Author Topic: Taxes and 1099C Q&A am I right or wrong?  (Read 5752 times)

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BLUEMOON

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Taxes and 1099C Q&A am I right or wrong?
« on: July 21, 2013 06:14:26 PM »
My current situation is I am at about 24 months after stopping all payments to OC'S. I am wondering what and when things will happen from here forward. I have found these recent articles and a tax case that settles these questions not only for me but others as well.

From these links:

http://blog.credit.com/2012/02/what-to-do-if-you-get-a-1099-c-for-an-old-debt/

http://www.ustaxcourt.gov/InOpHistoric/kleber.TCM.WPD.pdf

http://www.forbes.com/sites/peterjreilly/2013/05/20/bank-cannot-issue-1099-c-and-subsequently-try-to-collect/

I conclude the following:

1)1099C'S should be issued on Dec 31 of the year in which 36 months passes of no payments UNLESS there is continued collection activity then they do not need to issue it.

2)You do not claim the 1099C'S until they are issued except if they were in error then you can argue it.

3)If the 1099C'S are issued at 36 months you claim them that tax year with form 982 if needed.

4)The best part of course is that once a bank issues a 1099C they can't continue collections as referenced in the Forbes article above.

Quote
It is inequitable to require a debtor to claim cancellation of debt income as a component of his or her gross income and subsequently pay taxes on it while still allowing the creditor, who has reported to the Internal Revenue Service and the debtor that the indebtedness was cancelled or discharged, to then collect it from the debtor.  …… The court does not agree with the argument that because a Form 1099-C can be corrected or amended, it cannot constitute an admission by a creditor that a debt has, in fact, been discharged or cancelled and that the debtor is no longer indebted thereon.

However, here is the bad part......

Quote
If this ruling stands, financial institutions will be encouraged to delay having an identifiable event as long as there is the dimmest hope that something might be collected.  1099-C when finally issued will be a blast from the past to the recipient, who if they are diligent will probably be able to come up with an argument that the debt expired in a much earlier year.]

So am I correct with my assumptions? It looks like I have at least another year of collections to ignore before I start looking for my 1099'S in the mail. Also this would indicate if anyone is planning on using form 982 they need to end each tax year as close to insolvent as possible while waiting for the 1099C'S.

The one question I have yet to be answered is what if 1099C'S are issued in different years? Can a person file form 982 more than once?

TomNTex

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #1 on: July 21, 2013 06:30:22 PM »
But, they have been known to continue collection after the 1099-C was issued. The info is out there about them doing so.

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #2 on: July 21, 2013 06:38:38 PM »
Oh I know they do for sure but now there is case law to fight them if they do. It is another weapon to use to fight collectors because to me, that indicates any collection activity after a 1099 is issued you can beat them for sure now.

Here is the link to the case law I forgot to post it:

http://www.leagle.com/decision-result/?xmldoc/In+BCO+20130514530.xml/docbase/CSLWAR3-2007-CURR

duh

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #3 on: July 21, 2013 10:39:22 PM »
But, they have been known to continue collection after the 1099-C was issued. The info is out there about them doing so.

If the 1099C was filed and you paid your income tax on it, then for some odd reason continued collections managed to get the debt finally paid...

Would this mean that you can apply to the IRS for a refund?

I am not an attorney. My posts about my experiences are for entertainment and  possibly educational purposes only.

If you need legal help, you should seek legal counsel.

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #4 on: July 21, 2013 10:53:00 PM »
If the 1099C was filed and you paid your income tax on it, then for some odd reason continued collections managed to get the debt finally paid...

Would this mean that you can apply to the IRS for a refund?

I don't see why not.......just file an amended return for that tax year. This has to be done within 3 years of the filing date though I believe.

E. Normis Debtor

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #5 on: July 21, 2013 11:01:45 PM »
Oh I know they do for sure but now there is case law to fight them if they do. It is another weapon to use to fight collectors because to me, that indicates any collection activity after a 1099 is issued you can beat them for sure now.

Here is the link to the case law I forgot to post it:

http://www.leagle.com/decision-result/?xmldoc/In+BCO+20130514530.xml/docbase/CSLWAR3-2007-CURR
Be cautious, there are other holdings:

2005 NY Slip Op 25160, *; 8 Misc. 3d 260, **;
794 N.Y.S.2d 899, ***; 2005 N.Y. Misc. LEXIS 835 Michael J. Hathaway, Plaintiff, v Mark W. Tompkins et al., Defendants.

