1099C's what do they mean and will you GET ONE????

[tobee43]

i do understand there has been much concern about 1099c's....those that work in law firms have seen them issued...accountants have seem them issued...but what do they mean to US...here ...those that are going through or have been through bankruptcy???

personally, we all have sources of information that we feel we can trust or not....for me it's our accountant, whom, i believe it right on top of today's problems and situations dealing with bankruptcy as well as a number of financial problems many are faced with today.

i had to call our accountant today for information with early prep for our 2010 taxes. i wanted a break down and full understanding of HIS interruptions and experiences with 1099c's....when he has seen them...what do you do when you get one..and who exactly are they issued to??

his response was interesting....first, he stated the MOST he has encountered...(and remember this is ONLY ONE accountant in thousands)....were issued by CREDIT CARD COMPANIES.....on loses due to unpaid credit card interests and balances.

he said, he has seen them from chase, b of a....citi...etc. some for some amounts very small.... others for thousands....however, not one client had to pay tax or have any tax ramifications if they had a discharged bk...??? also, some clients had not filed bk, but were just not paying their credit cards.... again...interesting...

he also dispelled a terrible misnomer dealing with foreclosures... or at least it was for me...i was under the impression that a 1099c could be issued for a deficiency from states that allow collections on the deficient amounts between the sale of a house and the mortgage balance owed the bank. didn't YOU???

well, apparently, the laws changed in 2007 and all foreclosure deficiency are tax exempt on primary residences...he said they can in fact issue them, however, and he said he can't for the moment think of the line item number, however, there is actually a line item number on the tax 1040 for such an explanation if, in fact, one does receive a 1099c for this reason...interesting...

again...anyone can dispute this information source....or say they know someone who rec'd a 1099c....the real question here is, show us someone that actually had to pay an additional tax against a 1099c....

of course if one does receive one, you do and one must provide an explanation of the amount.

[helpmeout]

If one has filed for bankruptcy, all one has to do is complete a form 942 (it could be 944) for each 1099-c received and attach a copy of the discharge notice. Problem solved.

If one hasn't filed for bankruptcy, it may be more involved than above, but if one can prove insolvency, then one doesn't have to pay taxes on 1099-c.

[tobee43]

If one has filed for bankruptcy, all one has to do is complete a form 942 (it could be 944) for each 1099-c received and attach a copy of the discharge notice. Problem solved.

If one hasn't filed for bankruptcy, it may be more involved than above, but if one can prove insolvency, then one doesn't have to pay taxes on 1099-c.

that's my understanding as well....good news for many that were and are so worried about these 1099c's. and, actually, as it was explained even when not filing and you have a foreclosure on the primary home, it's federally exempt...cool...credit cards ...well we know where they can go!

[Egr61]

If you've been discharged, will the credit card companies send you 1099c's? The debt still exists technically, but just can't be collected, so why would they send 1099c's?

[ryan]

Going along with this, I'd be curious if there is any average time frame that would lapse before a creditor would issue one of these 1099C's.

[helpmeout]

All 1099's for 2010 have to be sent by 1/31/11. Just like your employer has to give you your W-2 by 1/31/11.

[Charlie777]

Egr61, if you haven't been discharged in bankruptcy the debt continues to exist (even after SOL for example). Once discharged in BK the debt ceases to exist because it has been discharged.

So a discharge is a final extinction of debt, and creditors may send 1099c.

A partial settlement is another final extinction of the debt, with a portion unpaid. That may lead a lender to send a 1099c for the unpaid portion. This raises other issues about how they calculate that amount (interest and penalty charges, etc.).

A charge-off is strictly an accounting issue, the term stands for "charged to profit and loss". A charge-off doesn't extinguish the debt, it just means the lender has counted it in their "reserve for bad debts".

Banks are trying to get those reserves off their balance sheets. So they sell the charged off accounts in large batches to JDBs. That is a final extinction of the debt as far as the OC is concerned, but it lives on with the JDB, and as JDBs resell them. So there's been no forgiveness of debt to trigger a 1099c.

My BK7 was discharged last year with about $200K of debt discharged. This was documented on Form 982 as "discharge of indebtedness in a Title 11 case" (the Bankruptcy Law is Title 11). You also use that form if you were insolvent when the event triggering the 1099c occurred. But in taking insolkvency you have to reduce various other tax items such as basis for future depreciation.

[tobee43]

If you've been discharged, will the credit card companies send you 1099c's? The debt still exists technically, but just can't be collected, so why would they send 1099c's?

who knows...just because they can?? and are just attempting to bother i think. however, if you prove the debt was listed they can't do a thing....according to this information you just have to supply supporting proof they were listed and discharged.

[tobee43]

All 1099's for 2010 have to be sent by 1/31/11. Just like your employer has to give you your W-2 by 1/31/11.

besides speaking with this accountant, i also did some personal research and what many of the items i read had in common is the 1099c can "appear" months...even a year later...so there is not time limit like an employer has with the issuing of a w2.

