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IRS considering "charged off" debt as income

It may help your wallet — and your mental health — to have old debts forgiven. But that relief could also come with an unexpected visit from the tax man.

As my colleague Jennifer Waters reported this week, the Internal Revenue Service expects people to pay taxes on forgiven debt of $600 or more. While the act of borrowing itself isn’t a taxable event, a debt such as a credit card balance that is cleared — rather than paid off — is considered taxable income, since the funds were used to pay for services and belongings that you no longer owe money on, she explains. Some exceptions include certain kinds of canceled mortgage debt and home-equity lines of credit.


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remember when----

occupy wall st was paying off people's healthcare bills

they found they may have screwed those people because,,,like this article,,,, they had to claim the bill paid as taxable income,,,,,, and it could screw the people already to poor to pay the med bills

you think libs,,, occupy,,, would wise up,,, to gov't in any form is bad,,,, you can't even do a good, honorable thing without gov't prying in and getting their piece



Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Does that mean...?

Does that mean we should also be taxed on how much money we're saving on our health insurance premiums with Obamacare? I remember him telling us how much it would save the average family if it was passed.

Maybe the tax could go directly to Obama. Like a residual on his presidential 'accomplishments.'

www.standardexcellence.net - Bringing you Oklahoma, Texas and national news & opinion that matters for liberty.

Dear Iris, Turn in your red dress. Give back our money.

Iris, why do you misbehave so?

Iris, you are not 16 anymore. War ended in 1919. The Victory Tax ended in 1945. You have no business anymore. Per the Grace Commission authorized by President Reagan, you have not provide one 5¢ toward any service taxpayers expect. You have squandered all we have given you. You are but a debt collector taking from us payers & giving away... Well, enough said.

In summary, you have no right to do harm to us. Give us back all you have taken. Close your house of ill repute.

Sincerely (under no penalty)
Mark Twain, 2013

PS: Definition of Perjury>

Websters 1913 edition:
Per"ju*ry (?), n.; pl. Perjuries (#). [L. perjurium. See Perjure, v.]

1. False swearing.

2. (Law) At common law, a willfully false statement in a fact material to the issue, made by a witness under oath in a competent judicial proceeding. By statute the penalties of perjury are imposed on the making of willfully false affirmations. &hand; If a man swear falsely in nonjudicial affidavits, it is made perjury by statute in some jurisdictions in the United States.

Websters 1828 edition: PER''JURY, n. [L. perjurium.]
The act or crime of willfully making a false oath, when lawfully administered; or a crime committed when a lawful oath is administered in some judicial proceeding, to a person who swears willfully, absolutely and falsely in a matter material to the issue.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Thanks for the interesting info...


"First they ignore you, then they laugh at you, then they attack you, then you win!"

"The belief is worthless if the fear of social and physical punishment overrides the belief."

way way way old news

saw this with student debt "relief", saw it with early attempts at "mortgage relief".


Be brave, be brave, the Myan pilot needs no aeroplane.

Can you pay credit card debt taxes (1099C)...

over a 3 year period. For example: I have a 1099C with the amount of $9,000. Can I declare $3,000 each year for three years so to spread the tax burden over three years instead of hitting me all at once.

"First they ignore you, then they laugh at you, then they attack you, then you win!"

"The belief is worthless if the fear of social and physical punishment overrides the belief."

Go Rand Go...

times of the essence

A true flower can not blossom without sunlight and a true man can not live without love.

no tax owed if you can show you were insolvent

and usually, if you had large debts that you couldn't pay you would most likely be insolvent. there is a form for that.

easy as pie.

What is this? Iris charging off with my credit account?

Paper Dollars

She has no right! My is my affair. And it is over between me & that bank. Over!... IRS pretends to be jilted. None of her affair. She is making stuff up.

She & her monopoly Boyz are spendthrifts. Have been since their inception, 1913... Not gold diggers. That is an honorable profession. They are paper Dollar con artists... If you are looking for her, hear tell there is a lair in Puerto Rico... Another in Delaware. I am not from those parts.

Last known address? Search her, not me. I just want sound money back.

Search: IRS Puerto Rico HQ
Search: IRS US Division, Delaware HQ

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Nothing new

This is not a new concept. Companies charge off bad debt it's cost of doing business. They have a loss and they have to do something with it on the books. You received a service, goods, etc. and the company booked a receivable. When you don't pay the company has to take a loss on that service or inventory that you essentially stole. This is how these types of companies make money. Some of their practices are shady at best, but this is standard business fair.

For those complaining about unfair interest:
As far as credit cards, loans with interest. You sign a contract when you receive a credit card or loan agreeing to pay the interest, fees, penalties, etc. If you don't like paying anything above and beyond the money you spent on your credit card then don't get one or pay your bill on time and abide by your contract. This is how they make money, banks and credit card companies are not charities.

If you don't agree with the way these companies work you can choose to not participate in the system, but as long as you are you don't get to back out of your contract on idealistic grounds, you shouldn't have participated.

...Then they came for me —
and by that time no one was left to speak up.

