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In A Jam
07-10-2006, 12:28 PM
Charge offs stay on a credit report for 7 years, right? When does that 7 year mark start? Is it when the account first charges off or when the account has been paid off.

Background:

I had several credit cards and due to circumstances some were charged off. I have started with a credit counseling company and am making monthly payments to each credit now.

I did have one account that was charged off and went to an collection agency. I paid that off last year.

I am working to get my credit back on track. I did take out a personal loan (I had a cosigner) and I am making ontime monthly payments. I also have a couple credits cards now (VERY low limits). They are being used to help raise my credit score (they report monthly). I am trying not to go crazy with them now.

I am still behind on payments for some things, but am working to get everything caught back up.

tinatark
07-10-2006, 12:50 PM
7 years from last activity.

Some people have had success negotiating with the companies to take them off the reports, either when they pay off a chargeoff or by disputing them. At the very least, it should be reporting as a "paid charge off"

Chicago526
07-10-2006, 01:02 PM
Yep, 7 years. When possible try to negotiate a removal of the tradeline (or a positive tradeline) in exchange for payment.

Also, if they offer you a settlement for less than your balance, the differance must be reported as income. If you owed $1000 and the offer you to settle it for $600, then you must report the $400 differance on your tax return.

summerrluvv
07-10-2006, 01:17 PM
Check out the forums on www.creditboards.com. It's VERY helpful. A simple dispute would probably get it taken off.

MyGoofy26
07-10-2006, 01:22 PM
Did the collection agency buy the debt? Or were they assigned the debt? There's a very good chance (especially if the CA bought the debt) that your original tradeline went unchanged and will fall off 7 years from date of last delinquincy. On the flipside, you probably have a tradeline from the CA now which looks worse.

You can call the credit bureaus and ask for an estimated date that any account will fall off. They can tell by your history your dates of last delinquincy and activity when your account is scheduled to fall off (provided there are no other changes between then and now)

pearlieq
07-10-2006, 01:37 PM
Here's a helpful article from MSN money about people who dig up old charge-offs and cause further headaches.

The article tells you what to look out for and how to protect yourself.

http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P74812.asp

picantel
07-11-2006, 11:09 AM
Yep, 7 years. When possible try to negotiate a removal of the tradeline (or a positive tradeline) in exchange for payment.

Also, if they offer you a settlement for less than your balance, the differance must be reported as income. If you owed $1000 and the offer you to settle it for $600, then you must report the $400 differance on your tax return.

This is not true. You may get a 1099-C form to fill out. IF you do not receive this then you do not have to report the difference unless you feel like donating to the government. 90% of the time you will never see this form.

Jon99
07-11-2006, 11:12 AM
I had a chargeoff that fell off my CR a few months ago, raised my FICO a whopping 3 points... :)

brandylouwho
07-11-2006, 11:21 AM
7 years from last activity.

Some people have had success negotiating with the companies to take them off the reports, either when they pay off a chargeoff or by disputing them. At the very least, it should be reporting as a "paid charge off"


This is the exact answer I was going to post!!! 7 years from last activity.

And keep any paperwork you have on what you paid. I work at a mortgage company and so many times we have to try to prove what was paid or not paid 5 years ago...the customers don't always know or remember, the bank may not even exist anymore...you get the picture. It causes more headaches and stress for people who are excited & already stressing about buying a house! Sometimes people even end up having to payoff old charge offs in order to qualify for the mortgage (every situation differs).

MyGoofy26
07-11-2006, 11:30 AM
I had a chargeoff that fell off my CR a few months ago, raised my FICO a whopping 3 points... :)

A lot of times, if the chargeoff is one of your older accounts, the chargeoff status starts to mean less than the age. Sounds like yours was close to being one of your older accounts. I've seen a lot of people on Creditboards say their FICO actually tanked when the chargeoffs came off because it killed their age.

picantel
07-11-2006, 11:34 AM
Keep all paperwork of everything you pay off(obviously your phone bills each month and stuff like that is not needed). If you close a bank account get a statement with the 0 balance and keep it for 20 years at least. I cannot tell you how many thousands of times I have seen people come to the forums on a paid debt that some scum CA comes after them for 10 years later. Just had someone email me on a paid bounced check from 6 years ago. The CA started threatening criminal action(illegal) even though the consumer sent them a receipt. Obviously that CA is now being sued.