The 1099-c form did not validly cancel defendants' obligation under UCC 3-605 (2), pursuant to which an "instrument" must be surrendered to the debtors by the "holder" of the instrument to effect a cancellation or renunciation of the debt. Here, even if the 1099-c form constituted an "instrument" surrender within the meaning of the statute, it was not surrendered to the debtors until after the assignment of the debt to plaintiff. Consequently, since the assignor bank ceased to be the "holder" of the instrument upon the assignment to plaintiff of the note and mortgage, it could not thereafter cancel the debt by the issuance of a 1099-c form

Leonard v. Old Nat'l Bank Corp., No. 89A04-0504-CV-205 , COURT OF APPEALS OF INDIANA, FOURTH DISTRICT , 837 N.E.2d 543; 2005 Ind. App. LEXIS 2171, November 21, 2005, Decided

OVERVIEW: Trial court properly found that bank did not intend to cancel debt by filing IRS Form 1099-C. As bank did not cancel the debt by filing Form 1099-C, trial court did not err in finding for the bank in a claim brought by guarantor on debt in question, alleging misrepresentation and failure of consideration with regards to his payment on loan

Owens v. Comm'r, No. 02-61057, Summary Calendar , UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT , 2003 U.S. App. LEXIS 12481, May 15, 2003, Filed

OVERVIEW: Taxpayers were entitled to litigation costs since IRS was not substantially justified in attempting to collect a deficiency, based on an erroneous notice of cancellation of taxpayers' loan, without investigating whether loan was in fact cancelled.
I don't respond to PM's or emails for advice on specific circumstances.  My participation in this forum is general in nature, and not intended to create an attorney/client relationship.

duh

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #6 on: July 21, 2013 11:03:24 PM »

However, here is the bad part......


The one question I have yet to be answered is what if 1099C'S are issued in different years? Can a person file form 982 more than once?

From my understanding , if a 1099C is filed on an account, or for many accounts and you are insolvent to the point of being able to use form 982.

Then the following year another 1099C is filed , yes another 982 can be used provided you are still insolvent.

Where the rub comes in, in my opinion is this.

For the first insolvency claim, all debt can be used for liability benefits. All written off, charged off, and  current, goes into that side of things. This is because the instructions on the 982 state that you claim insolvency based on assets and liabilities immediately before  the issuance of the 1099C.

Lets say that one has 4 charged off debts and that 3 of thss issue a 1099C.

When filling out the liability list for this specific year all four would be listed.

This would bode well and better to prove the insolubility because the total
amount owed would be compared against the assets of worth, ( and non worth as one must tally everything one owns...  inclusive of clothing and personal items.)

Assuming that nothing changes during the following year the asset total would remain fairly constant, however if a 1099C then would be filed for the 4th charge off, it would stand by itself because the other 3 would have been used the
previous year. Therefore the would not necessarily prove insolvency.

There is no way to predict what they will do on the 1099C issue.

That 36 month of non activity is law, but nothing can force them to abide by it.

I am not an attorney. My posts about my experiences are for entertainment and  possibly educational purposes only.

If you need legal help, you should seek legal counsel.

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #7 on: July 22, 2013 12:55:47 AM »
I understand the part about your actual assets changing by the next year. This would only benefit those who have huge debt amounts and say the last card had a balance like$25000 and they were still insolvent.

Also the 36 month timeframe is of course a conflict between the what the IRS says they should do and what is law about SOL in each state. Why should they file a 1099 after 3 years when they legally have more time under SOL to attempt collection?

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #8 on: July 22, 2013 01:21:46 AM »
Be cautious, there are other holdings:

2005 NY Slip Op 25160, *; 8 Misc. 3d 260, **;
794 N.Y.S.2d 899, ***; 2005 N.Y. Misc. LEXIS 835 Michael J. Hathaway, Plaintiff, v Mark W. Tompkins et al., Defendants.

The 1099-c form did not validly cancel defendants' obligation under UCC 3-605 (2), pursuant to which an "instrument" must be surrendered to the debtors by the "holder" of the instrument to effect a cancellation or renunciation of the debt. Here, even if the 1099-c form constituted an "instrument" surrender within the meaning of the statute, it was not surrendered to the debtors until after the assignment of the debt to plaintiff. Consequently, since the assignor bank ceased to be the "holder" of the instrument upon the assignment to plaintiff of the note and mortgage, it could not thereafter cancel the debt by the issuance of a 1099-c form

Leonard v. Old Nat'l Bank Corp., No. 89A04-0504-CV-205 , COURT OF APPEALS OF INDIANA, FOURTH DISTRICT , 837 N.E.2d 543; 2005 Ind. App. LEXIS 2171, November 21, 2005, Decided

OVERVIEW: Trial court properly found that bank did not intend to cancel debt by filing IRS Form 1099-C. As bank did not cancel the debt by filing Form 1099-C, trial court did not err in finding for the bank in a claim brought by guarantor on debt in question, alleging misrepresentation and failure of consideration with regards to his payment on loan

Owens v. Comm'r, No. 02-61057, Summary Calendar , UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT , 2003 U.S. App. LEXIS 12481, May 15, 2003, Filed

OVERVIEW: Taxpayers were entitled to litigation costs since IRS was not substantially justified in attempting to collect a deficiency, based on an erroneous notice of cancellation of taxpayers' loan, without investigating whether loan was in fact cancelled.

