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Chargeoff - IRS 1099 income

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warrior1

Junior Member
What is the name of your state? NJ

How to handle when a credit card company send you IRS Form 1099 with charge off amount that need to be treated as income. Can I deduct any amount that I have paid to settle that debt with Law firm or CA.
 


Ladynred

Senior Member
No, the 1099-C "cancellation of debt income" is also sent to the IRS, so you will have to claim it as income UNLESS you can prove that you were/are insolvent at the time the debt was 'forgiven' - then you will not have to claim it as income.
 

caliber

Member
Or perhaps you can prove...

If you can prove you are receiving your own value back to you(which is the 1099-C), then you really don't have income. Yet another ploy by the credit card company to make the appearance of risk/loss.

Ladynred
Senior Member Join Date: Feb 2002
Location: Nashville,TN
Posts: 9,326


No, the 1099-C "cancellation of debt income" is also sent to the IRS, so you will have to claim it as income UNLESS you can prove that you were/are insolvent at the time the debt was 'forgiven' - then you will not have to claim it as income.
__________________
"Knowledge is Power - use it as you see fit !

I am not a lawyer or a member of the legal profession. My advice is based on research and experience, my own and others, some who practice law. You decide for yourself what actions you do or do not take from my advice.
 

warrior1

Junior Member
need more clarification

Does that mean the following for example: I was delinquent for $10000 to Citi Visa. Now citi visa is sending me 1099-c for $10000. Since I am not declaring bankruptcy, I have to 1. claim $10,000 as income on my tax return, 2. I just paid 8,000 to the plaintiff (citibank law firm) to settle it 3. I got slammed with $18,000 liability or 4. I can deduct $8000 from the $10000 income for tax purposes and actually pay tax on $2000 only ? I hope I am able to clarify my question.
 

caliber

Member
Found money.

The 1099-c, in my opinion is bogus. I believe one could challenge that and prevail. But based on your example, $2,000 is the amount that would be reflected on the 1099-c. After all, you settled at $8,000. What did you get the law firm to report to the credit bureau at settlement? If it's the typical settled-less than than full, then it's derogatory. Looks like you bit at the 80% offer of settlement. A balance that large could have been negotiated even further, perhaps to 10%. Ever wonder why they are so eager to settle with you a small percentages? They really have little risk, if any. It's all found money to them.

need more clarification

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Does that mean the following for example: I was delinquent for $10000 to Citi Visa. Now citi visa is sending me 1099-c for $10000. Since I am not declaring bankruptcy, I have to 1. claim $10,000 as income on my tax return, 2. I just paid 8,000 to the plaintiff (citibank law firm) to settle it 3. I got slammed with $18,000 liability or 4. I can deduct $8000 from the $10000 income for tax purposes and actually pay tax on $2000 only ?
 

stevek3

Member
caliber said:
The 1099-c, in my opinion is bogus. I believe one could challenge that and prevail. But based on your example, $2,000 is the amount that would be reflected on the 1099-c. After all, you settled at $8,000. What did you get the law firm to report to the credit bureau at settlement? If it's the typical settled-less than than full, then it's derogatory. Looks like you bit at the 80% offer of settlement. A balance that large could have been negotiated even further, perhaps to 10%. Ever wonder why they are so eager to settle with you a small percentages? They really have little risk, if any. It's all found money to them.
It's always informative to have a representative from the Militia of Montana setting people straight about the U.S. tax code.
 

caliber

Member
Basic math

Pay(if you want) on $2000. Or formally dispute lawfully. Anything more doesn't square with what you settled for. You can prove the $8000 was paid by you per your example, yes?
 

Ladynred

Senior Member
WERE you insolvent (owed more than assets you own) when the 10K 1099-C was issued ??? If you were/are, then you will have to fill out that form with the IRS to claim insolvency and then you will not have to claim ANY of it on your tax return.
 

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