Automobile Repossession 1099-C, California

In California after your car or truck was sold, the finance company charged you a deficiency on the balance of the contract. They also reported the deficiency to the Credit Reporting Agencies. To be entitled to a deficiency, they must send a proper Notice. Years later, when they cancel that deficiency or debt, they may notify the IRS of the cancellation and it gets reported as “income” to you. If the notice they sent you after the repossession was defective, then you never owed the deficiency and there was no debt to cancel. There should have been no report of "income" to the IRS, because you never owed it. 

If you have received a 1099 from the lender/finance company on an old repossession, or a CP 2000 from the IRS charging you additional taxes on the cancelled debt, please contact us. It may be that you never owed the debt and are being charged taxes on a debt that was invalid from the start.

The finance company is not entitled to a deficiency unless they sent you a proper Notice under California law. That Notice is often called a “Notice of Intent to Dispose of Vehicle” or a “Notice of Our Plan to Sell Property”. However, if the Notice is defective, you never owed the money, and reporting it to the IRS is potentially an unfair or deceptive act or practice.

In many if not most cases it is years later and the consumer no longer has paperwork. That is OK and you should contact us anyway with whatever you received from the finance company or the IRS. However, if you have documents, we would like to see them if available. They are:

1. The 1099 and/or correspondence from the IRS.
2. Your original Purchase Contract.
3. The Notice of Intent to Dispose of Vehicle or Notice of Our Plan to Sell Property sent by the finance company immediately after the repossession.
4. Any letters to or from the finance company.
5. Any letters to or from the debt collection companies the finance company hired.
6. Account statements.

Even if you do not have all of your documents give us a call. 858/270-7000