A letter from Zakheim & Associates

It's basically saying if there were a balance of $600, and it wasn't paid, but they discharged it, they would have to report it. That money would have to reported somewhere, regardless.

$600 is the magic number where things need to start being reported. If you only made $583 last year, then you'd be exempt from reporting. If the balance was only $583, then it wouldn't need to be reported.

[quote]Information Reporting Under Section 6050P for Discharges of Indebtedness
The IRS and the Treasury Department are issuing final regulations that provide guidance on when an organization has a significant trade or business of lending money for purposes of reporting cancellation of indebtedness under section 6050P(c)(2)(D). Section 6050P(a) requires applicable entities to file information returns with the IRS when discharging indebtedness of $600 or more during a calendar year. Section 6050P(d) requires applicable entities to furnish information statements to debtors reporting discharges of indebtedness of $600 or more. Section 6050P(c)(2)(D) includes within the definition of "applicable entity" an organization that has a significant trade or business of lending money. These final regulations provide that the lending of money is a significant trade or business if money is loaned on a regular and continuing basis. TD 9160. Published October 25, 2004.[/quote]

source: http://www.irs.gov/taxpros/article/0,,id=129891,00.html

Regards
Mike

Does this mean that I have to report this on my income I am still a little confussed.

No, they would be the ones reporting. What you pay to a collection agency doesn't need to be reported. However, if a collection agency writes off a debt, they need to have it on their tax forms for the year.

I'm pretty sure you won't have to do anything the IRS.

HOWEVER, have you even asked for validation of this debt yet? What are the dates from this debt? If the SOL has passed, then you are no longer held liable for it, legally speaking.

Regards
Mike

When a debt is settled for more than $600, the negotiated amount is treated as an income and it is to be shown in your tax return. Creditors send the 1099 form for filling in the info so that they can enter it in their file.

I would send them a validation of debt letter so you can get a better idea of who you are dealing with, as I received the same letter from another collection agency almost word for word except for the creditor and amount due... Here is a generic letter for you to use that I have used

Quote:

onelamb

So are you saying the debtor is the one that has to file the 1099?

Or that the debtor will get taxed because they didn't pay the $600?

The debtor is issued a 1099 from the creditor and when the debtor files their taxes, they'll have to include the amount on the 1099 as income, which they can be taxed on.

If you have an interest-earning savings acct. or similar acct., a 1099 is usually issued showing how much interest you've earned, which is considered income. Discharged debt over a certain amount is viewed in the same way for some reason, so you can get taxed on the amount that was discharged when you settle.

Thanks Tiffany for clearing the query. I could have explained but your post looks better.

[quote=Mikey]So are you saying the debtor is the one that has to file the 1099? [/quote]

Yes, the creditor will send the form and if you look at the top post, the collector mentioned that the creditor will be sending it the person by 31st Jan next year.

[quote=Mikey]Or that the debtor will get taxed because they didn't pay the $600? [/quote]

$600 or more..

The same thing is discussed here

http://www.debtconsolidationcare.com/collection-agencies/about15326.html

By: Richard Battaglino, Esquire - Sasha Haro - Sabine Michael
Dear Sirs and Madam: I am to appear at West Regional Courthouse, N Pine Island Rd. on July 14 2009 at 11:00 AM.
My sister has been diagnosed with stage 4 Pancreatic cancer that has spread to her liver. My family is buying me a ticket to Indianapolisl, Indiana, to come be with her and help in this very trying time.
My nonprofit company has been with out funds for more than two years and I have lost all my credit, savings and spent all my cash, and feel since we have applied for grant funding for our affordable housing program I will be able to work out some kind of payment arrangement with Target. I have no money today or I would have continued my obligation to pay Target. I have been devistated by this financial economic housing crisis.
Please will you make a motion for a continuance until September sometime? Thank you,
Priscilla H. Barker
Personal info deleted - ND

We are not a debt collector. You need to contact them directly

This Kerr is on a stick, because even though i understand the value of a lump sum payment, it does not work out in the end because it ends up in the bad credit pile and it goes on your federal record with the government. Thank you.