Earlier this year, questions poured in from readers grappling with how to deal with 1099-Cs they received from lenders reporting “canceled” or “forgiven” debt. I wrote a number of stories addressing the issues they raised, and vowed not to touch the topic again until next tax season.
But the questions kept coming in.
One kept nagging at me: What should you do if you get a 1099-C for a very old debt? Though I had written one story already on that subject, the fact that I couldn’t provide readers with a clearer solution bothered me.
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Take Dave, for example. He told us that in 1997 he was in an auto accident. He was out of work for eight months and could not pay his auto loan. The vehicle was repossessed and the $15,000 balance was charged off. The loan was with Chevy Chase Bank. In 2006 – almost 9 years later – he heard from a debt collector but he ignored it. The debt was off his credit reports by that time. Capital One had acquired Chevy Chase bank in 2008, but didn’t try to collect from him. In 2011, he received a 1099-C from Capital One reporting $9,000 in canceled debt for tax year 2010 – about 13 years after he stopped paying on the loan. Now he may have to pay an additional $2,000 in taxes for 2010 as a result.
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If Dave’s story was the only one that I had heard, I would think it was an anomaly, but a number of taxpayers have complained about receiving 1099-Cs for very old debts.
As luck would have it, I was invited to speak at a local meeting for financial planners and CPAs. The speaker that preceded me was Jo Ann Koontz, a CPA and attorney who explained in detail some of the challenges taxpayers are facing when it comes to dealing with 1099-Cs. She was a wealth of information on this topic.
So I decided to break my vow and write one more piece this year.
One of the biggest problems with these forms, Koontz explained, is that it isn’t always clear when a debt was forgiven. Creditors are required to issue a 1099-C for the tax year in which an identifiable event took place. That could include a creditor agreeing to settle a debt for less than the full balance, or foreclosing on a home in a non-recourse state where the lender cannot try to collect a deficiency.
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But what about when someone, like Dave, just stops paying a debt? In many states, lenders have several years to try to collect. So when is the 1099-C supposed to be sent out?
Koontz explained that in those situations, what the IRS is looking for is the “expiration of a non-payment testing period.”
“The testing period is the 36-month period (not including a bankruptcy stay, if one applies) ending at the close of the year when there hasn’t been any payment or the creditor hasn’t engaged in any significant collection activity,” she says.
She also pointed to the IRS instructions for 1099-C forms:
Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.
So here’s my unofficial, plain English understanding of this. If the creditor hasn’t done anything to collect for 36 months, they need to send the taxpayer a 1099-C the following year. And my layman’s understanding of Dave’s situation is that, in Dave’s case, the lender waited too long to send him a 1099-C.
What’s a Taxpayer to Do?
Most people writing to me assume there is a form you can file with your tax return to let the IRS know that the 1099-C you received is incorrect. There’s not.
In an article about dealing with 1099-C forms on GetOutofDebt.org, CPA Jim Buttonow suggests taxpayers who get an incorrect 1099-C form initiate a dispute by calling the IRS at and asking them to “initiate a Form 1099 complaint. The IRS will fill out form 4598, ‘Form W-2, 1098, or 1099 Not Received, Incorrect or Lost’.” According to the article, the creditor that issued the inaccurate 1099-C will be notified by the IRS of the dispute and asked to correct the form within 10 days. “The taxpayer will be sent a letter and a copy of the form that they can attach to their tax return in the event a corrected 1099-C is not received in time.”
When I asked Koontz about Form 4598, she could not find any recent references to it and believes it was proposed but not adopted. So it may be worth a try, but until we hear from taxpayers who have successfully used it, don’t count on it.
So what should you do? Koontz recommends the taxpayer include the amount reported on the 1099-C form on his or her tax return, then back it out and attach an explanation of why it is wrong. (Form 982 is the form you use when you believe you qualify for an exception or exclusion, but it’s not the form you use if you disagree with the filing of a 1099-C.) It’s a good idea to work with a tax professional to make sure you are handling it correctly.
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She warns that the IRS will likely assume the 1099-C is correct and the taxpayer may get a notice of deficiency saying they owe money to the IRS. But that’s not necessarily a bad thing. Why? Because at that point you’ll be dealing with a more knowledgeable IRS employee than if you just try calling the toll-free number listed on the IRS website. “You’ll get someone at a higher pay grade,” she says.
She also shared a recent Tax Court case can that can be helpful in situations like this one. In Stewart v. IRS (2012), Stewart defaulted on a credit card debt owed to MBNA somewhere between 1994 and 1996. The debt was sold to two collection agencies. Stewart did not make any payments and sent the last collection agency, Portfolio Recovery Associates, a cease contact letter instructing them not to contact him again. At that point, PRA filed a 1099-C in the amount of $8,570.71 for the tax year 2008. The court determined that there was no cancellation of debt in 2008.
Raising a Ruckus
Most of the taxpayers who have complained about this type of problem are outraged, and they want to know whether they can “turn in the lender” for not following the rules. Dave wrote:
I don’t pretend to know anything about accounting practices for a large company like that but there has to be laws about what they can and can’t do. And aren’t these 1099c’s with doctored dates an outright lie to the IRS?
While there are “whistleblower groups within the IRS for those who didn’t issue 1099-Cs,” says Koontz, it’s hard to identify a way to complain about a lender issuing a 1099-C – even if it is too late.
Call me cynical, but would the IRS pass up an opportunity to collect more tax, even if the lender is sending the 1099-C form years too late?
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She also told me the Taxpayer Advocate’s office is not the correct place to complain about this practice. Although the National Taxpayer Advocate Nina E. Olson has identified these forms as one of the most significant problems facing taxpayers, her office is really designed to make sure that taxpayers get answers to their questions.
And as for suing the lender, Koontz said there may be some class action lawsuits targeting certain lenders, but because this is an emerging issue, potential members of the class may not have yet been identified. If you know of such a lawsuit, feel free to mention it in the comments section below.
Learn More (Podcast): Listen to an interview with attorney Jo Ann Koontz, CPA on Talk Credit Radio where she discusses 1099-C’s related to short sales and foreclosures. Download the interview here (right click and choose “save as”); listen online; or listen on iTunes.
Image: 401k, via Flickr
Gerri Detweiler Gerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com.
