Do you owe IRS on the settled debt amount?
Date: Mon, 05/31/2010 - 23:09
I am trying to settle some of my bills with my creditors. However, I was told by a friend that I would owe to the IRS for the amount saved in the settlement. Is it so? I am already broke and can't afford to owe taxes. I am trying hard to save as much as possible on my credit card bills so that I can pay down my student loan. If I am being taxed by IRS, I wouldn't be able to pay my other loans. Any suggestions.
You will get 1099'd for the forgiven debt. However, if you are
You will get 1099'd for the forgiven debt. However, if you are insolvent, basically meaning that your liabilities exceed you assets, the amount is not included in your income, hence no tax. For once there is an advantage to being upside down on your home. Consult irs publications for more info, I think its a 982 form...
