Posted on
March 11, 2010
at
3:15 am
Government taxes and forgiven debt?
Posted on
March 11, 2010
at
3:19 am
Government taxes and forgiven debt?-- is forgiven debt (debt settlement)taxable? The answer is yes. The consumer must report the forgiven debtas income in his/her return.
Posted on
March 11, 2010
at
3:23 am
Creditors and debt collectors who agreed to forgive $600 less than the original balance are required by the IRS to report that as an income - and to send the consumer a form called 1099-C (cancellation of debt notice).
Posted on
March 11, 2010
at
3:24 am
Why do I hear people getting surprised by this? Or facing what theycall a surprise tax problem, if they are being sent a notice anyway?
Posted on
March 11, 2010
at
3:28 am
I don't know. I guess they weren't aware that forgiven debt is taxable.Perhaps they weren't properly oriented by their settlement company.Perhaps they thought once they're done with the debt, any communication,with the agency or collector must cease, and so when they receive a notice containingthat form - they set it aside or throw it away - not beating the filing deadline.Who knows for sure - but failure to file puts them at risk for IRS audits, penalties and fines.
Posted on
March 11, 2010
at
3:32 am
Agreed - that's why it's important to choose the right settlement company.A good settlement company would orient the consumer not just aboutthe debt and the creditor/collector but also give warnings/ advice with regardsto reports (tax, credit, public report, etc.) A good settlement company alsooffers a money back guarantee if their program did not, after a time, is not producingpositive results. Speaking of which - destroydebt.com offers a free initial debtconsultation, just fill out a form! It's free of charge.
Posted on
March 11, 2010
at
3:34 am
Speaking of what to look for in a settlement company -- -The settlement company's program must have a fast completion time. 12-36 months./-The program must be able to protect and improve the consumer's credit standing./-Must be a member of the Better Business Bureau, BBB, for at least 5 years./-Must also have a good standing with the Chamber of Commerce/-A Member of TASC - The Association Of Settlement Companies and the IAPDA or theInternational Association of Professional Debt Arbitrators
