Important Updates
2/10/2009 - Update on A Current Technology
2/10/2009 - Update on A Current Technology
As always, Winston Shrout Solutions In Commerce is committed to creating more knowledgeable, aware and confident students. With this in mind, we have been carefully monitoring recent activity related to the 1099 OID technology. We want to keep everyone updated on the current climate as we see it and relate to you Winston’s viewpoint on the subject of 1099.
Recently, there has been a lot of interest and activity regarding the 1099 OID (Original Issue Discount) process. Over the past year its use has grown dramatically and many people have opted to use the process. Some people have used the ZYA (Zero Your Account) approach; others have used the more in-the-box ABC method – using the IRS’s own forms and instructions; while still others have put together their own hybrid 1099 process. Based on feedback we’ve received from many people, results have been mixed at best. Without going into the merits or potential problems inherent in the different approaches people have used, it’s safe to say that there have been both successes and failures.
What’s going on?
Those who truly understand the 1099 OID process believe this: While the 1099 OID process is absolutely valid and correct – when used appropriately – the process is beginning to push up against the existing system, the status quo…and the system enforcers are pushing back. Why is the IRS pushing back? Because widespread use of the 1099 process would force the existing debt-based system to change…rapidly and radically. They have the time, the resources, and most importantly, the motivation to push back. They push back…because they can.
So what does that mean? Here’s what Winston has to say:
“The goal of Solutions In Commerce has always been to present materials for study so that people can become better informed about the potential solutions to problems they encounter in the vast world of commerce. We have tried to present as many concepts (tools) as possible, both public and private, so that people can thoroughly understand, then choose which tools, if any, they might apply to their particular situation. One such remedy, or tool, that has been referred to, is the use of the IRS form 1099 OID. This is a complex technology that can be used in many ways. It is a potential remedy for the recovery of interest to principal utilizing the IRS form 1040. The OID identifies the asset and the 1040 is used to return the interest to principal. When you choose to utilize the 1099 OID process, you are entering into an express contract with the IRS (signed under pains and penalties) to act as a collection agency…for you. Unfortunately, many who hire the collection agency (IRS) are not carefully reading their contracts, any more than they considered the original contract that created the need to collect. Using the IRS is a benefit privilege and carries a certain amount of risk to the party who is asking for the benefit.
As I have stated many times, the use of any tool has inherent dangers associated with its use. However, before any complex tool can be successfully used to solve a problem, a great deal of knowledge must be acquired and become part of a person’s thinking. Unfortunately, it seems that many people are unwilling or unable to do this. Instead, they rush into filling out forms and filing them without sufficient study or understanding. Many are operating as if the 1099 OID process is some sort of get-rich-quick scheme or silver bullet. I can assure you it is not. If you can’t stand in front of the IRS with absolute confidence to defend and explain your actions, do not use the 1099 OID process. Without substantial knowledge on your part, your chances of winning are severely reduced when dealing with anyone who has a much greater amount of knowledge.
With the OID technology there have been winners and losers. I recently had the opportunity to visit with a man who had, in my experience, more knowledge in 1099 OID technology than anyone I have met. Not only had he read and re-read the IRS publications, and studied and re-studied the material, but he had invested many hours of actually going to the IRS offices and developing a one-on-one relationship with the officers there. Where there were questions regarding the printed materials, he was able to get answers by direct contact, and in some instances he had to go higher up the chain of command for answers, as the local agents simply did not know. He is a winner, and is raising the bar to accomplish new things … one in a thousand.
Can we prevent people from using the 1099 OID? Of course not. But we can tell people the truth and encourage them to study and thoroughly understand the foundational material…before they venture into challenging and complex situations. I want to strongly emphasize that the 1099 OID process is just a very small piece of the vast amount of commercial knowledge that is available. Don’t get sidetracked by something that sounds like it’s the answer to everything. There is no such thing. Stay focused on becoming a student of commerce and reach the point where you can stand on your own two feet in any situation, confident in your own knowledge and understanding. Sometimes, what appears to be a shortcut to a solution…is not a shortcut at all.
Over the past year, Solutions In Commerce has addressed the 1099 OID process simply because so many people were asking for it. We have tried to assist people in thoroughly understanding the process while at the same time stressing the potential problems involved. It appears that many people have gone forward without doing their homework. While the 1099 OID process is certainly interesting, it only represents a small piece of a much bigger educational picture. Unfortunately, it has distracted people from staying focused on thoroughly understanding the core education upon which the 1099 OID process is based. We need to refocus on the foundational material that can provide a lifetime of knowledgeable decisions and actions rather than on something that offers what appears to be a quick and simple solution to a complex problem.
In support of our friends and students, and in order to prevent as many potential problems as possible, WSSIC will no longer be offering the 1099 OID DVD. Too many people are moving forward too quickly without an adequate foundation. We will continue to provide updates regarding the 1099 OID, but at the same time we strongly recommend that our friends and students do not go forward with the process until they are absolutely confident and secure in what they are doing…and can confidently defend and explain their actions without hesitation.”
-Winston Shrout
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