Report: #269569

Report: MRC Receivables, Midland Credit

Category: Internal Revenue Service

MRC Receivables, Midland Credit PAYOFF SETTLEMENT TURNS INTO IRS TAXES AND PENATIES RIPOFF San Diego California

...They are allowed to do that.

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MRC Receivables, Midland Credit

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8875 Aero Drive Suite 200
San Diego, California 92123
U.S.A.

Submitted: Wednesday, August 22, 2007

Last posting: Wednesday, August 22, 2007

Somewhere, Other

Finally in 2004 after loosing my job and with high consumer debt, I settled with my creditors by refinancing my home.

One of the companies I owed was Midland Credit. My total debt was $8284.15. Through a local attorney, Midland Credit settled for $5900.00 payment in full.

Now after two years, I have received a notice from the IRS stating that MRC Receivables filed a "Cancellation of Debt" for the exact amount that Midland Credit chose to remove from my account and that I owe taxes and interest for this cancellation of debt.

How is this legal and furthermore how do I defend against the IRS since I must prove that MRC Receivables is in the wrong rather than them proving their right to file the cancelation of debt?

Pissed Off
Somewhere
U.S.A.

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Sorry.....but this is perfectly legal.... John [8/22/2007]
They are allowed to do that. Nikki [8/22/2007]

Submitted: Wednesday, August 22, 2007

Posted: Wednesday, August 22, 2007

John

Louisville
U.S.A.

Sorry.....but this is perfectly legal....

The IRS considers forgiven debt just as if someone gave you a cash gift for the same amount. Yes...this doesn't make sense and it's not fair...but it's the law.

I am surprised that the attorney who helped you with the settlement offer wasn't aware of this basic piece of information.

Submitted: Wednesday, August 22, 2007

Posted: Wednesday, August 22, 2007

Nikki

Coconut Creek
U.S.A.

They are allowed to do that.

Anytime you settle a debt, you must pay taxes on the amount forgiven by the collector. The IRS treats this as income to you (or maybe interest income).

Personally, I don't think it's right. You can't deduct the interest you pay on most of your debts, so how can they make you pay for interest "refunded" to you? By the time it goes to collections, it is usually a portion of the interest that you're forgiven.

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