I was thinking of starting to hand out 1099's like candy to my deadbeat tenants or people who left owing me any dollar amount. When it costs $12 for it, why not? I'm going to be coming up with a clause on my lease stating the large fee for sending their file to collections because in reality if they end up owing me 2,000 or something less they will only get taxed on their income bracket which will not be that much at all, I'm sure they don't know that though. Does anybody else do this on often?

To be honest, from the help through from you guys and Mr. LL I am getting better with turn overs and people skipping out, but they do slip through the cracks still.

I should send a 1099 to the glass company who lost my shower door and won't give my deposit back.

I wouldn't. If they have no money, they have no money ... the threat of a 1099, which most of them don't even know what it is, is not going tomake them to cough up the cash. what it will do is stop you from collecting down the road if they need to clear their credit.

Actually, you are giving them a good "out". They owe you $2,000. You 1099 them and if they're in the 10% bracket it will only cost them $200 - a lot better than $2000. Maybe they're rolling in the dough and just won't pay you ... because. they're in the 39% bracket. It will cost them $780 - again, a lot cheaper than $2000.

I agree with Nicole. They may not even notice the reduction in their refund. The average refund this year is $3k and I know many in my tenant pool receive more than that. That $200 the government gets from your debt cancellation is less than they are paying to have the forms filled out for them.

If you hang on to a judgment, even without pursuing collections, there is a chance you will get a payoff at some point when the deadbeat needs to clear up their credit. Maybe they got financially smart and saved up to buy their own home, but have to pay you off to qualify for the mortgage. Or maybe they are inheriting a house, but the title cannot transfer to them until they clear up the judgment.

V,

Now its coming back to me... I think it was your post a while back that said you did that before. That sounds good and all but whats the process?

Go to the secretary of state, find out their vin # then put a lien on title? I'm know my way with the court system garnishing wages(if I know where they work), I refuse to get a tenant in court to do a discovery of assets. So the part on taking cars or boats away from people has me thinking...

When this came up before, I did some research on it. Here is what I posted in January of 2013 related to this question as far as whether or not LLs are ALLOWED to file a 1099-C even though financial institutions are REQUIRED to do it:

I have seen repeated confusion on that -- even from Marv here (who tends to know his stuff). MY understanding is that the confusion comes from the difference between those that are REQUIRED to report using the 1099-C and those that are ALLOWED to report using it. Basically, those REQUIRED to file a 1099-C for forgiving debt include:

"financial institutions, credit unions, and organizations whose significant trade or business is the lending of money"

Again, that is a list of who MUST use the form. Therefore, a lot of people seem to think "Ok, Landlords are not on that list, so they CANNOT use the form." Back in 2010, Marv stated that it could "only be used by banks." However, I disagree with that -- and I'm fairly certain the IRS does too.

See this IRS memo:

www.irs.gov/pub/irs-wd/1998-020.pdf

The question basically asked was: "May an individual or entity not REQUIRED to file a Form 1099-C under section 6050P of the Internal Revenue Code nevertheless voluntarily file such a form?"

The summary answer:

"Individuals or entities not required by section 6050P to file Form 1099-C may nevertheless voluntarily file such forms in appropriate circumstances."

It also states: "While the requirement to report discharges of indebtedness applies only to the entities described above, there is no specific prohibition in the Internal Revenue Code or the Income Tax Regulations that forbids the reporting of discharges of indebtedness by entities not required to report. Such reporting may encourage voluntary tax compliance and proper gross income inclusions."

You can read the whole thing for more details, but my general understanding of it is that we can indeed file 1099-C forms for forgiving debt. These articles agree with my interpretation:

dinesentax.com/2537/issue-a-1099-c-to-a-deadbeat-client-or-customer

www.aicpa.org/publications/taxadviser/2012/december/pages/clinic-story-11.aspx

So, I think we're fully allowed to issue a 1099-C.

- John...

P.S. I am not a lawyer or tax advisor. Your mileage may vary. Look both ways before crossing.

Indeed -- people need to realize that this is a "only thing left and I'm giving up on EVER collecting anything" situation.

That's why I don't do it. I'd rather leave the debt on them. There is always the chance that I'll get to collect either due to a credit issue or they actually get a job and I can garnish.

- John...

I try to get the title before eviction begins, I post 3day then when they call - hey that 17ft bowrider is worth the rent owed - lets go do the title change sat morning and I will not file monday morning but if you are out in that week - dont test my patience - you will fail.

I come take the boat out sat after the title is changed leaving them more room to move out, park it at the next fixing house. Then if no mountain of garbage on trash day post a new 3day and then watch the excitement - honey Mr V was not kidding we are gonna get evicted next week! Suddenly the gas pedal is down and the lawn is getting broken things.

Dan: You miss the point. Those that send 1099s in these situations don't do it because of the money. They do it to try to get them into trouble. Tenants don't know what to do with stuff like that. They ignore it. It never gets reported, but the IRS gets their copy, of course.

It's something LLs do to people to hope that they get audited and such. It's just a last-ditch effort to get a little revenge, I think.

As I said, I don't do it. Not my think. Just explaining where that comes from.

- John...