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Gerri,
I just posted a comment on one of your other articles and stumbled onto this one. Thanks again for your attention to this issue and I’ll keep you posted whenever it’s resolved.
thank you for writing about this. I received first a 1099C information that I owed tax from the IRS that was the first time I even heard of this. The year I found out from Capital one bank was some 18 years ago when I filed a Chapter 7. April 1994. At this point I will try and contact the IRS and see what the next steps are. I don’t even think 1099C was around at that time.
Just in an update. So I called the IRS advising them that I need to dispute the 1099C and can they initiate the dispute. The answer was no. However, I explained this may have come for an already discharge Chapter 7 that was done back in 1994 after the death of my husband. I was insolvent. The IRS rep looked it up and now tells me she has closed the account and I will be receiving a letter stating so. Again this debit was from 1994 I never received a 1099C, only notice from IRS
I can only stress, don’t ignore this paper but fight it. I think most should probably have not been sent out.
Good Luck everyone.
Thanks Marie for telling us how this turned out for you. Hopefully others will get helpful responses from the IRS as well. Does make you wonder why these are going out now, though, doesn’t it?
When a form 1099-C is submitted to IRS do that mean, you do not have to pay taxes on any forgiven debt under a short sale from lender of your home you were living in
Linda,
Unfortunately, just because you were living in the home that doesn’t mean you automatically qualify for the exclusion under the Mortgage Debt Forgiveness Relief Act. You need to read publication 4681 carefully to figure out if you qualify. If you don’t qualify for that, you may qualify for an insolvency exclusion. If you aren’t sure, I’d suggest you consult with a tax advisor. If you do qualify, you’ll need to file Form 982 to demonstrate to the IRS why you aren’t including the cancelled debt in your taxable income.
Thank you for writing another article. I did not know about Stewart v. IRS….I could be Stewart! The only thing different is I had a car financed through Jayhawk in 1996. Their bankruptcy caused a mess for me and I was never able to obtain the title to my car or get anything showing it was almost paid off. I could not sell the car so when I married and moved away I left the car parked at my family’s home. In 1998 I was contacted by phone regarding debt..but the amount was the entire amount I finaced the car for. I asked for documentation and I never heard anything else. The car was finallly repossessed in 1999 or 2000. I received nothing telling me I owed more money..and
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i had a old charge off from HSBC credit card in 2007 then all of a sudden in 2011 listed me as deceased to the credit bureau I was told to prove that I was alive. they then proceeded and. they sent me 0n 12-28-2011 a 1099-C debt cancellationfor that debt which I proceeded and sent to the IRS which I paid taxes for year 2011. I cant seem to get through to HSBC/Capital One and the credit burean that the debt was forgiven. and they reopened the debt and added on interest for year 2012. what can I do. This is just tearing me apart. because they just dont get it. what can I do.
what can i do.
Going thru same thing, same bank. Got 1099-c and filed it on 2011 taxes. Have med bills in collection and poor credit so never applied for credit. Tried to be added to aged mom’s account at bank I have been with for 20 years and was told I was dead. Called bank and they informed me they have no record of how they decided I was dead. Informed me I would be liable for full amount of dept. I informed them I would not pay anything till I contacted my attorney. Can’t afford attorney! No answer from them about the income I had to report to IRS. I was told they have no answer for me on that.1 I think they do it on purpose.
they are ignoring the 1099c like it doesnt exist.
I had a debt from hsbc/capital one credit card which i had a charge off on. then one day i wanted to get a credit score but had none because hsbc reported me as being deceased. which took over a year to ssraighten out. can they legally just declare somebody deceased. the credit bureau told me hsbc the the only ones who could remove the decease from credit report. i had to llitally prove i was not dead. what theyput me through. then they sent me a 1099c debt cancellation for original debt which i then paid taxes in 2012 for year 2011 which the debt date cancellation was. now they reopened same account number same debt as hsbc/capital one who are the actual same place. so they reported to credit bureau as new debt. account was closed 2007 it has been 5 years now since closure of debt and i did pay taxes. what can i do. i have no credit score please i need your help lydia
As much as I’d like to give you a step-by-step guide as to what you can do, there is no simple procedure for disputing an inaccurate 1099-C. My best advice for you is to work with a tax professional. You may also want to see if you can get help from the Taxpayer Advocate’s office in your state: http://www.irs.gov/uac/Contact-Your-Advocate!-
Geri more info. HSBC was sued by Esslinger and won case. HSBC was charging card holder a debt cancellation protection plan which was illegal. this case was won recently for the consumers. i received notification. HSBC had no right to declare me dead originally. then I received 1099c debt was cancelled 12-28-11 then 2012 capital one bought out HSBC bank and now had reopened same account. I will find a tax preparer. I believe this account should never have been reopened.
Ugh – sounds like a royal mess. Wish I could offer more specific advice.
i hope kay/kay solves her problem. i have an attorney friend. i think i will beat them at their game because hsbc had to bring me back from dead first correct credit bureau report then they cancelled my debt 1099-c . then they also were sued by consumers for fraud in chargeing debt cancellation fees to credit card holders with their monthly fees which they can not do. the consumers won the case http://www.esslinger.com i am hoping i am right. maybe i am thinking . i will let you know what happends Geri
Please do let us know how this turns out!
In may i received a letter from IRS that i owed taxes from a car loan my ex wife filled bankruptcy on back in 2001. She took this loan for the car in settlement. eleven years later. I’m told by Irs i owe taxes. In court battle with ex over this issue. Is there any way to settle taxes on this?
I received a notice / bill from the IRS this year for my 2011 taxes stating I owed $259.00 for a 1099-C I had not claimed on my tax return.(I never received the 1099-c to submit with my tax return). I paid by their due date not wanting to be on their bad side… this was for an old debt that was wrote off by the credit card company seven years ago and was no longer on my credit reports.
Is it to late to dispute with the IRS since I have already paid it?
Nita – Do you know who the lender or collection agency was the sent the 1099? Can you describe the situation in a bit more detail?
I have a car loan that I defaulted on in 2000. They took me to court and got a judgement for 6900.00. Today, I received a form 1099c for 6203.00 in the mail from that company. It is 13 year later….is that legal?
Mary –
That’s the problem I was pointing out in this story. Lenders should probably not be sending out these forms many years after consumers defaulted on the debt but the IRS doesn’t have a clear procedure for handling this when it happens.
