Can a Debt Collector Report Me to the IRS?

A call from a debt collector is rarely a welcoming one. They are likely calling as a result of several missed payments or to update you on the status of your account. These calls aren’t meant to be intrusive or harassing, but many companies take that route as they’re used to dealing with elusive debtors. Third-party debt collectors can be some of the most aggressive as creditors often hire them and engage in agreements that entitle them to a portion of whatever they recover.

The Fair Debt Collection Practices Acts (FDCPA) protects consumers from debt collection harassment by limiting what debt collectors can say and do; however, debt collectors regularly disregard it. One of the most common debt collection tactics implemented by creditors is the threat of reporting payment delinquency to the Internal Revenue Service (IRS), but is that a legitimate possibility?

The Only Way the IRS Can Get Involved

A debt collector can report you to the IRS but not for the reason you think. Although often used to scare debtors into making a payment, the IRS will only get involved if the debt collector has discharged or forgiven your debt. Some instances that may result in discharged debt include:

  • Filing bankruptcy
  • Home foreclosure
  • Debt renegotiation

As a result, you’ll be sent a 1099-C form as the discharged or forgiven debt is seen as taxable income for Federal tax purposes.

Oftentimes, debt collectors report debt cancellations to the IRS for unsubstantiated debts, disputed debts, and those for which the statute of limitations has expired. It is for these reasons and many others why speaking with a knowledgeable attorney can be beneficial.

Your Rights Under the FDCPA

Creditors and lenders often ignore the rules when pursuing collection, but that does not mean that they do not apply. The FDCPA protects all consumers from invasive debt collection tactics, regardless of how much you owe. Debt collectors are disallowed from:

  • Suing for a time-barred debt
  • Calling multiple times a day
  • Exaggerating the debt amount
  • Failing to disclose their identity
  • Threatening you with jail time
  • Using aggressive language
  • Calling using an automated dialing system
  • And many more restrictions…

If a creditor, lender, or third-party collection agency targeted you or someone you know, be sure to reach out to an experienced attorney. The Florida TCPA and FDCPA lawyers at The Law Offices of Jibrael S. Hindi can evaluate case details and pursue appropriate legal action on your behalf.

Under the FDCPA you are entitled to up to $1000 for harassment by debt collectors, and under the TCPA you are entitled to between $500-$1500 PER CALL OR TEXT!! If we determine that you have a case, there is no cost to you to pursue the claim. Under the FDCPA, the defendant (debt collectors) must pay your attorney fees if they have violated the law. Contact us today at 1-844-JIBRAEL for a free case evaluation.