Chicago526
07-11-2006, 11:48 AM
This is not true. You may get a 1099-C form to fill out. IF you do not receive this then you do not have to report the difference unless you feel like donating to the government. 90% of the time you will never see this form.

That's not my understanding, every source I've ever read on the topic says that you need to include it in your income. Here's the most recent article I've read on the topic.

Of course no one should ever 100% rely on advice they get from message boards (even my own! ;) ), always ask a profesional! :)

http://moneycentral.msn.com/content/Taxes/Cutyourtaxes/P59989.asp

The debt-discharge surprise
Congratulations again! You convinced your credit card companies that, unless they reduce your debt balances, you’re going to file for bankruptcy, and they’re going to get nothing. They generously lowered you liability by $5,000 so you can pay off the balance over the next 24 months.

Here’s the nasty surprise: That $5,000 reduction is now ordinary income to you and could cost you as much as $1,750 in additional income tax -- if you're in the 35% bracket in 2005 and 2006. So much for getting your cash flow in order.

Unless it was sheltered by the umbrella of bankruptcy, debt reduction represents accession to wealth, clearly realized, and it is considered taxable income.

picantel
07-11-2006, 04:51 PM
only if you get the form. if you do not get one then do not report it. Not all agencys do send them out.

dawnball
07-12-2006, 01:55 AM
only if you get the form. if you do not get one then do not report it. Not all agencys do send them out.

Well, if you don't get the form (so the IRS doesn't get their copy), then the IRS has no way of knowing that you were supposed to report it. However, the tax code is pretty clear that you are obligated to report it - since it is income.

luckofthedraw
07-13-2006, 04:58 PM
The emphasis in all of this is that the chargeoff will fall off seven years after your DOLA (date of last activity). This means seven years after you either pay it off completely or seven years after you just stop paying it.

Just like the 1099 issue, the ethics part is up to you.

jenr812
07-13-2006, 05:28 PM
Well, if you don't get the form (so the IRS doesn't get their copy), then the IRS has no way of knowing that you were supposed to report it. However, the tax code is pretty clear that you are obligated to report it - since it is income.
Exactly. And you can bet your last dollar that the company does have a record of the transaction. If they are ever audited, the IRS will find out that you had "earned income" that went unreported by you. It's always good to just do the right thing, especially when the IRS is involved ;) I run into this issue with mystery shopping a lot - you only get a 1099 if you make more than $600 from the company. That doesn't mean you don't HAVE to report it if you make less than that. Many people get confused by that.

picantel
07-24-2006, 08:37 PM
The emphasis in all of this is that the chargeoff will fall off seven years after your DOLA (date of last activity). This means seven years after you either pay it off completely or seven years after you just stop paying it.

Just like the 1099 issue, the ethics part is up to you.

This is not true also. Where do you people come up with this stuff. If it was charged off 5 years ago and you pay it off then it comes off in 2 years- not 7. And once again you need only report the income if you RECEIVE A FREAKING 1099-C.

jenr812
07-24-2006, 11:49 PM
This is not true also. Where do you people come up with this stuff.
Why the hostility??? I will tell you where I come up with my info - the credit bureaus and the IRS. I have dealt with identity theft, inaccurate credit reports, and unearned income since the mid 90s.

If it was charged off 5 years ago and you pay it off then it comes off in 2 years- not 7
This depends on the type of account, but for the most part is basically true, especially thanks to a fairly "new" law that is finally being enforced by the FCRA.