I am going to have to suggest you talk with a tax professional to figure out how to dispute this. Work with someone who is familiar with 1099-C issues. You may want to show them this article and the reference to the Stewart v. IRS case.
I’m curious about a 1099-c my husband just received for a car we surrendered. The amount owed at the time of surrender was about 3500.00 (the car was paid off according to us but the bank added the cost of “insurance” because they claim we didn’t have any even though we proved that we were covered the entire length of the loan). Anyway, we received this 1099 but it doesn’t look like anything official, just a typed letter from the bank. It’s not even completely filled out it just states the dollar amount that was “forgiven”. My question is how is this considered income? I don’t have the car anymore nor do I know what the bank did with it after it was returned. I was expecting a letter stating what they sold it for and what my “difference” would be to pay, not something like this! They didn’t give me 3500 that I didn’t pay back to count as income, how is this legal?
What was the amount in the 1099-C? When was the voluntary repossession?
The paper says the identifiable event was 10/16/2012. It sounds about the same time they picked up the car but not 100% sure of the exact date due to them taking a long time to finally get it after we notified them of the surrender. The “amount of debt discharged” says $3527.47. There are other lines listing the loan number and a yes after saying “was debtor personally liable for repayment of the debt?”. This is only in my husbands name but he doesn’t have an income and now wonder how this will mess up my tax outcome due to filing jointly.
Christine – The first thing I would suggest is that you get IRS Publication 4681 and fill out the insolvency worksheet on page 8. If you qualify for the insolvency exclusion – and it’s large enough that you don’t have to pay more taxes due to this cancelled debt – then you may want to just file Form 982, claim the exclusion, and be done with it. If you don’t, then I would suggest you talk with a tax professional. (It’s a good idea to talk with one anyway.) You may need to look at other options for reducing your taxes or disputing the 1099-C if you believe it’s incorrect.
What happens if you receive a 1099-C from BoA and it just has your name and no SS number on it? It just has 000-00-0000. How does the IRS know this is you and not someone else? This debt expired on January 15, 2013, so how can they post date their claim to 2012? Their has been no contact with BofA for 42 months.
How very odd. I assume it has your correct name and address on it right? I assume the IRS can match it with that information.
What do you mean that it “expired” on January 15, 2013?
It has the correct name/address on the 1099-C, however the next week a letter was received from a collection agency (KSG) that claimed they needed the SS number inorder to file with the IRS. It also states “failure to do so will result in a $50. fine from the IRS.” I have never heard of a $50 fine from the IRS, usually it is much greater to force compliance from the taxpayer. I am thinking this debt has been passed around so many times the original paperwork has been lost and if KSG tries to submit the 1099-C with no SS number, the IRS will toss it in the trash.
I settled two debts in late 2011, though the final payment I made was in January 2012. At tax time I didn’t get a 1099-C and wasn’t sure if I should have. I called the collection agency and they said they wouldn’t be sending one. I asked to clarify that the “forgiveness” was in 2011 and they agreed and gave me the final amounts. I tried to contact the original creditors but had no success getting anything but redirected to the collection agency.
On advice from a tax professional I included that in my 2011 taxes and paid whatever extra.
But today I got a 1099-C for each of the two debts. That I already paid taxes on last year. The date of “identifiable event” is long after the settlement and final payments.
How do I handle this without having to double pay?
Jen –
You’ll need to include an explanation with your return describing why you didn’t include it in this year’s income. Unfortunately, I don’t see a place on Form 982 that specifically addresses this issue. So you’ll either need to call the IRS and ask them for instructions or consult a tax professional. Shouldn’t be that hard, should it?
I just received two 1099-C forms from Bank of America for the same credit-card account. The first indicated some $3,900 in discharged debt on an account for which the “borrower was personally liable,” and the second (marked “corrected” and received a day later) says no debt was discharged and that the “borrowed was NOT personally liable.” Does this means the debt was excused or does it mean the creditor is going to resume collection? Both notices include a Dec. 31, 2012, date of “identifiable event.” I appreciate any consideration in clearing up my ignorance and confusion.
Tom – Do you know what debt this is in reference to and what the background is?
It was a credit card that fell into collection when I was hit with a triple-whammy of divorce, a cut in pay and the death of a parent. I was under a payment arrangement, then the collection law firm went out of business. The debt has languished for a few years, and I expected to hear from a successor agency … but heard nothing until the 1099-C statements arrived over the weekend.
Tom –
As far as collections go on this debt, you’ll need to find out if the statute of limitations have expired. (That’s based on state law.)
The 1099-C is another issue. If the second 1099-c says zero and the box “corrected” was checked then you may be OK. But I have to say I am not completely confident in the accuracy of some of these forms, especially for old debts. I’d suggest you consider talking with a tax pro to make sure you handle this correctly.
Thank you so much for that prompt and prudent reply.
Just what IS an “identifiable event,” by the way?!?!??
This is just another example of the dysfunctional USA. I’ve had these companies call 15, 20 and 25 years on old debt with no activity. It got to the point long ago that we are held hostage and cannot literally even have a phone in our own names. Pretty sad, they should have time limits of 3, 5 or 7 years and huge penalties and financial sanctions for companies that violate those laws.
My car was repossessed by Bank of America in 2010 and BOA sold it for 13K. Apparently I owed them $18207 for which they filed a judgment against me in Jan 2011. I have hired a lawyer to fight the case which is still in court. I received a 1099-C from BOA stating that they have discharged $18,250.04 on 6/28/2012 under identifiable event code G. Do I mention the amount on the 1099-C in my taxes?
My car was repossessed by Bank of America in 2010 and BOA sold it for 13K. Apparently I owed them $18207 for which they filed a judgment against me in Jan 2011. I have hired a lawyer to fight the case which is still in court. I received a 1099-C from BOA stating that they have discharged $18,250.04 on 6/28/2012 under identifiable event code G. Do I mention the 1099-C in my taxes?
Abby – You must address this when you file your taxes. The IRS received a copy and expects you to include it in your taxes unless you qualify for an exclusion or exception or can demonstrate another valid reason why you do not have to include that amount in your taxable income. If you qualify for the insolvency exclusion that may be the easiest way to handle it.
I was plannning to file my taxes without including the 1099C info and respond to IRS if my taxes were pulled out after an audit as I may come across knowledgeable IRS reps that may help me resolve the issue.
