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Michele F | If a credit card has been reported to the IRS for non-payment, can the IRS take my tax-return when I file.? |
I have credit cards that are being reported to the IRS for non-payment. When I file for my taxes and get a return back, can the IRS just take that money and apply it toward my credit card debt.
Additional Details
I have credit cards that are being reported to the IRS for non-payment. I haven't paid in two years on two credit cards so I'm assuming they were written off. I received a letter from the credit card companies letting me know that the amount of the credit I didn't pay was being reported to the IRS. So when I file for my taxes and I usually get a big return back, will the IRS take what I owe that was reported to them by the credit card companys and apply it toward that. |
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v b
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Sequence of events:
1. You borrow money on the credit card.
2. You fail to pay.
3. Eventually the credit card company stops trying to collect and they write the debt off. When they write the debt off, they send a 1099-C to you and to the IRS.
4. You get 1099-C in 2007. You file your taxes for 2007 and ignore the 1099-C because you don't feel like adding it to your income. Your tax return goes through, you even get your refund.
5. 12-18 months later, the IRS starts sending out letters proposing to adjust your return to add this missing income. If you cannot show you were in bankruptcy or were insolvent, then the IRS adjusts your account and you *now* have a balance due. The IRS demands payment or that you set up a payment agreement.
6. You try to file the 2008 return in 2009, qualify for a refund and then get a letter saying the refund was applied to the balance due which has been accruing interest and penalties retroactively to 4/15/2008. |
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Judy1
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Overdue credit card payments don't get reported to the IRS, so your refund doesn't get taken for that, but if a credit card debt is written off, it gets reported to the IRS and becomes taxable income so your refund would be smaller. |
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petey00petey
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no....but unpaid credit card bills represent income and becomes taxable by the irs |
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A.Mercer
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I have never ever heard of this. Now, if you owe money for a student loan or for child support this can happen. However, I have never heard of the IRS collecting money for credit card debt.
If a collection agent told you this then that person is probably lying and that person broke the law by telling you that lie. It is against the law for collection agents to make threats that they do not intend to follow thru or that they cannot follow thru.
petey00petey has a valid point. If the debt is forgiven then it can be considered income and should be part of your total income for the year. Lets say that you earned and payed taxes on $30,000. You were forgiven $1000 in debt. The IRS will consider your income to be $31,000 for the year. |
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wartz
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The other answers are muddled.
Any refund you have coming IS NOT accessible by a credit card company to pay what you owe.
If you settle with the credit card company by paying part of what you owe in exchange for them dropping the balance, the unpaid part would be income taxable to you in the year it was forgiven.
If you don't pay your credit card bill they could sue you if they thought it would be worth the trouble. If they didn't and charged off the account it would not be income to you because you still owe on the account even though they are not trying to collect. |
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heyteach
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No. The IRS is not a collection enforcement agency. |
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MoB
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If the company "forgives" the credit card debt, then they are entitled to issue you a 1099-C. Cancelation of debt. You would list this as "Other Income" on your tax return. It is treated as ordinary income and is included in your adjusted gross income. If they do not issue you a 1099-C, then the collection agency is just threatening you. |
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Babycakes
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