Each Time An Account Passes To A New Collector, Does The 7-Year Drop-Off Cycle Start Again?

Does the process of transferring delinquent accounts from one collector to another allow for a bad credit item to stay on a credit report indefinitely by causing the seven-year cycle to start anew each time a credit item is reassigned to a new collector? If not, what can be done to stop the process?

In general, most negative account information cycles off your credit report automatically after seven years. In the past, however, collection accounts could be restarted over and over again due to the practice of reselling them to various agencies. Every time the account was sold to a new agency, a new start date would be generated on the consumer’s credit report and, so, a new seven-year cycle would begin.

To deal with this special situation, the Federal Consumer Credit Reporting Reform Act of 1996 included a section pertaining directly to the reporting of collection accounts. According to the act, any account reported in collections on or after April 1, 1997 may only be reported for one, continuous seven-year period, regardless of how many times it changes hands. Accounts reported in collections before that date could conceivably be re-reported one more time, but from that point on, the seven-year rule would stick.

For example, if you had an account go into collections in 1992, the notation would stay on your report for seven years, until 1999. If the debt was resold in 1995, another seven-year cycle would start, and that notation would come off in 2002. But, if it was sold again in 1998, that would be the last start date of any seven-year cycle. In other words, that account could never again appear on your report, paid or not, after 2005.

So, any collection account placed on your credit report on or after April 1, 1997 can remain on a credit report for only seven years, no matter how many times it changes hands in the future.

And once again you need only report the income if you RECEIVE A FREAKING 1099-C.This is NOT TRUE! As I stated before, companies are not required to file 1099s for every person they pay money to as a way to lower paperwork. Part of the paperwork reduction act. BUT that does not remove the taxpayer's responsibility to report the income. This is for any income, not just forgiven debt. It is for self employed income (I have a lot of experience with this for mystery shopping and merchandising), babysitting, providing other services - basically any kind of MISCELLANEOUS income which is what a 1099 is for. I don't understand why someone gets so irritated without even checking the "facts" they are providing to see if they are accurate or not.

Canceled Debts
Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. You have no income from the canceled debt if it is intended as a gift to you. A debt includes any indebtedness for which you are liable or which attaches to property you hold.

If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. If it is a business debt, report the amount on Schedule C or Schedule C-EZ (Form 1040) (or on Schedule F, Profit or Loss From Farming (Form 1040), if the debt is farm debt and you are a farmer).

Form 1099-C. If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. The amount of the canceled debt is shown in box 2.

Interest included in canceled debt. If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest will also be shown in box 3. Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible if you paid it. See Deductible debt, under Exceptions, later.

If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3).

Repayment of canceled debt. If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. The statute of limitations generally does not end until 3 years after the due date of your original return.

Exceptions
There are several exceptions to the inclusion of canceled debt in income. These are explained next.

Student loans. Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers.

You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. To qualify, the loan must have been made by:
The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof,

A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or

An educational institution:

Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or

As part of a program of the institution designed to encourage students to serve in occupations or areas with unmet needs and under which the services provided are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization.


Section 501(c)(3) organizations are defined in Publication 525.

A loan to refinance a qualified student loan will also qualify if it was made by an educational institution or a tax-exempt 501(a) organization under its program designed as described in (3)(b) above.

Deductible debt. You do not have income from the cancellation of a debt if your payment of the debt would be deductible. This exception applies only if you use the cash method of accounting. For more information, see chapter 5 of Publication 334, Tax Guide for Small Business.

Education loan repayment assistance. Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program) or a state education loan repayment program eligible for funds under the Public Health Service Act are not taxable if you agree to provide primary health services in health professional shortage areas. For more information, see Publication 970, Tax Benefits for Education.

Price reduced after purchase. Generally, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property.

Excluded debt. Do not include a canceled debt in your gross income in the following situations.
The debt is canceled in a bankruptcy case under title 11 of the U.S. Code. See Publication 908, Bankruptcy Tax Guide.