I strongly believe that I should be eligible for the insolvency exclusion as the car was sold for 13K by BOA at the auction. The rest of the amount that BOA mentioned on the 1099c definately exceeds the fair market value of the vehicle. My only concern is how I can prove the fair market value of the vehicle back then.
I spoke with an accountant who stated that I can file the 1099C on my taxes and back it all out (insolvency exclusion). All I need to do is keep paperwork proving that my liabilities exceed my assets which is the case. I believe I don’t have to pay taxes on 1099C at all. Thanks a lot for your advice
Excellent!
I am not a tax pro so I can’t offer you tax advice, but it seems to me if the vehicle sold for 13K then that was the fair market value. After all, the lender would try to maximize the amount it received in order to reduce its losses if you didn’t pay.
I just received a 1099-c saying to add the amount $16,563 to my taxes as earnings. I already filed my taxes and am getting 8,000 back. I got this form after filing my taxes.nam I going to get in trouble? Will instill get my 8,000? Will they pay me the 8000 and send me a letter later saying I owe money or will they just hold my return and not give me anything? Is this an automatic audit? If I would of gotten the 1099-c before filing my taxes how much do u think I would have to pay?
John,
I am not a tax professional, so I can’t comment whether or not this will definitely hold up your refund. But I think you can safely assume that the IRS received the 1099-c and that when your return is processed the income won’t match up. That may delay your refund. If it doesn’t, you will likely receive a notice from the IRS at a future date. So I’d suggest you figure out whether you can exclude this amount from your income, and then contact the IRS to find out how to amend your return – or work with a tax professional to do so. If you need more information, I suggest you read What is a 1099-C? Your Top 11 Questions Answered.
Was a vehicle I surrendered 5 years ago.
We purchased an “account protection plan” on one of my husband’s consumer credit cards, and paid monthly fees for the insurance. Unfortunately, my husband began having strokes and became disabled; one of the factors for which this “account protection” coverage would pay his balance. After a bit of a fight, the insurance coverage paid the claim in 2011, which was about $3,600. Lo and behold we just received a “bill” from the IRS stating that we owe $999 dollars in taxes for this “account protection” policy payment to the credit card. We never heard a peep from the bank that paid the claim that they were reporting it to the IRS, and I am totally at a loss. The bank, HSBC, has a bad reputation for dealings with Best Buy customer credit card holders. I assume it is being treated as cancelled debt, but it really isn’t cancelled debt. It’s an insurance claim/payment. I don’t know what to do about it. I don’t trust HSBC. I have sent a letter to the IRS explaining that this was a payment from a purchased insurance policy, and that we are disputing the 1099 from HSBC. Any advice for me?
Gerri,
So am I to understand that if you pay the tax on the amount declared that no subsequent collection efforts are allowed since you have paid the taxes and that closes out your liability?
Not necessarily. This is a tax issue. I wrote about your specific question in this new story: What is a 1099-C?
I recieved a 1099 C for 5,544. This was for a truck which I could not afford after an injury to my knee and wasn’t working. I called the bank and had them pick it up. They sold it at auction and the 5,544 was the difference of the loan. This was in 2006. I only had an income of 7292. I am unemployeed and do not have the money to pay the IRS. Is there any way I can get out of paying taxes on this debt? Please help me out,
Thank You,
Lorrie
Lorrie -
The easiest way to deal with this is to use the insolvency worksheet in Publication 4681 to determine if you are insolvent. If you are and your debts are larger than your assets by the amount listed on the 1099-C, then you can file Form 982 to show the IRS that you qualify for the insolvency exclusion. If not, then it may get a little more complicated. You may need the help of a tax professional to figure out what to do. There may be a case to be made that this debt is too old for them to send out a 1099-c now, but that’s not a simple thing to handle on your own.
I had a credit card that I had in like 2001 or 2002 that i had charged off and was told it was charged off due to the fact that I was on bed rest and unable to work and pay it. On May of 2012 I get a letter from IRS stating that I did not report income on my 2010 tax return and now they want me to pay $668.00 to IRS because of this unreported income. Why are they just now sending me this and should I just figure out way to pay it or should I fight it since my understanding was that it was charged off way back in 2002.
I just received a 1099-c saying to add the amount $27,094.24 to my taxes as earnings. I already filed my taxes and we are getting almost $8,846 back. I got this form after filing my taxes. Am I going to get in trouble? Will I still get my $8,846? Will they pay me the $8,846 and send me a letter later saying I owe money or will they just hold my return and not give me anything? Is this an automatic audit? If I would of gotten the 1099-c before filing my taxes. How much do u think I would have to pay?
I just receive a 1099-c from Citibank for my husband who has been deceased since June 2007. Box 1 is showing the date of identifiable event as 05/14/2012 with a debt of $1,549.86. I am assuming that this is when the debt was forgiven? My husband did not have an estate and we did not have joint credit cards so now what do I do. It also has box 5 marked stating “If checked, the debtor was personally liable for repayment of the debt”. If this is considered his income for 2012, it is certainly the only “income” he has. This is bizarre.
Barbara,
I turned to expert Bill Purdy to answer your question. He is an attorney with The Law Offices of Simmons & Purdy:
If the deceased husband had an estate and now it is closed legally, send a copy of the final income tax return for 1040 up till the date of death and a copy of the final form 1041 fiduciary income tax return for the period until the estate closed. Closing an estate, however, does not therefore wipe out this 1099-C for 2012.
Some people ignore these notices post death and just wait and see what happens. This has never been my favorite way to do things where the IRS is concerned. The automated nature of IRS correspondence can make an Olympic sized swimming pool out of one raindrop.
The IRS will likely need another Form 1041 for 2012. Should be a pretty simple income tax return. Just the debt relief would be on the return as income, and the estate would be insolvent by the amount of the debt, since there are no offsetting assets. Therefore there should be no no net income and no tax due.
If the estate was insolvent at the time, (and I bet it was) the moment before the debt was discharged, then there should not be any income taxable. A form 982 would need to be filed with the form 1041 for 2012 and an insolvency worksheet showing that there were no assets and presumably only this credit card liability at the moment before the debt was forgiven.
This negative net worth (the epitome of insolvency) should offset the amount on the 1099-C. Please have a competent CPA help fill out these forms and this should go away.
