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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1111
Experience:  US Taxation specialist.
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1099-C Student Loan Wells Fargo duplicate 1099s

Resolved Question:

1099-C Wells Fargo question. Suit was filed against co-signor by law firm on behalf of defaulted student loan. Principal on suit was $25,006.48, suit requested without specificity, unpaid interest, atty fees, costs.... The only amount mentioned specifically in the suit was the $25,006.48. Agreed to settle with payments for six months totaling $10,500.00. Paid that amount. The settlement agreement did not specify any dollar amount being forgiven other than to dismiss the suit upon full payment according to the terms of the agreement. The dollar amounts at play, left a written off amount of $13,038.81. Now, both original borrower and co-signor have received duplicate dollar amount 1099's in their respective names and social security numbers for $13,731.33 each. With the interest at play during the re-payment period, it could account for the $692.52 difference in those amounts. Hoping it is an oversight on the part of Wells Fargo on the double dipping here, what would be a suggestion for resolution? In reading through a few other threads on the matter I was impressed with the quality and depth of the replies;.


 


A second observation is that the 2012 1099-C has box 1 "Date of Identifiable Event" as being 1/18/2013.  Thank you

Submitted: 1 year ago.
Category: Tax
Expert:  USTaxAdvising replied 1 year ago.

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

USTaxAdvising :

Excellent narrative of the facts but what exactly is your question? Are you inquiring on what to do about the duplicate 1009s or what to do about the additional 692.52 accrued interest?

USTaxAdvising :

If you could get back to me on this I will do my best to answer your questions.

USTaxAdvising :

Best regards

Customer:

Thank you,. My question would be in two parts:

Customer:

1) What to do about the duplicate 1099-C's. I am the borrower and should be liable for the tax from what I understand. I was not a party to the suit, the co-signor was. I am not sure sure, tax wise, if it would be smarter which 1099-c to contest, the one to the borrower or the co-signor. The original principal was 21,000.00 with 4,000.;00 in interest. 2) (this part may not be answerable) The box 1 :"Date of Identifiable Event" being 1/18/13 would, in my thinking, put this in the 2013 tax year, although it's on a 2012 1099-c . Box 6, the explanation of the Identifiable Event" has code "F" which interprets to Student Loan discharge. Question being, is the assumption of it being a 2013 taxc matter, be totally out of bounds? Thank you for tackling this. Mike

USTaxAdvising :

Interesting fact pattern. So you are the recipient of the funds? and someone else was the co-signor? The co-signor received a 1099C and you did also? - sorry, I just want to get this right.

Customer:

That is correct. 1099's are for same dollar amount to the penny. (13,000.00 +) with my name and social on one, and the co-signors name and social on the other.

Customer:

With the settlement deal, one 1099 plus the amount paid would come close to the total claim

USTaxAdvising :

I agree this does not make sense for two 1099s.

Customer:

principal = 21,000. Amount sued 25,000. Paid by settlement agreement 11,000 plus. Amount written off, with one 1099 would about equal the amount in contention.

USTaxAdvising :

Have you contacted Wells Fargo and asked why they issued two 1099s?

Customer:

I think that would be prudent. :-) Facing these things is not pleasantly anticipated. The fact that is sounds irregular to a third party is relieving. I appreciate our help

Customer:

your

USTaxAdvising :

Definitely irregular. I am doing some research on remedies now. Hold on while I get some answers for you. First step would be to contact Wells Fargo and ask them why they issued 2 1099s. I anticipate they will tell you one is erroneous and that an amended 1099 will be issued reporting NIL.

USTaxAdvising :

Ultimately, you, the signor, is the one who is responsible to declare the 1099C as Cancellation of indebtedness income. The Co-signor should not be the one declaring this. (But someone has to)

Customer:

Understood. Tx, Part 2, which may be futile, I think it may be a discretionary area for the bank, is the event date. If this obligation occurred in 2013..;....

Customer:

not obligation, Event date occurred in 2913, 1099 received in the mail on 1/31/13 and is dated on the 1099 12/31/2012

USTaxAdvising :

2) agreed this is a 2013 taxable event if listed as 2013. The date the loan was forgiven will be the date of the taxable event. It should not be 2012 if the loan was forgiven in 2013. Thus no 1099C for 2012.

USTaxAdvising :

This really sounds like Wells Fargo (the 1099 issuer) has made multiple errors. There should not be 2 1099s issued for the same amount and if the loan documents state the loan was forgiven in 2013 then there should not have been a 2012 1099 issued in the first place....

Customer:

I may stay silent on that issue. Have the 1099 NIL to one party (co-signor) and then address the event date when I fill out the taxes in April.

Customer:

I think that's all we can do with this question. Well done. Thanks for your help

USTaxAdvising :

No problem. If WF does not amend the 1099 then one remedy is as follows: (1) the co-signor declares the amount of the 1099C as income. Then the co-signor also reports the exact same amount as a subtraction on their tax return notating the co-signees name and SSN as the transfer. Something like "Transfer to Co-signee, "Name of co-signee", "SSN" and then reporting the amount as a subtraction. That way the amount is reported by the co-signor but there is no tax effect because it is also reported as a subtraction.

USTaxAdvising :

The borrower/Student would then report the full amount on his/her tax return.

USTaxAdvising :

I hope this helps, please let me know if you have any further questions.

USTaxAdvising :

Best regards,

USTaxAdvising :

PS - please provide a rating when you have a moment. Thanks!

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1111
Experience: US Taxation specialist.
USTaxAdvising and 2 other Tax Specialists are ready to help you

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