Expert: Regan Shinski - 11/24/2009

Question
Hello - recently I have been trying to repay/repair my credit score by calling debtors and trying to settle or make arrangements for certain percent on the balances. When I am talking to a collection agency and working out a "deal" they say that they can remove a few late charges and interest fees, but that they can only do up to $599.00.  The reason - because if they take out more money I will have to pay the irs the remaining amount and fill out a 1099 c Form. Is this true? Or are they just pulling my leg on me having to repay whatever the amount they are " saving me is?

Thank you

Answer
Hello Andy:

They are partially right.  There is a $600 threshold for reporting on 1099's as dictated by the IRS.  It's still a part of the negotiating process though.  There is nothing preventing them from giving you a 1099.  That basically means you have to report it as income.  There is also nothing preventing them from NOT giving you a 1099.  That just means they have to take the tax hit and can't take it as a loss.  However, in some cases depending on how their company is structured, they may have to - or are told to - give a 1099 in these cases.

As stated, this does not mean they cannot just give you the 1099.  If reporting the income is not a major issue for you, I would call their bluff and say you will take the 1099.

Good luck.  Hope this helps.

Regan
mbscompany@aim.com