I received a call last month from what I am sure is a scam artist. An indiviual left a message and said I or my lawyer should contact him reqarding a 1099 form they are going to file. The only credit dispute I have ever had concerned a Sears charge of about 4000.00 maded in 1999 by someone using my a SSN on a credit app. Sears and I resolved this dispute and they took the charges out my name. All of my recent credit reports show excellent history. Obviously, i’m not going to return this scam call but would like to know what I could do just in case a 1099 C is filed. Also I wonder how frequent this scam is being used. Thanks
I had several credit cards that I was able to close with a reduction in payment during 2012, how long do I have to wait for a 1099-C before I can file my taxes?
Great question! They are supposed to send them out by the end of January. However, keep in mind that we’ve received tons of complaints from readers who have received these forms years after they settled debt or stopped paying on it. And the IRS says you are supposed to report it even if you don’t get a 1099-C. So you may want to go ahead and wade through Form 982 now rather than waiting until you get a 1099-c later. If they send you a 1099-C next year, you can explain that you already included it in 2012. Make sense? Of course, I am not a tax pro so please get advice from a qualified tax professional if you need it.
I received a 1099 for a timeshare that my ex-husband defaulted/foreclosed on. I have already filed my taxes. The original loan was received in my name; however, divorce papers claim that he is responsible for timeshare debt. The 1099 is in my name with my social security number. Although I am not responsible according divorce decree, what are the steps I need to take to contact the IRS and have it removed from my name?
Stacy,
I ran your question by Bill Purdy, an attorney with the law offices of Simmons & Purdy. Here’s what he had to say:
There’s no such thing as contacting IRS to remove it from her name. The 1099 is in her name because the debt is in her name. She needs to see her divorce counsel immediately and have the decree enforced to collect the money from her ex. This may be very difficult.
She also needs to have a professional review her status one moment before that foreclosure occurred to see if she is taxable on the 1099. There are several exclusions that might apply. If the 1099 is for the same year she already filed she will need to amend her return to include the 1099 and explain it.
The big problem with divorce decrees is that they don’t bind banks or the IRS.
Not one bit.
I received a 1099-c today from Americredit Financial Services. I purchased a car financed through them in 2002. I defaulted on the loan and filed for Bankruptcy in 2003. I never made another payment. The Loan was charged off and taken off my credit report in 2010. Why am I only now getting this 1099?
My husband received a 1099-C from BOA today for an account that was “charged off” in 11/08. As far as paying the tax, I will pay whatever I have to and will consult our accountant. However, my question is about the credit bureau. Do you know how this will affect the credit report and does BOA also send this information to the credit bureau? We’re trying to clean up our credit and wondering what this 1099-C means for that.
Darcy – Great question. A 1099-C is a tax matter so the lender won’t report that form to the credit reporting agencies. However, if there was a debt charged off in 2008, then that account is likely already listed on your husband’s credit reports as a charge off. The 1099-C doesn’t change that in any way. The only way I can see it affecting your credit is if it triggers a large tax bill and the IRS files a tax lien.
See this is exactly what I have been saying in that if these are invalid sol expired debts, reporting period expired debts, then this is a new way for these collectors to improperly relist this on your credit report – again illegal and invalid! People you need to be filing a complaint with the FTC on this as well. I have against Asset Acceptance for a 1099-c I received that they never even had the right to collect or have in the first place – nor did they at all – they just sent out a 1099-c period thats the only communication I got from them (mine was dismissed in court to another collector in 2006 – I won the case then!) They are just buying up portfolios like they always do but using this method as a new way to bump up their bottom line and profits at the expense of fraudulent reporting to the IRS as credit against their own taxes with these 1099-c forms that should not be getting sent out at this time now for I would say atleast 98% of the people getting them.
i get a social security disability. i have very limited income. i got a 1099c. do i have to file taxes. i only had 8,000 in ssa and 20,000 on a 1099 for student loan. what do i do?
Received on. Feb 5, 2013. Three. 1099-c on old debts. Over 13 years ago. From same collection agency. Have correct address and ssn. I never received. Or heard from this agency. Not sure dollar amounts are correct. Weird part about this on 1099-c form on box. 6. Empty regarding identifiable code event blank. Shouldn’t. That be filled out if this is legitimate. 1099-c form. Your article statess check with your statue of limitations on debt. Are you stating that cjeck statue limitations. Of. Debt occurred. Or when moved to another state.
Alyic – What is the name of the collection agency? Is there a phone number listed to call them to find out what’s going on?
As far as the statute of limitations goes, that generally starts from the date you stop paying the debt. If you moved from one state to another then it’s a good idea to know what it is in both states just in case. But very few states have statutes of limitations that are 13 years or more so therd is a good chance it has expired.
I need to reiterate, though, that the 1099-C and the statute of limitations are two separate things.
I’m curious about how the IRS can apply a penalty or interest if a customer didn’t claim the debt cancellation in the year the 1099C form was issued because it was sent to the last address on file with the bank (generally no longer the customer’s residence.) I would think the IRS should be able to confirm the 1099C was sent to an outdated address and therefore shouldn’t hold a customer responsible for reporting something they never received. Do you know if there is any recourse on the IRS forgiving penalty/interest on not reporting the 1099Cs during the tax year they were issued due to non-receipt?
Good question. Hypothetically, my guess is the IRS would say the taxpayer is supposed to report the cancelled income regardless of whether a 1099-C is issued. (They do say that in Publication 4681.) But given that the sometimes convoluted formula for figuring when an identifiable event occurs, it can be tough for the consumer to know when to report it.
I would think the company that supposedly forgave the debt should be required to then send out a letter stating as such, before any 1099-c is sent out – sure would help in a lot of these issues, and if necessary it could be disputed with the creditor/collector prior to it becoming a big huge mess for the government to deal with all the disputes on the ones that are improper and invalid. Otherwise how does the consumer know if a debt is truly “forgiven” or is it just reported as such then sold off to the next collector to do the same thing a year or 3 later again.
I was able to get a couple of these resolved through the US tax court. Its kind of a pain but here’s what I did on one of the 1099-C’s I received. I had a car repossessed in 2000, and after the bank auctioned the car off there was a difference of $12,000, they didn’t send me a 1099-C till 2011. So I went ahead and filled my 2011 taxes ignoring the 1099-C. After a couple months I received a “statutory notice of deficiency” or its also called a 90 day letter. Now you have 90 days to petition the US Tax Court, which I did. In both instances with a lot of help from google searches, they settled with me without going to court after I explained that the bank didn’t follow the proper rules for filing a 1099-C. They were both done under the Court’s simplified small tax case procedure and cost $60. Its a pain, but it seems to be the easiest way to beat a 1099-C.
