• Turner's Tax Service
  • Contact Us
  • Directions
  • Recent Tax Updates
  • Fees and Policies
  • Forms

DEBT FORGIVENESS

3/2/2014

0 Comments

 
Tempted to work out a settlement with that credit card company and have some or all of what you owe forgiven?  Be aware - the amount the credit card company writes off will be treated as income and must be reported on your tax return.

When you borrow money it's not a taxable event because it's assumed you will pay the money back.   However, if you don't pay the money back, it then becomes taxable.   For example, if you run up a $15,000 credit card debt, pay back only $5000 and get the lender to write off the $10,000 balance, the $10,000 is considered income because you were able to use the credit card to buy things just as if you had $10,000 in the bank and wrote checks for those things.

Lenders must report the amount of debt they write off to the IRS.  They send you a Form 1099C telling you what they have reported and that amount must be shown on your tax return.  If you had debts forgiven in 2013 those forms arrived in January 2014.

Be sure the 1099C is correct.  Some 1099C's are issued in error, some are issued for the wrong amount and some are duplicative.  

Debt forgiveness isn't always a taxable event.  Certain types of mortgage debt forgiveness is excluded as income and other types of forgiveness can be excluded if you have filed bankruptcy or are insolvent. 
 
An experienced tax professional can help you properly report income from debt forgiveness.  Please contact Turner's Tax Service for assistance.    
0 Comments



Leave a Reply.

     

    Federal and state tax laws and regulations change regularly.  As we become aware of changes, we will post them here and, if you are a client who has provided us with an email address, we will also email them to you.

    Archives

    January 2025
    June 2023
    December 2022
    July 2021
    January 2021
    December 2020
    April 2020
    March 2020
    October 2019
    January 2019
    November 2018
    June 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    July 2017
    May 2017
    April 2017
    January 2016
    June 2015
    May 2015
    July 2014
    March 2014
    December 2013
    November 2013
    October 2013
    September 2013
    February 2013
    January 2013
    August 2012
    January 2012
    June 2011
    August 2010
    January 2010
    September 2009

    Categories

    All

    RSS Feed

Proudly powered by Weebly