After filing a 1099C for debt that has been charges off for 36 months, can we not accept any payment on that debt after the 1099C has been filed? I have read the instructions & it talks about canceling of debt & forgiven debt which I take is that we can no longer actively pursue collecting that debt due to our choosing to forgive it. However, when the customer receives the 1099C and they want to come in & pay on that debt, are we allowed to take that? If we are allowed to, how would we treat that. I hope that doesn't sound too redundant. Any help is greatly appreciated.

However, when the customer receives the 1099C and they want to come in & pay on that debt, are we allowed to take that?

Yes

If we are allowed to, how would we treat that.

As a recovery. The consumer's tax reporting burden is not your concern.

That is a tax issue. I would recommend you talk to your tax accountant. 1099C is for forgiveness of debt. Then you accept a payment, your 1099C previously issued is incorrect.

Thanks rlcarey.

osucpa,

In the 1099A&C instructions, it states under the when to file section that you are not required to file an additional or corrected 1099-C if you receive payment on a prior year debt.

Thanks

Another question that has been brought up is that 1099-C's are required to be filed. For instance, customer has had a checking account with us that has been charged off & it meets all the requirements of the 1099-C. My interpretation is that is an election on that financial instituiton's part to forgive that debt or not. Am I correct in my interpretation?

Charging off a debt does not equate to "forgiven." The bank may elect to continue collection proceedings in an effort to recover these funds. If you do not engage in any collection activity, you must look to the 36 month period referred to in paragraph 8 under "When a debt is cancelled."

Thanks BrianC. So as long as we are actively pursuing that collection, we can elect not to file & are not required to, but once we choose to stop the collection process, we can then there choose to forgive that debt after the 36 month period & file the 1099C. It is our election to file & not required by the IRS. Correct?

Once you have an "identifiable event" as defined in the instructions filing a 1099C mandatory for that tax year unless one of the exceptions applies.

Thanks for the insight BrianC. It is greatly appreciated.