IRS and the 1099 C form

[Creditwrench]

Collections Law
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?

Answer: 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
405-684-9297
405-227-9423

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