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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29655
Experience:  Taxes, Immigration, Labor Relations
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Citi Corp sent me two 1099Cs for 2010. Im not sure what they

Resolved Question:

Citi Corp sent me two 1099C's for 2010. I'm not sure what they are for but presume a possibility of one credit card debt foregiveness as cancelled a card 11 years ago because of incorrect interest cancelations. If so that would make a majority of the unforegiven debt listed as actually interest so shouldn't that be classified separately on the 1099 under interest box. Does interest, particularly not substanitated or falsely claimed contitute a valid unforegiven debt 1099C.
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

LEV :

Hi and welcome to Just Answer!
Several issues...
1. You are correct - if interest charges are included into cancelled debt - that amount should be reported in the box 2.
2. In most situations - the amount of forgiven interest included in canceled debt - is taxable income - however - see some exemptions on the page 3 in this publication - http://www.irs.gov/pub/irs-pdf/p4681.pdf
3. If the interest was added incorrectly - and the correction was made later - such correction may not be reported as forgiven debt on the form 1099-C. If the form 1099-C was issued incorrectly - you need (1) contact the issuer and request corrections (2) if correction was not made - file an official complain to the IRS.
4. Please be aware that you may exclude the canceled debt from your taxable income if you were insolvent immediately before the debt was canceled - see the date on the form 1099-C. In this case you need to file the form 982 and attach it to your tax return.
5. If you already filed your 2010 tax return and did not attach the form 982 - please be aware that you may amend your tax return and add the form - but you should do that within six months after the tax return was filed.


Let me know if you need any help or clarification.

Customer:

How long does a CC Co have to report Xnl'd debt. In this case it appears that it may be over 11 years ago. Also, during that time the CC charge appears to have been sold to 2nd and 3rd parties who attempted to collect as the CC never responded to my objections on the charges. They simply kept adding to them. Doesn't the CC Co have some obligation to substantiate the numbers reported.

LEV :

Yes - the creditor has obligation to proof the amount of the debt they cancel.
Also if the debt was not cancelled in 2010, but 11 years ago - they may not report as it was cancelled in 2010.

Customer:

This was not a verified debt as they never responded to my disputes. Rather they contiuned to compound the interest until it appeared they sold the so called debt as first one than two Agencies tried to collect. I wrote the same info to these Co. Once they sold the debt didn't they give up right to foregive the debt as they were supposedly paid for it. How long can the interest be compounded as it was in dispute as to any amount being a valid charge. How can I make the creditor prove the debt particularly after this amount of time has passed. Is there not a time cut off for claiming it as a foregiven debt?

LEV :

If you believe that the amount of debt forgiven is incorrect - you have several options.
First of all - as I mentioned above - you may request the issuer to correct the form 1099-C. I f you do so - I suggest to contact by certified mail and request corrections. If correction was not made - file an official complain to the IRS. The IRS will request the issuer to proof the amount.
Regardless of the outcome - you may sue the issuer for all damages resulted incorrect information reported on the 1099-C. In the court you may request the creditor to prove the debt amount.

Customer:

Last couple of clarifications. Does the creditor of a cc have a time limit to issue a 1099C on forgiven debt. Do they give up the right to foregive if they sell the debt? I read the publication 4681 previously and it seems that charges for business can be treated differently as forgiven debt ie if the original charges were for business or rental property would they be forgiven against the business or rental property if still existing.

LEV :

Does the creditor of a cc have a time limit to issue a 1099C on forgiven debt?


Yes - the form 1099-C for 2010 should be issued by Jan 31, 2011. However the penalty for violation is only $50.


Do they give up the right to forgive if they sell the debt?


The debt ether forgiven or in collection. If the debt is forgiven – the creditor is REQUIRED to issue the form 1099-C. If the debt is uncollectible – it generally is forgiven. There is no such thing as “give up the right to forgive” In your situation – it became uncollectible three years after your last payment – so cancelled that debt after 11 years seems strange and according to general practice the debt should be canceled long ago.


I read the publication 4681 previously and it seems that charges for business can be treated differently as forgiven debt ie if the original charges were for business or rental property would they be forgiven against the business or rental property if still existing.


Yes – business and some other types of debts are treated differently when forgiven. Thus forgiven debt is included into business income. The interest would be deductible for business – so forgiven business interest simply is not included into taxable business income.

Customer:

As it seems you don't have sourse of cc creditors rules or requirements for filing 1099C's ie time allowed to report and the selling of debt any thoughts on how to obtain this info.

LEV :

rules or requirements for filing 1099C's may be fount in instructions - www.irs.gov/pub/irs-pdf/i1099ac.pdf - see Specific Instructions for Form 1099-C.
Form 1099-C is to be used only for cancellations of debts for which the debtor actually incurred the underlying debt.
File Form 1099-C, Cancellation of Debt, for each debtor for whom you canceled a debt owed to you of $600 or more


A debt is deemed canceled on the date an identifiable event occurs or, if earlier, the date of the actual discharge if you choose to file Form 1099-C for the year of cancellation.
For due date - see last page - http://www.irs.gov/pub/irs-pdf/f1099c.pdf
Due dates. Furnish Copy B of this form to the debtor by January 31

LEV :

It sounds that teh debt shoudl be cancelled long before 2010 - if that is correct teh creditor incorrectly issued the form 1099-C for 2010. See the definition of an identifiable event in instructions.

LEV :

You have two ways to fight the form 1099-C - to file a complain to the IRS and/or to sue the creditor.

Customer:

I am reading the phamphlets noted. Thank you

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