What is IRS Form 1099?

Some debt collectors are threatening consumers with turning in a 1099-C to the IRS ostensibly under 26 USC 6050P and claiming that discharged debt is "income" to the consumer. Is that legal?
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David A. Szwak
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Joined: Thu Jul 13, 2006 11:19 pm

What is IRS Form 1099?

Post by David A. Szwak »

What is IRS Form 1099?

This is an IRS Statutory Notification Letter - Publication 908 referenced as IRS Form 1099.

Typically, you'll receive an official looking letter that reminds you of a debt that you have failed to pay. It then refers to the creditor's "right to forgive this debt and submit a Form 1099 to the Internal Revenue Service on all bad debt accounts.

The last sentence usually reassures you that the creditor does not intend to take such an action at the time, and then urges you to remit payment to "avoid any additional collection activity."

According to the FTC website, this letter, because of its implied threat, clearly violates the FDCPA, Section 807(5) "False threats of legal action"
David Szwak
Chairman, Consumer Protection Section, Louisiana State Bar Association
Bodenheimer, Jones & Szwak
509 Market Street, 7th Floor
Mid South Tower
Shreveport, Louisiana 71101
318-221-6444
Fax 318-221-6555
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