[tobee43]

All 1099's for 2010 have to be sent by 1/31/11. Just like your employer has to give you your W-2 by 1/31/11.

no...they can be issued at any time during the year and applied to whatever tax year may be applicable....they have no deadline date...now only the w2 do...not even the 1099 or the 1098 have to be by jan 31st...nice....right?

i would always fight with one company issuing our 1099's in late march...come to find out they didn't HAVE to meet the "deadline" that i thought was correct.

[tobee43]

Egr61, if you haven't been discharged in bankruptcy the debt continues to exist (even after SOL for example). Once discharged in BK the debt ceases to exist because it has been discharged.

So a discharge is a final extinction of debt, and creditors may send 1099c.

A partial settlement is another final extinction of the debt, with a portion unpaid. That may lead a lender to send a 1099c for the unpaid portion. This raises other issues about how they calculate that amount (interest and penalty charges, etc.).

A charge-off is strictly an accounting issue, the term stands for "charged to profit and loss". A charge-off doesn't extinguish the debt, it just means the lender has counted it in their "reserve for bad debts".

Banks are trying to get those reserves off their balance sheets. So they sell the charged off accounts in large batches to JDBs. That is a final extinction of the debt as far as the OC is concerned, but it lives on with the JDB, and as JDBs resell them. So there's been no forgiveness of debt to trigger a 1099c.

My BK7 was discharged last year with about $200K of debt discharged. This was documented on Form 982 as "discharge of indebtedness in a Title 11 case" (the Bankruptcy Law is Title 11). You also use that form if you were insolvent when the event triggering the 1099c occurred. But in taking insolkvency you have to reduce various other tax items such as basis for future depreciation.

charlie...so right...and the KEY word here is " insolvent ".....it's rather easy to proof your are insolvent when you were discharged from a no asset chapter 7 case...at least one would think...

[Charlie777]

You don't have to prove insolvency, any Title 11 BK (7, 11, 13) automatically gets exempted from recognizing income for debt discharge - that's by statute and you don't have to go any farther.

[tobee43]

You don't have to prove insolvency, any Chapter 11 BK (7, 11, 13) automatically gets exempted from recognizing income for debt discharge - that's by statute and you don't have to go any farther.

well i believe it was the "Mortgage Forgiveness Debt Relief Act of 2007" which generally allowed the taxpayer to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.
and then if there is a further problem you can fill in the form 982 to submit with your taxes to dispute the 1099c.

[HHM]

1099's and BK, here is what you need to know.

On the creditors side: the IRS imposes a duty upon any qualified financial institution to issue a 1099-C to a borrower "any time" a debt is forgiven (for whatever reason) showing the amount of forgiven debt. Creditor's interpret this duty in various ways, but by a strict reading of the guide, a 1099-C is supposed to issue when the debt is forgiven (discharged). The duty falls on the taxpayer (the debtor) to tell the IRS that they shouldn't be taxed on that forgiven debt.

On the debtors side: The IRS code puts the duty (burden) on the debtor to prove that the debtor should not be taxed on that forgiven debt. In bankruptcy, THIS IS VERY SIMPLE. Should you get a 1099-C from a creditor for a debt that was DISCAHRGED in bankruptcy, the debtor fills out IRS Form 982 and checks box 1(a). That is it, end of story, no more issue.

For mortgages, specifically, there are 2 ways of getting out from underneath the tax burden. If you filed BK, then follow the above directions. If you did not file BK, then you "might" trigger the 2007 Mortgage Debt Forgiveness act (it really should be called the Mortgage Debt Tax Forgiveness act). In any event, if you meet the qualifications under that act, you check box 1(e) on form 982.

If you get a 1099-c and have filed BK, it's not a big deal.

[tobee43]

1099's and BK, here is what you need to know.

On the creditors side: the IRS imposes a duty upon any qualified financial institution to issue a 1099-C to a borrower "any time" a debt is forgiven (for whatever reason) showing the amount of forgiven debt. Creditor's interpret this duty in various ways, but by a strict reading of the guide, a 1099-C is supposed to issue when the debt is forgiven (discharged). The duty falls on the taxpayer (the debtor) to tell the IRS that they shouldn't be taxed on that forgiven debt.

On the debtors side: The IRS code puts the duty (burden) on the debtor to prove that the debtor should not be taxed on that forgiven debt. In bankruptcy, THIS IS VERY SIMPLE. Should you get a 1099-C from a creditor for a debt that was DISCAHRGED in bankruptcy, the debtor fills out IRS Form 982 and checks box 1(a). That is it, end of story, no more issue.

For mortgages, specifically, there are 2 ways of getting out from underneath the tax burden. If you filed BK, then follow the above directions. If you did not file BK, then you "might" trigger the 2007 Mortgage Debt Forgiveness act (it really should be called the Mortgage Debt Tax Forgiveness act). In any event, if you meet the qualifications under that act, you check box 1(e) on form 982.

If you get a 1099-c and have filed BK, it's not a big deal.

good to know....and yet scary NOT to know...thanks hhm!