The debt is canceled when you are insolvent. However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. See Publication 908.

The debt is qualified farm debt and is canceled by a qualified person. See chapter 3 of Publication 225, Farmer's Tax Guide.

The debt is qualified real property business debt. See chapter 5 of Publication 334.

The cancellation is intended as a gift.



It does NOT say "if you don't receive a 1099 you don't have to report the money" or "you only have to report if you receive a 1099". It is dangerous to give out or accept tax info/advice because everyone thinks they are an expert.

To the OP - Obviously there is a difference of opinion - your best bet is to consult a certified tax consultant. But the above info is straight from the IRS website btw. HTH!

As an aside I find this part of the tax law is hilarious Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner. :rotfl:

Anewman
07-25-2006, 12:55 AM
It does NOT say "if you don't receive a 1099 you don't have to report the money" or "you only have to report if you receive a 1099". It is dangerous to give out or accept tax info/advice because everyone thinks they are an expert.



No it does not say that, but the article does state that the amount is in BOX 2 of the 1099. If there is no 1099, there is no BOX 2 and hence no amount

Form 1099-C. If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. The amount of the canceled debt is shown in box 2.

Just being a nerd, sorry I could not ressist.

jenr812
07-25-2006, 02:37 AM
No it does not say that, but the article does state that the amount is in BOX 2 of the 1099. If there is no 1099, there is no BOX 2 and hence no amount

Just being a nerd, sorry I could not ressist.
Nerd!! :p It says *IF* the debt is over $600 then you'll get the 1099 and then you'll report the amount in box 2. But otherwise there is STILL an amount - you just have to add up your income by yourself :teacher: Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income.bolding mine ;) :p

Goobergal99
07-25-2006, 02:55 AM
I worked seasonal for the IRS and "YOU DO NOT HAVE TO FILE A TAX RETURN IF YOU MAKE UNDER $600" In fact the IRS will not even bother to audit a person who made under 15,000 a year (whether they file or not) because unless there is significant income from a spouse there is no gain on the part of the IRS. In other words you are the one losing out because you would be owed a refund. that's what the commericals mean when they say that the IRS has millions of dollars in unclaimed funds.

barkley
07-25-2006, 06:31 AM
kinda off topic-but the issue with the irs and reporting stolen property brought back a flood of memories. when i worked eligibility for the welfare department we had a speech we had to give each applicant that told them they had to report ANY MONEY they received-though legal or illegal means and that we did not report to either the irs or the police so it would not be an issue with them-but if they failed to report to us it was WELFARE FRAUD!!!

it is truly fascinating to process monthly 'income reports' from people who are involved in illegal activities-we had some who were very upfront about what they did (prostitutes who kept a running tally on binder paper with the dates and amounts-all under the customer name of 'john' :rotfl2:) and some who were more 'creative' (the local weed guy reported his earnings under 'herbal supplements' and the guy who fenced stolen electronics referred to himself as a 'low overhead private electronics distributor') :teeth:

seashoreCM
07-25-2006, 08:31 AM
Caution: Creditor A may charge off the debt and also "sell "the debt (by selling the loan note) to Would Be Creditor B who then tries to collect the debt.

The creditor has to forgive the debt in order for it to be taxable income to you. That means the debt is no longer owing and payable.

I do not know at what moment a debt is considered forgiven and I don't know how to find out when/whether a creditor has forgiven a debt. There is nothing wrong with asking for a formal letter of forgiveness after you hear that a debt was "charged off", but I believe you may regard a 1099 form as evidence of forgiveness.

Disney hints:
http://members.aol.com/ajaynejr/disney.htm

ducklite
07-25-2006, 09:21 AM
I worked seasonal for the IRS and "YOU DO NOT HAVE TO FILE A TAX RETURN IF YOU MAKE UNDER $600" In fact the IRS will not even bother to audit a person who made under 15,000 a year (whether they file or not) because unless there is significant income from a spouse there is no gain on the part of the IRS. In other words you are the one losing out because you would be owed a refund. that's what the commericals mean when they say that the IRS has millions of dollars in unclaimed funds.

