Today TaxMama hears from Ken in the Tax Parlor with this tale of woe. “I received a 1099-C in 2005 and included it on my tax return. The credit card company has since taken me to Arbitration and my defense is that I have already paid taxes on this debt. Is there some publication that I can cite that says that they cannot pursue the debt because (1) I have paid the taxes on the debt. (2) They did not inform me at the time they sent me the 1099-C that they would be pursuing the debt. The 1099-C was for the balance owed on the debt. “
Hi Ken I do wish that were the case.
But sadly, there is nothing in tax law that governs the collectability of a debt.
The credit card company can still try to collect it as long as the statutes of limitations in your state, or their state, allow.
What is your case for the judge or arbitrator?
Perhaps that the fact that they issued the 1099-C means the company has written off the debt as uncollectible. However, if you have money to pay the debt with at present, the arbitrator will probably grant them a judgment. If s/he does….
Then you should pick up the amount that you pay back as a negative amount on the Other income line, where you originally picked up the cancelled debt as income.
You might want to do some research in your state’s statutes on credit cards.
A friend of mine was being harassed by credit card companies, and she learned a great deal going online and researching.
Incidentally, is it the credit card company taking you to court, or a collections agency? And if it is a collections agency, do they still have the authority to collect it?
Run a search online for the agency’s name and also for the owner’s name. You might find that this agency is excessively aggressive and doesn’t have authority.
Also, see if there is a reputable credit counseling service in your area and find out if they know this agency. You may be able to get the case thrown out of court if you do the research.
And remember, you’ll find answers to lots of questions about credit card debt and other tax information, free. Where? At TaxMama.com[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips. Please click on the subscribe link and join us.]
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