I received a 1099C from a mortgage lender. The twist is that I am involved in a class action lawsuit with the mortgage lender from unfair practices. The lawsuit has not been settled and has not even gone to trial as of yet. We have had several trial dates set but a criminal trial takes precedence and therefore has been continued many times I contacted the attorneys involved in the case and the only thing the said was they could not suggest but indirectly mentioned to seek the advise of a CPA. I am concerned about how this may affect me since this has not been settled or went to trial.
Last year I took care of an outstanding debt and settled an amount with (Asset Acceptance,LLC). A couple of weeks from sending the full payment to them. I get a letter from them saying that the reference account was closed payments made after the closure are being refunded. They sent me the checks and I got my money back I sent them. Well now I have received a 1099C form for $5,230. I’m kinda confused, can they do this? Thanks!
How strange! If they did cancel debt then they are required by the IRS to file a 1099-C. But you may not have to pay taxes on that amount. You’ll want to read this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt
I have question. In 2005 i was in an auto accident, and because my vehicle was totaled I had to purchase another truck that same year. In 2006 my husband and I separated and that same year in August 2006 the truck was repossessed. I called to have the vehicle surrendered. I never knew how much the vehicle was sold for nor did i know if there was a balance due since I had been separated from my spouse and I moved. I never received any notification from the lender or no collection attempts were made and then now i get a 1099-c and it is for 10,000. The cancellation date for the debt was listed as 10-14-12. Can I use form 982 for insolvency? Dont know were to look or what to do.
Sylram – Start by reading Publication 4681 and filling out the insolvency worksheet. If you qualify for the exclusion that may be the easiest way to handle it. (You would then fill out Form 982.) Remember to include the $10,000 debt in your liabilities since insolvency is calculated before the debt was cancelled. However, if you fill out the worksheet and discover you are not insolvent by $10,000 or more then you are probably going to have to seek professional tax help. You have a somewhat complicated situation because it appears the creditor sent the 1099-C out later than they probably should have. But the IRS doesn’t have a specific procedure for disputing that fact.
Hello, recently i have been receiving calls from a collection agency every day about an old account with sears. I had a sears credit card in 1997 and i believe i owed about 200 dollars. It was on my credit report up until recently. After all the charges they are asking me to pay 671 dollars. I read somewhere that if I pay this that it will go back on my credit report. Is this true? Also, wasn’t this debt written off already? Are they legally allowed to keep harassing me about this? Thank you
Shannon – Am I correct in understanding that you defaulted on this debt in 1997? If so then the statute of limitations has no doubt expired and there is no reason why a debt this old should appear on your credit reports. Ask the debt collector for their address, which they are required to provide you. Send them a certified letter stating that you know the debt is too old and instructing them not to contact you again. Send it with proof of delivery and keep a copy for your records. If they contact you again after that, talk with a consumer law attorney.
I recieved a 1099-c from capital one bank cancellation of debt for $1573.00. I went through a personal bankruptcy in 2012 and the debt was discharged through the bankruptcy. It also states reason A. In the box on the 1099-c and the date of the event is the discharge date of my bankruptcy. had a bankruptcy attorney for the bankruptcy and I sent him the information and he has told me that capital one cannot send out a 1099-c for this debt. But the bank is being sneaky as they have sent the 1099-c to my company name and put in my entire social security number on the form. I am confused, broke and I hired a tax professional in the past to handle an audit nad he did nothing except collect his fees. Also I need to state that the credit card I had had a $600.00 limit and was very close to being paid off. I stopped using the card in 2008 and what the bankruptcy attorney does is go through your credit report list all the debts, and you meet with him if you have any debts personal or otherwise and list them in the bankruptcy. So my big question is how can these banks get away with this? I have been out of work for 3 years now and I was self employed. I just do not see why these forms should be sent out. I can see the bank is trying to lower their income by sending this 1099 out to pay less taxes but I am not sure what to do when I finalize my taxes. My experience with the IRS they just want money and having read through your blog I can see that there is no clear cut way to dispute this 1099-c. Thanks for any information you can give to me.
John,
The good thing is that you do not have to pay taxes on debt discharged in bankruptcy. You can file Form 982 to show the IRS it was included in bankruptcy. Read this article: Just Received a 1099-C? Don’t Freak Out!
I hope that helps!
Dear Gerri, Thanks for the information it is just what my lawyer said- but I still wonder why a bank would attempt to get away with this action? I own a business which has subcontractors from time to time I am required/supposed have them fill out a W-9 which is not a problem with a properly established firm. But in the construction field there are many fraudelent companies. I have recieved fraulent insurance certificates/documents and fraudelent contractor and business licenses, and fraudelent identification cards. Thanks you for you help and information. John M.
Who knows?? As you’ll see from reading all the comments on our stories on these forms they are often a mess.
Oh lovely…Just got the notice from IRS that we owe an additional $1122 in taxes for 2011. Apparently the IRS received 2 1099c forms….one for around $3600 from FAI (credit card) and the other for about $700 from some collection agency. They listed my husbands social…but he doesn’t recall the debts. Nor did we ever get a copy of the 1099′s. I think they may be really old (back from the early 2000s). Is there a way to get a copy of them? You would think that the IRS would devise a program in which to dispute them since this seems to be a growing issue. OR at minimum put a copy of the 1099′s in with the notice.
Thank you in advance for any assistance you can render.
Mysty – You’re right. What a complicated mess! First the collectors were supposed to send your husband a copy of the 1099-C. In fact, the IRS requires them to be mailed to the taxpayer before they send them to the IRS! I am not a tax professional so I can’t give you tax advice but if this were me, I would first call the IRS, explain that I never got the 1099-Cs in question and that you aren’t even sure that these were your debts. Ask them how you can get copies of the 1099-Cs in question. Then come back here and let us know what they say.
I received a call about a gas credit card from 2001, which I dont even remember having. They gave me all my personal information to assure me it was my debt, including where I was working at the time. Problem is, I filed for Social Security in 2000 and havent worked since. How liable will I be for this very old debt? thanks
Social Security DIsability ^^
Maria –
Anytime a debt collector calls you should ask them to send you a written notice of the debt. In fact, this is required under federal law.
