Settled Debt / Remaining Balance claimed as income

Yes, thats correct. You can time it such that part of it is this year and part of it next year. Roughly $35k you would have to pay another $10k in taxes.

Thanks, I need to save that up as well!!!!!! Now, do I have to claim it if I don't receive a 1099C from the creditor?

I think the creditor is required to send you a 1099c. However, if you are insolvent at the time of the settlement, then you don't have to pay taxes on it.

alias1958 - What does that mean "insolvent at the time of settlement " and how is that defined? I mean how do you prove it when you file taxes that your assetts < liabilities. Does your assets include your paycheck?

Thanks

The IRS considers a forgiven debt of $600 dollars or more to be considered taxable income. However the IRS has a form (Form 982)
available for certain hardship situations that may exempt you from this tax. I would contact a local tax advisor and see if you would qualify.

To get a better idea of the laws, you can go to irs.gov and look at publication 4681. There is a section in there that discusses insolvency.

I haven't ever done it myself, so I can't really give you exact answers. Good luck!

you will get a 1099c. make sure you read all the info in the publication 4681. We about missed some important info. one other thing is that you can call irs (this number is usual found in tax booklets) and they can help. All we had to do was write a paper telling of all assets and liabilities. at this time everything went okay but i would call them first.

You mean.......if you have a debt over a certain amount, and you pay it off with a CA, etc., then you CAN claim it on your taxes, as paying it off? It's the CA's responsibilty to sen you the paperwork? I never knew that. Did I get that 'assumtion' correct?

There are ways to avoid the taxes, consult with a CPA, or a more qualified debt settlement professional.

IRS form 982 if I am not mistaken allows to help avoid 1099C pitfalls IF you receive one.

Call with questions or debt help. I have 10+yrs experience as a collections manager buying and selling charged off debt. Now I use my knowledge to help people with debt settlement and other solutions.

Best of Luck.

Cyrus Robinson
FH Financial Service
phone#removed soliciting prohibited paulmergel

Please tell me something, CYRUS. You said you buy and sell debts. When you sell debts, do YOU make a profit doing this? Why DO CA's sell debts..or buy them, for that matter? debt settlement?...can you give me some advice?!

nah chargers,he's just trying to drum up business.

SDchargers, you can't claim a paid debt as an expense on your tax return. However, if you settle a debt for less than the amount owed, the CA is supposed to send a 1099c form to you (if the "forgiven" amount exceeds $600). Then you have to claim that forgiven amount as income on your tax return, unless you are insolvent at the time.

Ok..I believe I understand this now. Just when I fell like I'm 'ahead' of the game, something 'new' pops up. LOL SOO much to learn about debt, taxes, etc. Gosh..I don't think my brain can take all of this. LOL

Mobile is right. Go straight to the IRS website and download Form 982. There's a good chance you'll be excempt from you tax liability. Also talk to your tax advisor.

I did a little reseach on insolvency and the tax after you get a 1099C.
1. You should get a 1099C from your creditor
2. Once you get that determine whether you are insolvent.

I did a little reseach on insolvency and the tax after you get a 1099C.
1. You should get a 1099C from your creditor
2. Once you get that determine whether you are insolvent.
If your cancelled debt is less that your assets then you are nsolvent. But if your cancelled debt is $10000 and you have $6000 in assets then you are $4000 insolvent and you can only deduct $4000 from your gross income when you file your taxes.

One thing I did not get an answer for is if I have zero assets but my I get a job with salary is $100000/yr after my debt was settled for $60000 is my in solvency $60000 ? or..... ?

A good document is publication 908 on IRS website.

Thanks

That's a good, clear definition. Thanks. I appriciate it. Makes sense. Not to be ignorant, but, I never knew something like 'that' existed. Wow!!

Virtual, your salary does not come into play with the IRS when the debt is settled.

My husband went through this re: a debt that was charged off before we were married and the Company sent the 1099 to his ex-wife who did NOT forward it to him.

Basically he had to send a list of assets and liabilities to prove "insolvency" - AT THE TIME OF THE CHARGE-OFF. Basically that his liabilities were more than his assets. Assets include real estate, vehicles, jewelry, etc. and Liabilities are mortgages, car loans and credit card debt. Even though we owned a house when he received the IRS notice (2007), he had NOTHING when the debt was charged off and the 1099 sent (2003). The IRS forgave the debt and he did NOT have to claim for taxes.

FOR ALL OUT HERE CONCERNING CHARGE OFFS: The IRS informed us that they have come down hard on companies requiring them to send 1099(c)'s to those whose debts are charged off. In the past most credit card companies just let charged off debt go since they ususally sell off to collection agencies. Now alot of them are sending a 1099 if you settle or don't pay at all. A 1009c used to be a rarity and is now becoming more commonplace.