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Is charge off better for tax reasons than not

Date: Tue, 08/03/2010 - 11:32

Submitted by anonymous
on Tue, 08/03/2010 - 11:32

Posts: 202330 Credits: [Donate]

Total Replies: 6


I have read alot about trying to keep accounts from going to charge-off (or being sold to third partys if thats the same) in order to get better settlements. However, it seems to me that if a creditor "sells" the debt to a third party, then they can claim a loss, but CANNOT send you a 1099 since they haven't relieved you of the debt. The third party CANNOT send you a 1099 since they didn't really incur this debt (account). Does this make sense and/or is it true. If so, it seems that it may be better to settle with a third party than with CA even at a slightly higher %... Thanks for any advice


If they forgive debt over $600, under any circumstances, they are required to send 1099. Even if they do not, I believe you must report it on your taxes and file the form. After all, it is considered income and all income is required to be reported...if you are following the irs regs. Just because you don't happen to receive a 1099 does not mean you can omit it as income.


lrhall41

Submitted by dantheman on Tue, 08/03/2010 - 20:09

( Posts: 860 | Credits: )


Quote:

Originally Posted by Anonymous
How can a collection agency send you a 1099 (Like they paid you something) when they, in fact, purchased the debt for pennies on the dollar? It seems that if they buy a $10K debt for $1 k, they WOULD NOT be able to send u a 1099. Is this correct?


No that is not correct. Even though they only paid $1K they bought the rights to collect on $10k. Now if you pay them $1k you will be 1099 for $9K. Bottom line is someone wrote off/forgave $9k in debt.


lrhall41

Submitted by OZZIE69 on Wed, 08/04/2010 - 06:22

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