This debt is very likely outside the statute of limitations. That’s a matter of state law, and in most states it runs anywhere from 4-6 years from the date you last made a payment. If the debt is too old, you can simply write the collector telling them that you know the debt is too old, and asking them not to contact you again.
If the creditor has a judgment against you that would be a different story. If you’re not sure, check your credit reports. Judgments will usually appear and will be listed with the word “judgment.”
I never received a 1099-C from a creditor or collection but I received a certified letter from the IRS last week notice of deficiency that a collection agency reported about $5000. Now the IRS said that I have to pay about $1700 in taxes. The debt is so old that I don’t’ even remember probably from 1997-98. Quite frankly I don’t’ even remember this account.. Any advice? Thanks in advance.
Fight it. I wrote about another taxpayer that did just that successfully in this story: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won
And when you find out who the creditor is who sent you the 1099-C (you can request a Wage and Income Transcript from the IRS for the year in question that will list it) please post it here – and file a complaint against them with the CFPB and the Taxpayer Advocate.
What is with these banks. Bank of America filed a 1099C for and a repossession
which took place in 2008 for a Motor Home. We purchased in 2002. We told them to pick it up as we no longer had the available funds to pay the $884.00 a month payment. They never filed for judgment or or hassled us after they repossessed the motor home in 2008. We never had a collection agency or the bank send us bills or call us. In 2008 as with many people my practice slowed down to a crawl and my wife;s hours were cut back. We stopped paying the payment is 2007. We sold our house in 2007 and paid off most of our credit cards . Today we are almost debt free since all our credit cards are paid off. We make receive enough money from Social Security to pay our rent and utilities. My wife has enough income to pay our food and monthly bills. My wife is 72 and I am 75. We don;t make enough to have to pay taxes. We did not file for bankruptcy we were able to pay everybody by negotiating our payoffs. We have n
no assets. This 1099 for $58,000 would sink us so we would have to file bankruptcy.which we do not want to do. According to what I read from other posts we can file for insolvency. How can a bank file a 1099 five years after the event happened. The motor home was sold two months after they repossessed it in 2008. They did not keep sending us bills so we though it was settled, .
I agree – it’s a mess. I’d encourage you to file a complaint against the bank with the Consumer Financial Protection Bureau and report this problem to the Taxpayer Advocate.
Hello, I’m so glad to have found your page! I am a army wife of 21 yrs and 15 years ago I was going to join the army too, to provide a better life for or kids. Well someone above had other plans and the #3 we had been hopeing for 2 years beat the odds of BC! So now we were soon going to be a family of 5 a camero, upside down on it couldn’t trade out of it. We vollentery gave it up. About a month went by they told us they sold it for 1500. It was a 9000.00 car. They wanted the difference my husband asked to see a bill of sale where they sold it, and we would try to work something out. They couldn’t produce it. So he told them to call back when they had it. This was the spring of 97. Never heard anything else from them. Last Jan after we filed we got a letter stating that in 08 we failed to add the 1099-C To our taxes and now we owe x amount. We tried to dispute it 2 times. We never received a copy of it to file. 2. They changed the sale date to like 05. I don’t understand how they can do that to us. In 08 we had plenty of cushin to have added it, it just makes me mad that they can do that after so many years, I need to file taxes for this year but wanted to see if there’s anything I can do. We have no paperwork that’s why the IRS took FMC’s side.
Please help, army wife on a wire
Michelle
Michelle – I don’t have a specific solution for you but it definitely sounds to me like you should not have to be dealing with this at this late date. Eleven years later? Does the DMV have any records by chance? Do you still have the VIN number somewhere – maybe in some old insurance papers? Then you could try running a Carfax perhaps…(I don’t know if they go back that far.) Maybe one of our readers has an idea.
I’d still suggest you consider challenging it. One of our readers took it to Tax Court and he prevailed. It seems like the collector or lender would have to come up with the documentation if it came to that (though I am not an expert on Tax Court procedure. It seems like it’s worth a try. Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won
I had to file my taxes for this year even though we were still tring to dispute it they took it out of our refund. Do you know if we can still challenge it. My husband and I are honest people and tried to settle this back in 96 with no response from anyone. I should have filed for an extention, but I was scared to get into more trouble.
Thanks
Michelle
Michelle – Unfortunately, we’re not tax advisors and can’t answer whether or not disputing the refund is even an option. This is really a question that should be answered by a tax professional (whether a tax attorney or tax advisor), to make sure you’re getting the right answer and the best advice for your situation.
It may be worth a try, though. We have written about some success stories from other taxpayers who have challenged these forms and succeeded: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won
I just received a letter from the IRS saying that I owe taxes due to an increase in my income from a 1099-c from an old auto debt that was repossessed back in 2007 for $8,813. I never received the 1099 back in tax year 2011 and how can they consider an old debt to be income? I dont understand…:-(
My question is can American First still collect on the debt, After they sent me a 1099-C form, I thought it meant that the debt was cancelled ? Now the collection agency is after me for the debt.
The IRS specifically says that the fact that a 1099-C has been issued doesn’t necessarily mean it has been cancelled. There are situations where the creditor is supposed to issue a 1099-C even if it hasn’t cancelled the debt. (That doesn’t mean the 1099-C you received isn’t wrong – that’s a possibility as well.) I’d suggest looking into what the statute of limitations are for old debts in your state. It may be that this debt is too old.
I don’t understand how debt from a car loan can can be concidered income. The money I earned and that I would have used to make the car payment was taxed but the car payment nor the interest (even if I had all the payments) was never a deduction to reduce my taxable income. The creditor was able to write the debt off and reduce their taxable income. It seems to me that if I now have to show the amount discharged as income then I am being taxed twice but was never allowed to claim any deduction. Can someone please explain.
William — unfortunately, this is the way the law works. If a creditor is unable to collect the payment on loan (or the vehicle) and they forfeit or forgive the debt, the IRS gives them the right to write it off in a 1099. Otherwise, they actually get stuck with the debt/loss without being able to claim the loss — and still have to pay taxes on the full amount as though they actually collected it.
I don’t disagree entirely with you. I wrote some about this in this piece: What is a 1099-C? Your Top 11 Questions Answered. I think it’s a lot easier to see in situations where you ended up with something of value but you didn’t pay back the money you borrowed. It’s harder to see when you lost that item plus were dunned for the debt!
