt with a payday loan company and they refunded me money. I was stil issued a 1099 by their lawyers for the money that was refunded. It is up to me to dispute it on my taxes against any losses I occurred. I think that you should retain a good tax attorney in this case if you can afford one.

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