This is so true. A couple of years ago I filed a tax return for my son who had made $580 that year. He got a few dollars back. Why should the government keep what he was entitled to?

Anne

Cheshire Figment
07-25-2006, 09:33 AM
As an aside I find this part of the tax law is hilarious

Originally Posted by IRS website
Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.

To add to this, there is a Supreme Court Ruling, James vs. US, which hold that embezzlement proceeds are taxable income.

Don't forget the basic tenent of the Internal Revenue Code: "All income from all sources, unless specifically exempted by law, is taxable under this code." How do you think the government has been able to imprison some major criminal, it if for violation of the Internal Revenue Code and non-reporting of income.

Mike (CPA Retired)

In A Jam
07-25-2006, 10:18 AM
Thank you everyone for your responses, but I am still confused.

Some are saying that the charge offs will fall off 7 years after the charge off date (even if I continue to pay). Others are saying that the seven years begins when I make my final payment. Which is correct?

I am paying on all of these (so no moral issues to worry about) and I am also paying the full amounts (no IRS issues either; I have found that usually companies won't settle for less if you can't pay it off in a lump sum).

I am hoping to get my credit back on track, but if the charge offs are going to show for another 10 years or so, how am I ever going to come back from this?

ducklite
07-25-2006, 11:33 AM
Thank you everyone for your responses, but I am still confused.

Some are saying that the charge offs will fall off 7 years after the charge off date (even if I continue to pay). Others are saying that the seven years begins when I make my final payment. Which is correct?

I am paying on all of these (so no moral issues to worry about) and I am also paying the full amounts (no IRS issues either; I have found that usually companies won't settle for less if you can't pay it off in a lump sum).

I am hoping to get my credit back on track, but if the charge offs are going to show for another 10 years or so, how am I ever going to come back from this?

They will show for seven years after the final payment, BUT, creditors really don't care after about two years as long as it's been paid, and frankly it's not going to make much of a difference to your credit score once it's been paid for two years.

Anne

T. Lynn
07-25-2006, 11:35 AM
I still don't understand why you'd have to claim the money anyway. It's not like you earned it from a job. If you have a cable bill for $500 and you only pay $300, that money ($200) isn't EARNED income. Or if you had a bunch of stuff on layaway for $100 and it all went onsale when you picked it up and you only spent $50 then. It's not technically earned money. They're not physically handing you the money from something you earned, it's more of a savings that your making.

You're already claiming the money from your job that you made. They don't check your credit card balances when you file your federal return.


Better Example:

Your job wages for the year $5,000.

You go to the doctor and the bill will be $1,000. After hours on the phone of crying, the doctor decides to only charge you $500.

What you report would only be the $5,000 you earned from your job. The $500 wouldn't be earned money (because you didn't actually make $5,500).
The $500 is only money saved because the doctor reduced his fee.

apirateslifeforme
07-25-2006, 11:47 AM
My ex settled his $47,000 credit card debt 8 years ago, and those accounts are STILL listed on his report as of this year. The credit reporting agencies refuse to remove them. He was wondering if it's because he got into major debt (with other credit cards) two more times since. He's called the 3 agencies, the creditors themselves (even though he's had no transactions with them in the 8 years since)...they simply will not remove them.

I'm just grateful that it didn't affect my credit.

Chicago526
07-25-2006, 11:59 AM
I still don't understand why you'd have to claim the money anyway. It's not like you earned it from a job. If you have a cable bill for $500 and you only pay $300, that money ($200) isn't EARNED income. Or if you had a bunch of stuff on layaway for $100 and it all went onsale when you picked it up and you only spent $50 then. It's not technically earned money. They're not physically handing you the money from something you earned, it's more of a savings that your making.

You're already claiming the money from your job that you made. They don't check your credit card balances when you file your federal return.