-Pastor Martin Niemöller

I know if I keep squeezing this turnip....

...blood will come out.

We all want progress, but if you're on the wrong road, progress means doing an about-turn and walking back to the right road; in that case, the man who turns back soonest is the most progressive.

-C. S. Lewis

This is my 2nd letter to Citibank in regards to 1099C.

To Whom it May Concern:

It has been over 30 days and no response to an "incorrect" 1099-C. Instead I get a letter suggesting I call 800-XXX-XXXX at my earlist connvenience and this letter comes from a different address than what was on the original 1099-C. This is unacceptable. I want a written response. Let me begin with explaining what I understand to be correct. Your company: Citibank credit card, is one of many shareholders of the Federal Reserve Banking System that is a private company. It is not a Federal government organization as many have been mislead to believe. I have requested a copy of theoriginal contract that I signed and to this date have not recieved it. Citibank; being a shareholder of the FRB system, gives you access to money/credits (printed out of thin air that devalues the US dollar through "inflation") to pass onto me with a "line of credit". This money I hypothetically used towards
purchases and then I pay it back in monthly payments. So legally I should not ever be charged by your company any "interest or late fees" because you did not give me this money from your assets.
Plus your company has no intention of paying back the Federal Reserve Bank System as I pay you back. So In essence; you have taken money from all American Taxpayers through "inflation"
(indirect tax) and profited with the additional interest and late fees. AGAIN THE 1099-C IRS FORM SHOULD REFLECT THE TOTAL PURCHASE MINUS PAYMENTS "ONLY". Please note that I have kept records like credit card statements dating back to 10/2009 up until you company cutoff my access to them. I also have the three major credit reporting agency "reports" dating back to 07/2010 when Citibank
"Charged off as Bad Debt" which means that a 1099-C IRS form needed to submited to the IRS by 1/31/2011. I have already spoken with many attorneys in the past and a handful were interested
in taking this matter to court. I rather not so "AGAIN THE 1099-C IRS FORM SHOULD REFLECT THE TOTAL PURCHASE MINUS PAYMENTS ONLY". With this calculation done; I suspect "no" 1099-C IRS form will be required. Attached is my previous letter in regards to this matter. I will be forwarding a copy of this letter, he "incorrect" Form 1099-C you sent me, your reply to my letter, credit card statements, and credit report agency with the date Citibank
"Charged off as Bad Debt" - to the IRS. Plus a copy of this certified mail delivery.

P.S. I am a heavy blogger on many websites and have found many like me that know this is wrong and it would not be hard for me to organize and find an attorney to represent us.

"First they ignore you, then they laugh at you, then they attack you, then you win!"

"The belief is worthless if the fear of social and physical punishment overrides the belief."

Garan's picture

You are all missing something...

..that is, all the people saying that the IRS is justified.

Consider the scenario where a person makes a loan for (say) $3000, pays off the $3,000 over time, yet the penalties and interest add up to (say) another $6,000 over time.

That $6000 is 'invented' debt through the lender's and collector's imposed interest, fees, and penalties.

Yes, you signed a contract, yet they have you 'over the barrel' and they start charging (almost) whatever they want. They just pile it on you and act like they've given you something.

If the $6000 is charged-off and you settle with the collector for (say) $1000, then you have a tax liability of $5000.

So, the IRS would tax you on a made-up figure.
The IRS would collect real money, on "made-up" debt.

This is 'new' to anyone who doesn't know it, and the knowledge should be continually shared until everyone knows.

No one forces you to use a

No one forces you to use a credit card. If you do use one, no one forces you to carry a balance. The rational way to use a credit card is to pay off the balance in full every time. No exceptions. If you do that you won't get trapped under a spiraling mountain of interest charges and penalties. If you don't pay off the balance every month, and you do find yourself with massive interest and penalties, keep in mind that you accepted the contract. That money is money you legally owe. And if someone were to pay you enough to pay it all back, you would be subject to income taxes on it. So how is it any different if the loan is forgiven? If you don't like that your real beef should be with the income tax itself, not with the fact that it is applied consistently.

Garan's picture

I think you've missed the point, ..and my deflection.

..just pointing out that when I said/typed "Yes, you signed a contract", i did that to pre-concede that it is a persons choice to use a credit card. So, I was hoping not to get an ear-full on that.

The main point of my post is that the hard-lined view about debt does not take into account people who (for what ever reason) find themselves in a situation where they are stuck with a bill, largely (or even completely) of interest and penalty charges.

What if you made a short-term loan of $5000 from your neighbor agreeing to pay $5500 back within a month.
Let's say you pay him back the next day and he agrees to forgive the $500.

I think most people's sensibilities say that the deal is private and no tax is owed.

However, the IRS might see this as a loss to them since you didn't earn (say) $750 and paid (say) $250 to the IRS as income tax before making the $500 payment to your neighbor.

So, you and your neighbor said some words, made (effectively) no exchange, and a third party (IRS) thinks they should get $250. For what?

These idiosyncrasies expose fundamental problems with income tax.

Take note of the post (above) about the 1099-c and you'll see that there are those who oppose this specific taxation.

