1099-C Cancellation of debt form??

[merime]

I just received in the mail from an old debt Chadwhicks Visa a 1099-C form which says cancellation of debt and the Date IS 8/17/2012. Is it real? Do I include this as income on tax forms? I did not pay the debt off ,nor did I ever receive any notification before this official looking form. Thanks for any clues as to what to do with this.

[LadyInTheRed]

Sometimes creditors cancel debt instead of reselling it.

Have you filed BK? I think you may be somebody who is waiting out the SOL, but I'm not certain. This kind of info is important to include when you ask a question.

Assuming you did not file BK, the foregiven debt is taxable income unless an exception or exclusion applies. One exclusion would be you being insolvent on 8/17/2012. You file form 982 to claim the exclusion. Here's info on the IRS website: http://www.irs.gov/taxtopics/tc431.html You'll probably want to read publication 4681 which includes information regarding insolvency.

[merime]

Thank you, no I did not file. The statute ran out long ago, and I never agreed to a settlement. I read that this is happening lot. I also read that a third party can not issue this . In my case it came from Asset Acceptance LLC, speaking for Chadwhicks, World financial nation. Also they had not sent anything before this. Just another bump in the road.

[LadyInTheRed]

I am pretty sure (but not certain) a creditor can forgive a debt without your agreement. I don't know about the third party issue. But, Asset Acceptance LLC does purchase debt. So, they may be the current owner of the debt.

I would hope that forgiveness of a debt that is past the SOL isn't taxable, but I don't know. Hopefully, there is something in the IRS publications that covers that.

[LadyInTheRed]

I decided to do a quick google search about 1099c for debt past the SOL. There doesn't seem to be agreement on how to handle the issue. The best thing to do is to consult a CPA.

But, if you Google "1099c 'statute of limitations'" you'll find some articles about creditor's issuing 1099Cs for old debt.

You could try following the advice in this article: http://getoutofdebt.org/43711/how-to...-irs-form-4598 It includes a description of a tax court ruling that suggests that when the debt was cancelled will depend on the facts of your specific situation.

[merime]

Thank you so much for the useful links and advice. I will be looking into it tonight.

[HHM]

I am not sure about the 3rd party issue as well, where did you see that?

A creditor can, at any time, forgive a debt.

[merime]

the Creditors name is Asset Acceptance LLC, and in box 4 is chadwhicks /world financial as the debt description. In box 7 there is a fair market value of 0?

[LadyInTheRed]

It makes sense that they would list the original creditor in the description of the debt. It doesn't sound like it was issued by a 3rd party. It was issued by the current owner of the debt.

Box 7 is for use if the form is issued in connection with a foreclosure. They probably should have left it blank. But, putting zero shouldn't make any difference.

From the form instructions:

Box 7. Fair Market Value (FMV) of Property
If you are filing a combined Form 1099-C and 1099-A for a foreclosure, execution, or similar sale, enter the FMV of the property. Generally, the gross foreclosure bid price is considered to be the FMV. If an abandonment or voluntary conveyance to the lender in lieu of foreclosure occurred, enter the appraised value of the property.

[merime]

No it does not make sense , when I think about it. I never agreed to anything. I know if you agree to a a reduced balance due, or a payment plan , that is considered income. I did not do that. I also read that the company in order to send out a 1099 c , had to make no effort to collect in 36 months. I know they called a few times in the last 3 years. I am beginning to think its a trick of some sort. I do not even file taxes. I guess what I will do is say that I never agreed to a settlement if it comes up. I have no income coming in. Thanks LadyInTheRed for so much advice and knowledge sharing!!

[merime]

Creditors name is Asset Acceptance , that is for sure.

[HHM]

Merime

Time to step back, take some Xanax and realize that things can happen that you cannot control. The 36 months rule only relates to when the IRS code "requires" the issuance of a 1099-C. A creditor can voluntarily, and unilaterally, forgive a debt whenever it wants. I think the confusion lies in the fact that we often talk about the 1099-C arising in the debt settlement scenario or the bankruptcy scenario. But if a creditor unilaterally forgives a debt, the same issues arise. The creditors lent you money, you didn't pay it back, the government then considers that income. As a result, you must demonstrate to the IRS that you are not liable to pay tax (e.g. IRS form 982).

[merime]

I do not file taxes so do I just send in this 982 form?

[HHM]

No, you will need to do a 1040.

From the IRS perspective, they have a 1099-C (income information), as such, they are expecting a tax return.

[merime]

Since I have no assets , its more of a scare tactic, and it works!! Not concerned anymore. Thanks everyone.