1099-MISC from a creditor?

[Koda1021]

My husband and I received a 1099-MISC from a junk debt buyer. Obviously, I was a bit shocked, since that form is mainly for income earned. I asked my attorney about it, who basically said "you are not paying any prior bills outside your bankruptcy" and then told me to pass it to my tax preparer. Generally, my husband and I file with TurboTax or some such program, because we don't have enough to itemize (it's always straightforward for us). But, I contacted a local CPA who honestly had no idea what to suggest to me! At first he said go back to the attorney, this isn't the right form, but the attorney then pushed me back to "tax professional". I even spent an hour on hold calling the IRS and the person on the phone told me they were completely stumped and had no clue what I should.

Meanwhile, my husband and I spent a month calling the creditor demanding they issue a 1099-C (which is obviously what they should have done). At one point a very rude woman told me they are issuing no new tax documents, and that too bad, what I got is what I get! Finally, last week my husband again tried calling them...transferred all over and finally got a woman who understood the issue and said she would send the 1099-C the very next day. Well, obviously a lie because it never arrived.

So here we are two days before needing to file, and the existing 1099-MISC increases what we owe in taxes by nearly $1,000! We already figured out that we owe anyway (and are going to have to make payment arrangements) and since we owe, we can't file an extension.

Has anyone gotten a 1099-MISC post-confirmation? I am at a loss for what to do!

[LadyInTheRed]

You can file an extension of the time to file your return. You just have to pay whatever tax you owe with your extension request. The mail isn't always as quick as you think it should be. That 1099-C may still arrive. I would file IRS form 4868 and pay the tax I owe and continue to work on getting the correct form. If you don't get it, I would file your return as if you received 1099-C instead of 1099-MISC and attach an explanation. If TurboTax doesn't have the ability to file the extension request and pay the tax electronically, you may have make a trip to the post office.

[LadyInTheRed]

Try this: https://turbotax.intuit.com/tax-tool.../INF12040.html

[keepsmiling]

I wonder if this is an actionable offense on the junk buyer's part.

[Koda1021]

You can file an extension of the time to file your return. You just have to pay whatever tax you owe with your extension request. The mail isn't always as quick as you think it should be. That 1099-C may still arrive. I would file IRS form 4868 and pay the tax I owe and continue to work on getting the correct form. If you don't get it, I would file your return as if you received 1099-C instead of 1099-MISC and attach an explanation. If TurboTax doesn't have the ability to file the extension request and pay the tax electronically, you may have make a trip to the post office.

Thanks for the insight. I knew about the extension, but because the Trustee as you all know from my other thread, is bleeding us dry, we don't have enough to pay the taxes and are going to have to go on a payment plan anyway. But, I think I am going to go the route you suggest of entering it as a 1099-C, and sending an explanation. About a decade ago, I received a 1099-MISC from a family member who gave me money (as a birthday gift no less) then tried to claim it on his business taxes that I'd done jobs for him! I sent the IRS a letter stating that this was false, and they accepted that. Ironically, they audited the relative for years of writing off false business expenses!

Thanks again for your great advice, I really appreciate it!

[Koda1021]

I wonder if this is an actionable offense on the junk buyer's part.

You know, I was wondering the same thing. When talking with a CPA, he said I would have to claim it on my taxes and when I said why! It's not correct! He basically said "well, it may be too hard to fight". I may ask our consumer attorney (who managed to sue one creditor successfully for padding costs) if it might be something to look into.

[Koda1021]

Just wanted to say thanks again for the suggestions given. Unfortunately, no tax professional would file the MISC as a C, and told me I had to get the C. I also re-contacted the IRS who said the same thing, that I would be in violation if I did not report the correct form. They went on to say that it isn't that it can be worked out at a later date, but for the time being I had to file with the correct form (MISC) otherwise their system would throw up a red flag since the MISC had been filed already by the JDB.

So, my husband and I went with the local tax person, and sure enough..our final bill was enormous due to the 1099. Rather than file an extension (since we would owe money anyway and because of the Chapter 13 wouldn't have enough anyway), we just went ahead and filed and returned the voucher to set up a payment plan. The tax person told me, though, to definitely seek out a consumer attorney, as the JDB can't get the benefit of claiming it on their taxes as income, since it is no such thing. So..my husband and I are contacting a few consumer attorney firms to see what action we can take to remedy this.

On a side note, I did a search and evidently this issue has come up with other JDB's and they were successfully sued. Evidently, because they are claiming the full amount of the debt, and not what they actually paid for it, they are in violation. Likewise, many of the debts are either time-barred or unable to be proven. In this case, I don't even know what the debt is for! I searched all of our collections letters (that I'd organized for the Chapter 13) and found no notification from them, and likewise, no creditor at all in the amount they are claiming.

So..fingers crossed that we can work this out. Thanks again for all the great insight here. This forum, and you all, have helped me really retain my sanity during this process.

[Koda1021]

Well, the plot thickens on this whole thing. I just spent all morning combing through all my documents and emails with the bankruptcy attorney, etc. and I finally figured out what the original debt is. We had received a lawsuit from Atlantic last year on a debt owed. At the time, we had a local consumer attorney who had (successfully) sued another creditor who provided false information on a lawsuit to us (not Atlantic, a different creditor).

When we initiated bankruptcy proceedings, the consumer attorney was in the beginning stages of fighting the lawsuit. When I first started working with the BK attorney, I sent him a spreadsheet of all our expenses, and all of debts. In that, I listed the two lawsuits. For the one in settlement, they negotiated the amount to be exempt with the trustee. I didn't know how the second one was handled (and never thought to ask). All I know is that after the filing, we received no communication from the creditor, or the court.

I emailed the Associate to ask how that was handled, and she said she wasn't aware of a second lawsuit. So, now I'm waiting to see what the heck is going on and/or how it's going to be handled.