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Old 01-11-2013, 01:24 AM
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Money owed to client and 1099

Can anyone answer this for me. I have an ex client that I owe $5500 to. Since I don't have that much I told them I would send them payments. Well today I received a 1099 from them. The $5500 was on the 1099-misc, so my question is have they just written it off or what. I was fixing on sending a payment but don't know if I am supposed to pay it or not.



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Old 01-12-2013, 10:28 AM
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“ I have an ex client that I owe $5500 to. Since I don't have that much I told them I would send them payments. “so my question is have they just written it off “=============>No I don’t think so; Canceled debt income often referred to as canceled or forgiven debt is something anyone who has debts unpaid, but not gifted, should be concerned with. The IRS considers this income! If your debt has been written off by a creditor, your client then you may receive the 1099-c form. You must claim this amount as income on your taxes because you never paid it back- thus making it taxable income where the IRS is concerned. Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. You have no income from the canceled debt if it is intended as a gift to you. If you settle this debt as "paid in full" with the creditor make sure you ask that they agree to the settled in full arrangement and not send the remainder as a loss to the IRS. If the creditor willingly accepts "less than" as full payment then make sure they agree not to report remainder -- get it in writing if possible. The creditor can refuse but usually does not.
“Well today I received a 1099 from them. The $5500 was on the 1099-misc, “or what. I was fixing on sending a payment but don't know if I am supposed to pay it or not.”=============>Then, you must report $5.5K on Sch C as your 1099 income; a 1099-MISC form is used to report miscellaneous income to the IRS. This form is used for income earned by an independent contractor but not an EE. For example, if you paid $600 or more to a non-EE or $10 or more in royalties during the year, you must send that person a 1099-MISC showing the total amount you paid for that year. The 1099-MISC Must be submitted to the payee by January 31 of the following year, and it must also be submitted to the IRS by the end of February. So your client will send a copy of 1099/1096 to the IRS and you must report the amount on yur return as your 1099 inocme,OK???



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Old 01-25-2013, 02:25 AM
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Thanks for the reply.



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