Better Example:

Your job wages for the year $5,000.

You go to the doctor and the bill will be $1,000. After hours on the phone of crying, the doctor decides to only charge you $500.

What you report would only be the $5,000 you earned from your job. The $500 wouldn't be earned money (because you didn't actually make $5,500).
The $500 is only money saved because the doctor reduced his fee.

Income is income, regardless if you earn it or not. If you win money gambleing or in the lottery, that's income. If you win a prize, that's income. If you make money on investments or interest, that's income. You didn't work for (earn) any of these things, but the IRS still taxes it.

In your example, I'd think that if the doctor reduces his fee prior to sending you the actual bill, it's not reportable. But if he bills you and then, after you talk to him, he reduces it, then I'd think (but I'm not sure) you'd still need to report it just like you'd report any other forgiveness of debt (although I'm sure many people don't, not on purpose but just because they don't know they're supposed to).

seashoreCM
07-25-2006, 12:04 PM
I You go to the doctor and the bill will be $1,000. After hours on the phone of crying, the doctor decides to only charge you $500.

What you report would only be the $5,000 you earned from your job. The $500 wouldn't be earned money (because you didn't actually make $5,500).
The $500 is only money saved because the doctor reduced his fee.
Semantics makes a difference.

If the doctor bills you repeatedly for $1,000. and then accepts $500. and calls it even, then you realized $500. of additional income. If the doctor bills you at first for $1,000. and later adjusts his bill to $500. you did not realize any additional income. Additional facts may come into play if the IRS comes for an audit, for example if the doctor referred the matter to a collection agency and/or if the doctor charged interest since the latter is computed on some outstanding owed balance.

T. Lynn
07-25-2006, 12:12 PM
I understand the gambling income. Your actually receiving money that you didn't have (thus income).

With bills, you were going to spend xx.xx of money you already had, but instead it was adjusted for whatever reason.

If you had $500 in your savings and took $100 to pay a bill that they reduced (was going to be $200), I can't see how the other $100 would be income. It doesn't make sense. It wasn't adding money to your income. If you didn't owe anything and someone gave you money, then that's income or money earned for whatever reason. It's money you DIDN'T HAVE BEFORE.

picantel
07-25-2006, 12:30 PM
Jen let me explain why you are incorrect. Let us say you settle a bill of $5000 for $2000 with a creditor. The OC either tells you it is settled in full of they send a letter stating this. If they send a 1099-C form then the debt is truly over with and cannot be resold. You pay your taxes on the remaining amount and go your way. Let us say they do not send a 1099-C form. Even though they told you it was settled in full without proof they will resell the amount to some scumbag CA who will come after you for the remaining 3k along with a couple k in bogus fees and lord knows what else they choose to add. If the OC failed to send the 1099-C form you cannot just pay taxes off and consider it closed. That is why the 1099-C form is important if you want to get it over with. If you settle with a CA they will just lie and resell irregardless.

For the person who has negative info over 8 years old. Firstly, call the credit bureaus and ask when it is suppose to come off your credit. If you have proof these are over 7 years old then get an attorney from the www.naca.net. I have butted heads with all 3 CRAs and come out on top every time.

jenr812
07-25-2006, 01:30 PM
I worked seasonal for the IRS and "YOU DO NOT HAVE TO FILE A TAX RETURN IF YOU MAKE UNDER $600" In fact the IRS will not even bother to audit a person who made under 15,000 a year (whether they file or not) because unless there is significant income from a spouse there is no gain on the part of the IRS. In other words you are the one losing out because you would be owed a refund. that's what the commericals mean when they say that the IRS has millions of dollars in unclaimed funds.
I guess I should clarify...you are correct of course, but I was working under the assumption that the individual has other income besides the unearned income that may or may not generate a 1099 depending on the amount, thus the need to claim it. :)