(Also take note of other posters who obviously didn't read anyone else's posts. uuhg).

Garan is wrong

1099-c's do not make something income. They make it reportable. You report it, you report you are insolvent, then guess what... the IRS doesn't tax you. So, since this post and many responses are based on the premise that this hurts poor people without assets, how about you address the fact that it doesn't. I'll guess why you don't, because you didn't know that it doesn't.

Was there a post accusing someone of filing false 1099-cs? The penalties for that are incredible.

Your comment that people should be allowed to make loans at no interest and discharge any interest has no merit. Once again, consider how wealth transfers would occur from every single family if that were actually possible. You've effectively made many other taxes null and void, and you don't even address the issue. You can disagree with those taxes, but you pretend that it's one "neighbor" loaning another money (which never even happens in the real world BTW, how about a real example).

What does happen is rich people use your ideas to avoid a half dozen taxes, which is the real reason you don't acknowledge why your idea doesn't work. You pretending one goodly neighbor is hurt by $250 assumes your goodly neighbor filed a 1099-c in the first place. The chances of your example occurring in the real world are 1:10,000T. On top of it, your example also says the person can't pay and is insolvent. You don't even know they aren't taxed if insolvent.

So, stop spreading misinfo.

Garan's picture

Some valuable goodies, and some attitude.

I like what you've added. Of course I don't know it all.

However, I think if you calmly read my posts and review your own, you might see why I think you are exaggerating differences and maybe even projecting frustrations at my posts.

The analogies are to make a point, and are definitely made-up and not very wholly realistic. They are analogies. ..and possible (you've never made a loan to family, friends, or neighbors?)

I think I was consistently vague in my speech and not misrepresenting associated hard facts; just offering a view that I think other's have missed.

Also, it appears to me that you are putting words in my mouth.
I don't think I mentioned anything about poor vs rich or other things you decided to argue.
..by the way, when I say "it appears to me", I am not saying you are putting words in my mouth. I am speaking about my perceptions, which is hard to argue (I see what I see, right or wrong).

It should be possible to add the things you've said, without arguing right and wrong, or being completely dismissive.

In a bad mood, I might have dismissed your post as well.

Glad I didn't.

Thanks for the info.


Sorry, this isn't news, or new, and you're wrong, they're not considering it, they do it. If you think about it for about 10 seconds you can understand why giving someone a loan and hten discharging it is income to the person receiving it. Because it is. What if they didn't do that? Then guess how every small business would pay their employees.

But if you are not solvent it isn't income. So it actually doesn't hurt people that don't have assets. So again, understand the topic before sharing misinfo.

Your post and mine got

Your post and mine got minused down for the usual reasons -- we stated facts that people don't want to hear.

they also don't want to hear

That when you are insolvent, the IRS does not consider it income. They pretend like this is a catastrophe for those that can't pay their bills. They posted something they know nothing about, can't defend, and for whatever reason it's still up like it's a story.

This isn't anything new. The

This isn't anything new. The IRS considers a forgiven debt to be equivalent to being given the money needed to pay the debt, and that's income. Think about how it would be if this were not so -- you would agree to work for your employer for free, but he must give you a $60,000 loan. You have a nod and a wink agreement that at the end of the year, when the loan comes due, your employer forgives the debt. The result -- $60,000 a year without any income taxes. The IRS isn't going to allow that obvious sort of tax evasion.

This rule used to apply to forgiven mortgage debt but I believe that congress passed a law making that non-taxable.

Garan's picture

"The Fed" isn't new either. ;)

..but I don't see people saying "this isn't new", which is basically saying "I already know this". Others might not know and it is news to them.

That aside, it is interesting to see you mention how people would otherwise side-step the IRS with cash loans, yet mortgage debt is handled differently.

If you connect the two ideas, then couldn't someone accept a unpaid and forgiven mortgage debt as payment?


The Theory behind this is the lender gets a tax break by declaring the loan as a loss. The imputed [taxable] income to the defaulting borrower Lets the IRS "break even". This is just another way Big Banks and Big Business use Big Government so you to pay their taxes.

You can't help getting older; but, IRS can help you get poorer.

Humpty Dumpty

Lewis Carroll, Author (January 27, 1832 ~ January 14, 1898)

"You can't help getting older." - Humpty Dumpty

"IRS defines words to mean exactly what they want them to mean. You have nothing to fear, except fear of IRS itself." - Mark Twain, lamenting Income Tax, 2013..

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Mark Twain: Making quotable quotes

for over a century.

"The two weakest arguments for any issue on the House floor are moral and constitutional"
Ron Paul

The IRS Has No Standing

Since when and how- has the government decided that it has standing in my personal business affairs? At no point in my personal business transactions did the IRS, loan, pay, or facilitate my personal business.

Is the government going to give me a credit for all the people who have stiffed me on various debts? Our government has clearly left the fucking rails.

This, coupled with the

This, coupled with the announcement that the government wants access to all our financial records opened to all the ABC organizations, sounds like a recipe for massive government over reach waiting to happen.