|
New Page 1
|
 |
Don't Forget To Include ALL of Those 1099s When You File Your Taxes! --plus-- 1099-Cs...And How To Avoid Paying Tax On Old Debts --plus-- Why Do Men's and Women's Shirts Button Differently, Anyway?
March 9, 2000
|
Dear Ben: I just received a 1099-C form from Discover Card indicating a debt cancellation amount on which they say I'll be liable for taxes. How many years after a bad debt write off can they do this? I was in considerable financial trouble back in the early 90's; the last activity on the account was around September '92, or possibly early 1993. I didn't hear a thing from them for years and then out of the blue, started receiving bills last year. Is there a statute of limitations? Is this 1099 legitimate?
G.H., Dallas
Dear G.H.: Yes, it sounds like this IRS Form 1099-C that your old friends from Discover sent to you is very legitimate. The time period for which a company can "write off" an old/non-performing debt can vary, depending on their accounting practices and when they declare a debt as officially "dead." So to try to answer your first question, there's no clear-cut time period in which a company must send you a 1099-C. Since the last activity on the account was as [potentially] as late as 1993, the creditor (Discover Card) lost their chance to successfully sue on this debt years ago; the rule-of-thumb for the statute of limitations on most credit card debt in Texas is four years.
Don't pay any future Discover bills since they've taken action to make you accountable to the IRS for the non-payment (forgiveness) of the original debt. If you're contacted by the company (or a third-party collection agency), tell them to leave you alone and to never call/write again. Be sure that they're aware that the debt is not enforceable in a court of law, nor reportable on any credit bureau since it exceeds the 7-year limitation on reporting of this type of information as covered by federal law (the Fair Credit Reporting Act). By the way...be sure to include the 1099-C with all other 1099s, W-2s or other income reporting paperwork when you prepare your personal income tax return since whomever prepares your taxes will need to know about this when computing your tax liability. (The quickest way to trigger an audit from our friends at the IRS is failing to properly report any/all income that 1099 forms routinely track.) If you are/were insolvent for the tax year in question, ask a qualified Certified Public Accountant or tax attorney about invoking the little-known "Insolvency Rule" which, if you meet the criteria, may allow you the luxury of avoiding paying any income tax on this "phantom" gain. Worst case? Pay the tax you owe on it, put it behind you and chock it up to another one of those valuable "learning experiences" from the bad old 1990s.
Dose of Dover For The Week: I know you've probably lost as much sleep about this one as I have. So why do men's shirts button right-to-left, but not women's? According to the March edition of Maxim magazine, when men started wearing button-up jackets in the 17th century, they buttoned them right-to-left in keeping with the pattern used for armor, which was designed to make it difficult for a right-handed opponent to thrust a sword into the seam. According to Dierdre Donohue, the librarian of the Costume Institute at New York's Metropolitan Museum of Art, theories vary as to why the sides were reversed on women's shirts. One thought is the switch made it easier for maids to dress their mistresses. Another theorizes that it helped mothers breast-feed on their left side, over their heart and [hopefully] more comforting to the baby. No matter what the origin, in today's society anyway, left-to-right buttoned shirts usually means higher laundry/dry cleaning costs for women.
|
|
|
|
|
