Ways around 1099c
Date: Fri, 01/09/2009 - 21:55
What I mean is an agreement is drawn up that a certain amount of money is all that is due and owed, and once paid, discharges the debt. Something worded like this:
The COLLECTION AGENCY and the CONSUMER agree that the alleged debt is $_____________.00 (_____________ & 00/100 dollars) to ((OC)). While the CONSUMER feels that validity of the debt has not been proved by the COLLECTION AGENCY, the parties agree that the COLLECTION AGENCY shall accept the sum of $_________.00 (___________ & no/100 dollars) as due and owing on the debt and that no other monies were due upon this debt.
This way, it clearly states that both parties agreed that the actual amount owed was a certain amount, and then that amount gets paid...rendering the alleged amount null and void.
Could this work?
I think it could work, since the 'alleged' amount is in dispute
I think it could work, since the 'alleged' amount is in dispute and if both parties come to an agreement that a certain amount is the actual amount due...it just may work.
However I bet it will be like pulling teeth to get the CA to agree to it...unless they realize that it relieves them of the burden of filing a 1099c...maybe? Hmm. I need to test this theory out. LOL.
The problem I see is that with a little creative accounting a co
The problem I see is that with a little creative accounting a collection agency can benefit from submitting a 1099-c. They could potentially save the tax on the fictitious loss. The larger they make that loss appear the more they save. I think it is to their benefit to inflate that value as much as possible which will make it difficult to get them to sign an agreement stating the amount settled at was the amount owed which technically would make the debt settled in full for amount owed. I have been successful in getting a letter similar to this stating the amount owed and the amount settled for implying that we agreed on the amount of the debt and then settled for lesser. I had them include the amount owed to further show I was settling the full amount and not a partial amount. I never received a 1099 on that debt so they must have never filed one. That was a number of years ago.
I don't think their would be any harm in trying your approach but I do think you would end up fighting with the IRS over the amount if the CA filed the 1099c for a different amount then what your agreement showed. I think you would have a stronger case if the letter specifically stated the amount owed and the amount settled for. I think the trick is getting the CA to reduce the amount owed on their records. I think their books would have to match your letter showing the amount owed was the amount you agreed at and not show a difference but it would be hard to get a CA to do this.
I wanted to add that in the case above I did get them to remove
I wanted to add that in the case above I did get them to remove a bunch of fees, penalties and interest which reduced the amount owed. I then settled on that amount. This is in line with what I generally recommended. I like to settle on the base amount owed which is usually the max limit of a credit card for example. I try to get the CA to permanently remove from the account all monies over that limit since it is obvious that I would have never received a benefit over the max limit. If they ever filed a 1099-c it would have to be on the reduced amount after the removed all the fees and stuff. I think you could do the same thing if you could get the CA to classify all the money they were removing from your account as fees, penalties and interest and not actual money you received. It basically will come down to what numbers they put on the 1099-c and if they ever get audited by the IRS.
Yeah I am thinking that now that I think upon it more. These 10
Yeah I am thinking that now that I think upon it more. These 1099c just makes settling so much less attractive...who wants to settle if the balance will just come back to bite them on the butt at tax time? Plus, who is to say if the OC ever filed a 1099c..although I imagine if they did you woulda heard about it before the CA tried it.
I am starting to think that working on PFD is a better option then a settlement.
Most of the posts I have made talking about settlement always in
Most of the posts I have made talking about settlement always included something about taking into account the amount of tax one might have to pay if a CA filed a 1099-c. Basically the best and easiest way to handle them is to account for it in the settlement. Try to permanently reduce the reported debt and then settle with the tax in mind. Some CAs won't or can't reduce that number but if you are dealing with an OC then they can. After that make the offers lower to offset the tax burden. Essentially that is what you were suggesting by getting them to agree to the amount owed being equal to the amount you are paying. The key is to get them to change that in their database so the numbers match if they are ever audited.
This happened to me two years ago. I received a 1099-C as income
This happened to me two years ago. I received a 1099-C as income for an unsettled debt. I wrote the IRS a letter expaling the account was originally in dispute. Contrary to consumer protection laws, the card company continued to assess interest and late fees. Then the case went to arbitration and finally to a collection agency. I explained that many attemps to settle with the collection agency were unsuccessful and the amount was in question because of the additional charges. In the end, the IRS accepted my plea and I was allwoed to disregard the 1099-C. I think the real sinching deal was my attempts to settle were not accepted by the collection agency. All they would accept was a lump sum payment. If I had the money for a lump sum payment to the collection agency, then I would have paid off the original debt. It was a viscous circle, but in the end, I won my argument. Any comments would be appreciated....