jenr812
07-25-2006, 01:49 PM
Jen let me explain why you are incorrect. Let us say you settle a bill of $5000 for $2000 with a creditor. The OC either tells you it is settled in full of they send a letter stating this. If they send a 1099-C form then the debt is truly over with and cannot be resold. You pay your taxes on the remaining amount and go your way. Let us say they do not send a 1099-C form. Even though they told you it was settled in full without proof they will resell the amount to some scumbag CA who will come after you for the remaining 3k along with a couple k in bogus fees and lord knows what else they choose to add. If the OC failed to send the 1099-C form you cannot just pay taxes off and consider it closed. That is why the 1099-C form is important if you want to get it over with. If you settle with a CA they will just lie and resell irregardless.

For the person who has negative info over 8 years old. Firstly, call the credit bureaus and ask when it is suppose to come off your credit. If you have proof these are over 7 years old then get an attorney from the www.naca.net. I have butted heads with all 3 CRAs and come out on top every time.I see your point, but that still doesn't address the fact that it is still unearned income. You may still get letters later from unscrupulous CAs, but that doesn't release someone from reporting the income. In your example, a 1099 is mandatory because it is over $600. BUT even if it was less than $600, you still need to report the income either way because it *is* considered income. A letter from the OC stating the account is PIF is sufficient to stop any further collections with or without a 1099. I would hope that anyone who settles with a creditor would obtain it in writing before paying!! :goodvibes

Goobergal99
07-25-2006, 10:18 PM
This is so true. A couple of years ago I filed a tax return for my son who had made $580 that year. He got a few dollars back. Why should the government keep what he was entitled to?

Anne


Isn't that the truth, I think alot of ppl fear that if they are being claimed by a parent or spouse then the person claiming them will be hurt because they earned a couple hundred bucks, which is totally not ther case, in most cases you will be do a refund.

Goobergal99
07-25-2006, 10:20 PM
I guess I should clarify...you are correct of course, but I was working under the assumption that the individual has other income besides the unearned income that may or may not generate a 1099 depending on the amount, thus the need to claim it. :)

Ahh true..... I get ya now... :thumbsup2

picantel
07-25-2006, 11:10 PM
I see your point, but that still doesn't address the fact that it is still unearned income. You may still get letters later from unscrupulous CAs, but that doesn't release someone from reporting the income. In your example, a 1099 is mandatory because it is over $600. BUT even if it was less than $600, you still need to report the income either way because it *is* considered income. A letter from the OC stating the account is PIF is sufficient to stop any further collections with or without a 1099. I would hope that anyone who settles with a creditor would obtain it in writing before paying!! :goodvibes

a 1099-C form is not mandatory. I settled on an account like 10 years ago and saved like 1k. They never sent the form and I do alot of stuff like this and many people do not receive the 1099-c form. If under $600 it is considered forgiven. If over you need the form which probably 75% of creditors do not bother to send. They will probably just sell it off and make more money to some junk CA like asset acceptance or the other scum trolling the waters.

seashoreCM
07-26-2006, 12:25 AM
In addition it is a good idea to make the creditor "substantiate the income represented by a 1099 supposedly from a written off debt". The substantiation would consist of a description of the debt and ideally would include the original loan note if any.

You don't want to become connected with a debt that is not yours. You do not have to accept, and should not accept, forgiveness from a debt that is not yours because:

1. That admits that the debt is indeed yours which is not true and which admission you don't want. (A debt cannot possibly be forgiven if it was not valid in the first place.)

2. Accepting forgiveness is the same thing as agreeing to pay about a third of the debt. (This is the average dollar amount of the taxes due.) You should not openly admit to pay any part of a debt that was not yours.

Should the above problem occur you would tell the IRS (after being audited) that the reason for not reporting the income is that the income was not yours and not received, because the debt was not yours. In addition every communication from the creditor including the 1099 would be responded to with a denial of the debt.

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Don't pay on a settlement (perhaps cents on the dollar) until the settlement is agreed upon on writing. Otherwise the creditor might renege and demand more money.