If you receive a 1099 for cancelled debt, you might not have to pay taxes
Date: Thu, 07/29/2010 - 19:16
I've seen alot of posts here about receiving a 1099-c once you settle with a creditor.
For example, if you settle a $30,000 debt for $10,000, the creditor will send you a 1099-c for $20,000 that essentially makes that $20,000 taxable income.
BUT there is an exception! If you are insolvent (debts outweigh your assets), you don't have to pay taxes on cancelled debt.
I'm not a CPA, so you should consult one for your individual situation. Also read:
http://www.irs.gov/pub/irs-pdf/f982.pdf
Good luck.
For example, if you settle a $30,000 debt for $10,000, the creditor will send you a 1099-c for $20,000 that essentially makes that $20,000 taxable income.
BUT there is an exception! If you are insolvent (debts outweigh your assets), you don't have to pay taxes on cancelled debt.
I'm not a CPA, so you should consult one for your individual situation. Also read:
http://www.irs.gov/pub/irs-pdf/f982.pdf
Good luck.
P.S. Most CPA's usually only charge around $500 or less to do y
P.S. Most CPA's usually only charge around $500 or less to do your taxes, so if you have a lot of cancelled debt that's money wells spent.
