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What to do about a 1099-C Debt Cancellation form to the IRS



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hey what's up everybody I wanted to make

this quick video real quick about 1099

cancellation of debt forms that some of

you may be getting in a this is a really

jumping off real big right now because a

lot of people probably had had

cancellation of debt either from student

loans or credit card companies where the

company just said we're gonna you know

in it what I think people get confused

about it they're like if they wrote off

the debt how are they able to come after

me for it if they wrote it off they're

thinking that it was cancelled and

that's what I've been trying to get

across to people just because the

company writes off a debt or charges it

off that's nothing but a legal

technicality that all companies have to

do for loans at our thurber because they

have investors that they have to do they

have to report to and they have to say

what happened with these loans and they

give it's usually a six month period

before they have to write it off in an a

when they redo the reporting they're

letting people their investors know that

these are the debts that did not go

through that they're not gonna be going

through they can sell that debt to a

debt collection company they can still

collect the debt now the only time that

they can't collect that as if they

actually write it off as in as a

cancellation of debt and that's when

they report to the federal government

using a form 1099 - C stating that they

have forgiven the debt but now this is

where it's on the flip side what happens

to you if you find yourself receiving

one of these forms in the mail is that

the IRS is going to consider that income

so let's just say for instance you had a

ten thousand dollar credit card balance

and you got the credit card company

decided to cancel that debt they're

going to send this form to you and

they're also going to send it to the

federal government and the federal

government is going to wait and see what

you're gonna do when you file your taxes

if you do not include a copy of this or

you do not state it that you had a

cancellation of debt and add that amount

to your income you're gonna get

automatically triggered for an audit and

uh but a lot of people are confused

about that because they're like I didn't

get the money because they you know it

was on the credit card and I bought

stuff with it that's where you need to

put your plus and your your one plus one

equals two thinking together you use the

credit card to buy things that you

wanted and so that means that even

though you didn't directly get the money

you indirectly were able to use the

money and that's why the credit card

company can write that off now coming to

my mind right now some things that you

need to be careful of when dealing with

this is number one be careful of them

blowing up the amount of the

cancellation of debts you want to make

sure that the amount that is cancelled

was the actual amount that you owe

because let's just say for instance they

waited for three year or two or three

years and then able let that balloon up

a ten thousand dollar credit card debt

up to twenty thousand they send you a 20

thousand dollar cancellation of debt

form that you didn't get twenty thousand

dollars with the income so you would

need to make sure that this is correct

so even if they did do that and you

remember it being something different

you need to let the IRS know that

they're gonna probably still try to

audit you over it but you need to let

them know right away that you did not

receive $20,000 that you did not have a

balance of twenty thousand dollars and

that this cancellation of debt form that

they sent you is inaccurate and they

will follow back up with that company

and make sure that they make the

appropriate changes you also need to

write a letter and get it certified and

send that to the company and tell them

that you did not borrow that amount of

money and that you do not think that

that's an accurate amount on there and

let them know that you have notified to

our arrest that they haven't that

they've turned in

cancellation of debt form to them now

something else that I put on here is

that you if you do get this notice

cancellation of debt you're there you

are never obligated to pay the original

creditor any money now what I've been

saying happened is that debt collection

companies have taken that money I have

purchased those old debts and they're

going after people that don't know their

rights if you ever receive something

that you believe that you know was

cancelled from the previous holder of

the debt or a previous creditor you need

to do is call a validation you validate

the debt you need to make sure that it

wasn't cancelled when you when you do a

validation you want to ask those

questions because they're not gonna

answer any questions that they don't

want to answer they're only gonna answer

what you put in that letter so you want

to ask them to make sure that this debt

was not canceled you want to find out if

they own the debt or that they are they

just collecting it for the original

creditor all of these things are there's

a whole bunch of things that you need to

ask for things like if they've purchased

a debt then you want to ask for all of

your credit card charges your signatures

everything to prove that they number one

have purchased a debt and have legal

authorization to collect the debt and

then you want to ask them for the

documentation on when they purchased a

debt and they will give that to you if

you ask the questions the right way but

if you don't do that and you end up

making one payment to a debt that is has

been cancelled you can technically be

legally bind it to that new contract

even though that contract would not be

void the only way you build a void out

that contractors take them into court

because that you when you've made that

payment even if it was cancelled out

that you've actually initiated a new

contract with that collector even though

it's a hundred percent illegal for them

to do that but what are you gonna do are

you gonna pay the money to take them to

court and open this whole thing back up

some people get afraid some people are

scared they don't know their rights so

they just end up

and the money now if for some reason and

I got in I'm making this video in

response to a YouTube question that came

about and some questions that were on

Facebook if you happen to pay that debt

even though you had the cancellation of

debt and you know that our arrest is

going to consider that is income what

you need to do is whoever you paid the

debt to you need to request aw - nine

form from them so if it was a collection

agency it as you paid the money to

request a w-9 form from them as proof

that you paid them the money I'm gonna

tell you the reason why you need to do

that in why your receipt will not work

for that it will work but it's gonna

work later you need to do this so you

can head off what the IRS is gonna try

to do they work by having these types of

documents that w-9 form looks similar to

this but it says w9 and it's gonna have

the company's information and it's gonna

stand in you'll be able to state that

you sent them the payment you're gonna

get their information so you can then

fill out a form back to them showing

that you have a 1099 which is uh there's

a 1099 form and there's different ones

but there you need to pick the one that

you've paid someone money and as long as

it's over six hundred dollars in a year

you can fill out that form so you would

so you get the the w-9 form which you

have their information their tax ID

number then you're gonna own a 1099 form

for independent contractors or that you

you paid a non-employee money you're

going to fill out that form with their

information your information that you

what for whatever amount that you paid

them and that way it'll block the IRS

from thinking that you had that extra

income and then the next step would be

it to take them to court or you can try

to get everything worked out without

going to court by providing the debt

collection company

the information about the cancellation

of debt from the original creditor and

that you believe that you were defrauded

by them and that you should not have had

to pay that collection that at the time

you did you did not understand and that

you would like to have all of the monies

refunded in a timely manner that you

paid on the cancellation of debt

collection that they were on the can on

the debt that was cancelled but when

they brought it to you you didn't

understand your rights and that you

didn't know that you didn't have to pay

that debt legally so if you need any

assistance or you you can always go to

our website the credit repair shop comm

we have a blog on there you can watch

more of my videos and you can post your

comments because I think that there's

just so many questions out there and a

lot of people are not given the the

correct information when it comes to it

so I do this I make time to do this to

help people like you out so you can keep

more of your money to take care of the

things that you need to take care of so

again this is Stephen Williams with the

credit repair shop calm thank you