I received a 1099c in the amount of 11,000, and I reported it on this year tax return. My question is, #1, is the debt now resolved?, and #2, I am trying to clean up my credit, so what steps do I need to take to have this debt removed from my credit?
Those are great questions. The answer to #1 is maybe. The IRS specifically says that receiving a 1099-C doesn’t mean the debt has been forgiven. Instead, you’ll want to find out whether the statute of limitations has expired on the debt, and if so, then the creditor or collector can’t successfully sue you.
The answer to #2 is that the debt will remain on your credit reports for as long as it can be legally reported. How are they reporting it? As a collection account? If so, then this article The 7 Biggest Questions About Debt Collections & Your Credit clarify it should help clarify it.
I just received a response back from the IRS and they are asking me to give them the Fair Market Value (FMV) of the vehicle that was repossesed. Is that my responsibility when Americredit Corp did not fill it out information (box 7) on the 1099-C form and they have that information. Where would I even find that information since Americredit was recently bought by GM Financial? Did they file the 1099-C to late? Thank you for your help with this question. Please see my letter to the IRS I sent on 3/27/13 below
Warm regards, Jordan Braswell
To whom it may concern:
This letter is in response to your correspondence dated March 4, 2013 with AUR Control Number 500140882. After reviewing the afore-mentioned document, I do
not agree with the changes stated for tax year 2011. Enclosed please find documents that I believe support my reason for disputing the information provided.
First, this debt was incurred for the purchase of a 2000 Mazda Miata (car loan) in January 2001. Due to reasons beyond my control, I was unable to make payments and the car was repossessed sometime in late 2004 or early 2005. I believe the above-mentioned vehicle was sold at auction by Americredit Financial Services shortly thereafter. Based on information I gathered from my credit report dated 2/7/2011 (copy enclosed for your reference) this account was closed on 1/2005. I have also enclosed a copy of my 1099-C Form, as I believe it was not filled our properly. Based on the information I read when a car is sold at auction the sale price should be deducted from the outstanding amount (if any) and difference should be reflected in box 7.
Secondly, I do not agree with the decision to allow Americredit Financial Services to submit this information 6 years and 8 months after it occurred. It is my understanding that under the Statue of Limitations for the State of Florida for these situations is 5 years, hence, the time frame to report this matter was expired at the time information was provided to your office. I have also enclosed documents regarding the Statue of Limitations.
I hope after reviewing my case and documents provided that your office will agree with my information and reverse your decision to change information on my 2011 Form 1040A, as well as removing interest charges.
Hello
In 2011 I recieved a forgiveness from American Express for $6300.00. I did recieve the 1099-C from American Express and reported this income on my Bussiness 2011 Tax returns. These cards where in the business name but I was the personal gurantor, (as the company didn’t have enough credit history to receive the card). today I received a letter from the IRS stating I didn’t report this income, and now own them. Would I be personaly lible for the bussiness?
Thank you
I have been refuting a supposed cancelled debt that is trying to be added on to my 2010 return. A collection agency claims the 1099 was mailed out but to date I have never received anything. I have records showing the debt was part of a debt consolidation plan and I had made payments on it for 8 months until I realized the company in charge was mis-managing my money and I took over payment on 8 of the 10 accounts myself at end of 2010. This supposed “cancelled debt” was one of the two I did not resume payments on though it shows as a negative credit entry on a June 2011 credit report I happen to have. It is not listed any place on a credit report that I got about a year later in 2012. IRS claims the collection agency sent them a form and says the debt is valid, and so, that is all they need. I have a copy of the form and the majority of the info they provide about me personally is not even correct, but the IRS is saying it is still justification of the cancelled debt. I have been in grad school and have over $50K of student loan debt about to become due and do not have the $2000 they are claiming I owe in back taxes for this debt I NEVER got any notice on until IRS sent me the form saying it had not been on my 2010 return. That was in August of 2012. I am growing tired of going back and forth with the IRS. Is there anything I can do to just prove to them I don’t owe this money on my 2010 return? While it may have been cancelled, I just do not see how 2010 was “selected” as the target year given I have provided so much documentation to the contrary. Thanks!
Lorraine — Based on what you’ve explained, this particular debt was one of the two that you did not resume payments on, which leads me to think it was most likely never paid.
Did you pay the debt in question? If the debt was never paid, the lender/collector is legally within their rights to issue a 1099 so it’ll be difficult to prove otherwise unless you paid the debt. If the debt was paid, you should be able to provide proof of payment to the IRS to address the problem. If you’re not able to get anywhere with the IRS on that front (assuming the debt was paid), consulting with a tax attorney may be your next best option.
Gerri,
I received a 1099-c for 2012 for an unpaid credit card that was closed in 3/2006. On my credit report it states ” dispute resolved reported by grantor, closed 3/2006″. The report also shows ” last active 5/2006″ . Can they do this?
They can. The 1099 doesn’t erase the debt so the collection would still be reported in your credit report until it reaches the statute of limitations for reporting. The dispute statement means that you (or someone) must have filed a dispute to against the collection and the dispute was investigated and resolved as reported by the creditor (the grantor).
For more on how long negative information can be reported, see How Long Does Negative Info Stay on My Credit Report?
my husband received a 1099-c that was dated for the end of December 2012 for the balance of a credit card. we did apply that form to our 2012 taxes. We have not pay anything since 2009, not even a settlement offer. How should that reflect on his credit report?? a $0 balance since a 1099-c was filed??
I did confront the credit card company and they will not change it. what should I do?
I. too, have been hit with a 1099C for an old (12-13 yrs) debt. Portfolio Recovery Associates started collection efforts about 4 years ago. Due to their constant calls, I wrote them a “cease and desist” letter in 2010. No word from them since. However, the IRS sent me a letter that I owed $2K in taxes for the 2012 year. PRA had apparently filed a 1099C of which I was totally unaware. I spoke with the IRS and asked them to dispute, which they agreed to do. Almost 3 months later I received a letter from IRS, stating that PRA verified the charge was legitimate. Actually, they said “PRA verified that they paid you this amount.” I don’t understand how an original creditor, whoever this was, can write off the full amount years ago, sell it to a collection agency for pennies on the dollar, who then writes off the same full amount and tries to force the debtor to pay taxes on said amount? This is very wrong in my opinion and a tricky way for the IRS to extract taxes on unsuspecting citizens.