Now what happens when you have different rulings on the same topic that conflict? If you cite case law as your basis what will a judge rule with conflicting decisions?

duh

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #9 on: July 22, 2013 02:05:43 AM »
I understand the part about your actual assets changing by the next year. This would only benefit those who have huge debt amounts and say the last card had a balance like$25000 and they were still insolvent.

Also the 36 month timeframe is of course a conflict between the what the IRS says they should do and what is law about SOL in each state. Why should they file a 1099 after 3 years when they legally have more time under SOL to attempt collection?

The 36 month time frame is supposed to be 36 consecutive months on NON collection activity. Not from default, charge off or write off.

Theoretically, after those events you would have several months to a year or much more of phone calls, written correspondence, or possibly law suit.

This would place the 1099C issue , legal wise, at more of the 4 year or more
time frame. Allowing for the passing through many state SOLs.








I am not an attorney. My posts about my experiences are for entertainment and  possibly educational purposes only.

If you need legal help, you should seek legal counsel.

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #10 on: July 22, 2013 02:26:15 AM »
The 36 month time frame is supposed to be 36 consecutive months on NON collection activity. Not from default, charge off or write off.

Wrong

Quote
The expiration of non-payment testing period… This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31, plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law.”

Bingo! If none of the other triggers for sending a 1099-C apply, it sounds like the creditor must send one out three years after there has been no payment made on the debt for three years.]

It's 3 years of no payments not 3 years of no collection activity.

silverzgirl

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #11 on: July 23, 2013 01:45:16 PM »
It is 36 months of nonpayment, in spite of collection attempts. They also cannot have engaged in any bonafide collection activity in the 12 months prior to the 1099C.

I just wish they would agree for credit reporting sake...TU set mine as owing zero but EX and EQ claim the amounts are valid. Needless to say, TU is my highest score at this stage of the game.
“Know your enemy and know yourself and you can fight a hundred battles without disaster.”  - Sun-Tzu

I am not a lawyer, nor do I play one on TV. I once thought I was a lawyer when I was litigating in a courtroom, but turns out I just had Patron induced bed spins and dreamed it all. Take my posts with a grain of salt...and a shot of Patron. But not so much you think you are a lawyer.

BLUEMOON

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #12 on: July 28, 2013 10:00:34 PM »
It is 36 months of nonpayment, in spite of collection attempts. They also cannot have engaged in any bonafide collection activity in the 12 months prior to the 1099C.

I just wish they would agree for credit reporting sake...TU set mine as owing zero but EX and EQ claim the amounts are valid. Needless to say, TU is my highest score at this stage of the game.

Just curious.......what stage you are at? How many months past last payment/s are you and has anyone sued?

duh

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #13 on: July 29, 2013 12:15:45 AM »
Just curious.......what stage you are at? How many months past last payment/s are you and has anyone sued?

53 to 55 months past last payment on all accounts.

NO 1099Cs as yet.

One lawsuit ( out of 19 potential) that was dismissed with prejudice
and a mutual walk away after  arbitration was initiated. I requested no 1099Cs and the attorney could not get the OC to sign off but told me it would not be a worry as this was not a settled account. (I know better). That account was sold after the dismissal.


I am not an attorney. My posts about my experiences are for entertainment and  possibly educational purposes only.

If you need legal help, you should seek legal counsel.

silverzgirl

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Re: Taxes and 1099C Q&A am I right or wrong?
« Reply #14 on: July 29, 2013 01:57:20 PM »
Depends. Citi sued at the 6 month mark right at CO. Bank of America sued about 18 months after nonpayment but not on both accounts, just one.

BoA gave up when ordered to arbitration, court dismissed without prejudice. They gave up for another 18 months, then sent 1099Cs though they insist the amount on CRs is valid.

May be time to turn the tables on them. I paid taxes so in essence, they sold those accounts to me. They cannot be owed and considered my income, I am thinking...
“Know your enemy and know yourself and you can fight a hundred battles without disaster.”  - Sun-Tzu

I am not a lawyer, nor do I play one on TV. I once thought I was a lawyer when I was litigating in a courtroom, but turns out I just had Patron induced bed spins and dreamed it all. Take my posts with a grain of salt...and a shot of Patron. But not so much you think you are a lawyer.