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Question
I understand that I will receive a 1099-C for the amount of debt discharged by a credit card company, and that I will have to pay taxes on the amount of the discharged debt if it is more than $600. My question is will I be taxed on the full amount of the discharged debt (including interest and penalties) or will interest and penalties be excluded from the amount on which I am taxed?
Well, I'm not a tax expert by any stretch of the imagination but I do know a little about this to give you an answer.
When a creditor files a 1099-c they have to list the interest and penalties separately from the principal amount charged off. IRS only taxes on the actual principal balance owed at time of charge off.
But it is my understanding that if you can prove you have properly disputed the debt then IRS either can't or won't collect on any of it.
IRS itself is the best source of information on that matter. Call them at
1-800-IRS-1040 and ask them about it. I think that is the correct number but if not it is easily available on the web.
Bill Bauer
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Answers by Expert:
Creditwrench
Expertise
Debt Collections law, Fair Debt Collection Practices Act (FDCPA), Fair Credit Reporting Act (FCRA), federal law, how to properly answer court summons for collection cases, how to prepare federal cases against debt collectors, how to deal with debt collection phone calls.
Experience
I've been an active consumer advocate for more than 40 years and have helped hundreds of people win cases against debt collectors as well as helping them defeat demands for summary judgment lodged against them by banks, debt collectors and defeat mortgage foreclosures and keep their homes.
Education/Credentials
Paralegal courses for the most part.
I have been teaching people how to deal with judgments, mortgage foreclosures and other such problems both on and off the internet for many, many years. I am a Richard Cornforth information provider ever since 2000 and worked with many other organizations and causes since 1980. I was Oklahoma State Chairman for the nationwide drive to defeat the Constitutional Convention which was proposed by various factions within our federal government such as the Council of State Governments and the National Organization of State Governors who were working hard to organize a Constitutional Convention to be held in 1995 for the purpose of rewriting our American Constitution to be more acceptable to the United Nations. I worked with Senator Charles Duke of Colorado and Senator Don Rogers of California and many others across the nation to keep them from getting the number of delegate states required to lawfully hold a Con-Con and we were successful. I have worked with many other legislative issues in Oklahoma and have always been very successful.
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