1099 statute of limitations

[ALPINAB9]

What is the name of your state (only U.S. law)? Washington

My wife and I purchased a house in 04/2008. In order to get financed we were required to pay an outstanding collection on her credit report from a car repo in late 2001. I do not know the entire amount owed but know the creditor accepted $5000.00 to settle the debt. The money was paid and the house was purchased. Roughly 90 days later we received a letter from the IRS saying we owe them $2000.00 for our 2006 tax return. After doing some research I was told that a 1099 was filed that applied to 2006 tax return and we now owe. We never received a 1099, and if we had we would have paid by April 07. MY question is.... Does the bank have a right to file this 1099 on property repossesed in 2001 and then apply that to my 2006 tax return when the settlement of the debt occured in 2008? My real question is how can I be resposible for this income tax debt in 2008 for 2006, over the bank losses that occured in late 2001? Please help me to understand.

[cosine]

The IRS should be able to identify who filed the 1099. Many possibilities exist. One significant one is that the amount "forgiven" when you settled the $5000 collection debt was reported. What was the difference between the original amount owed and the amount paid? If this is the case, it is a 1099-C.

You need to get a copy of the 1099 from the IRS. Maybe it is some entirely different matter you didn't realize you needed to pay taxes on. Once you have that, with the name of the party that filed it, the form type, the amount, and your research into what it might be for, let us know.

You should post this in the appropriate tax forum on this site.