taxes when you get credit card debt negotiated down?
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Laura P wants to know:
Do you have to pay taxes for debt you got wiped out with debt negotiation?
i read that if you saved more than $800, or something like that, with debt negotiation, that it gets reported to the IRS and youre liable for paying taxes on it. is this true? if it is, whats the benefit, then, of doing the negotiation if youre going to have to pay 30%, or so, on taxes? i dont get it…
Do you have to pay taxes for debt you got wiped out with debt negotiation?
i read that if you saved more than $800, or something like that, with debt negotiation, that it gets reported to the IRS and youre liable for paying taxes on it. is this true? if it is, whats the benefit, then, of doing the negotiation if youre going to have to pay 30%, or so, on taxes? i dont get it…
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Yes. I believe the amount is $600 not $800 though.
When $600 is “forgiven” on a debt – that means you basically got $600. Therefore you are send a 1099 tax form that you will have to acknowledge along with your W-2 come tax time.
Might want to factor your tax bracket % in when negotating a debt settlement.
BUT – if you saved $600 – and your tax bracket is 20% — you’ll realize paying approximately $120 on that $600 —- you still saved $480.
Make sense?
I had a tax attorney look at over 15k in forgiven debt after my debt settlement company recommended him. He was very pleasant and because my expenses exceeded my income, I was declared insolvent at the time of forgiveness up to the forgiven amount because my liabilities were so high. I would recommend consulting a tax advisor in this manner. Or you can call Mark at the reference below-my old settlement company manager-and maybe he can tell you what to look out for.
Good luck.
Be
Check out some of the articles at
Specifically the categories ‘Debt Consolidation’ and ‘Debt Relief’. Taxes might be of interest to you too. I’m not sure if it will help but there’s a load of good advice there.