This might be a stupid question but.......

if the amount is over 600.00 that is considered income for the next calender year.thus it is taxable.

I have heard the same thing. If you settle an credit card debt lower than the owed amont. Then the remaining amount is reported on your taxes at the end of the year. I do not know if there is a minimum or maximum amount regulating this, but I would like to know the written policy or laws governing this rumor :?

Oh Thanks Paul :wink:

Quote:

It is true, bum deal. I don't understand how the heck that is income!!

I settled on a couple of mine last year. The amount that I saved was under $600 and I didn't get the form for my taxes. On my CR it says that it was settled for less. So they knew it was paid and if they didn't send it to me, too bad for them. I was watching for it because I knew that I would have to claim it as income.

So if you settle for less then just watch the mail for the form to use on your taxes, if you don't get the form then you shouldn't have to claim it. Because the CC company has to report it also. So when they send the form to the IRS they send one out to you also.

Most people who choose a debt settlement solution are NOT liable for taxes on the forgiven debt.The IRS gives an out for debtors who are ???insolvent??? at the time of debt settlement. ???Insolvent??? simply means that your debts exceed the value of your assets. If you are in a hardship situation where a debt settlement is necessary, you are probably insolvent. In other words, you would have a negative net worth where your liabilities outweigh your assets. There is an IRS Form 982 you would need to fill out. I suggest you speak with a tax expert to ensure that you are doing things properly and correctly so that you won???t have to worry about the IRS coming back in 5 years to do an audit on you because of a simple clerical error or something.

Thank you Mobile, I feel a tad better now. :?

Mobile is exactly right about IRS Form 982; but even if you're deemed not insolvent, the savings you save from the settled amount and from future interest payments, far exceeds the taxable income amount.

Here is a thread that discussed insolvency and the 1099 in great detail.
The Truth About Being Insolvent.

And it's not a stupid question at all, it's a very good one.