Staggering Settlements and 1099
Date: Tue, 02/23/2010 - 11:27
I tried to search through but didn't notice any threads that addressed this issue. When does the creditor send a 1099 to the IRS? After your last settlement payment and the account is completely considered settled and closed or after settlement agreement (which doesn't make much sense)?
The reason I ask is because I am already stretched thin trying to gather funds to settle multiple cards. Doing quick estimate, if I manage to settle all my debts this year, then I will get another hit next year during tax season with a whole bunch of 1099s at the same time. If I manage to get creditor to agree to stretch my last payment out to next year (2011), will the amount of forgiven debt show up for 2010 or 2011 taxes?
For example:
Total forgiven debt $8,000 - settlement agreement signed April 2010
Last Payment of $200 will be paid in Jan. 2011
Will 1099 for $8K be sent out Jan 2012 and taxes due in 2012?
The reason I ask is because I am already stretched thin trying to gather funds to settle multiple cards. Doing quick estimate, if I manage to settle all my debts this year, then I will get another hit next year during tax season with a whole bunch of 1099s at the same time. If I manage to get creditor to agree to stretch my last payment out to next year (2011), will the amount of forgiven debt show up for 2010 or 2011 taxes?
For example:
Total forgiven debt $8,000 - settlement agreement signed April 2010
Last Payment of $200 will be paid in Jan. 2011
Will 1099 for $8K be sent out Jan 2012 and taxes due in 2012?
The account will not be officially settled until 2011 so you won
The account will not be officially settled until 2011 so you wont get your 1099 until january 2012, due that year for 2011 tax return.
Thanks Soaplady - this puts interesting spin on staggering settl
Thanks Soaplady - this puts interesting spin on staggering settlements. So far I have only been able to successfully negotiate one card but not sure how to work out the payment plan for the others. It seems the most favorable settlements come at 150 days in lump sum or less than 4 payments. If I had known any better I would have began to strategically stagger settlement to later into the year (more cash on both ends).