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Debt Relief – Insolvency – Bankruptcy Information » Insolvency » i settled my credit card debt this year and i am trying to figure out if i need to include it on my taxes.?

i settled my credit card debt this year and i am trying to figure out if i need to include it on my taxes.?

i am unsure if my debts are Insolvency as you call it. i settled my cards for 20,0000 and i make 26,000 but the orginal debt was up to 30,000. please advise

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4 Responses to "i settled my credit card debt this year and i am trying to figure out if i need to include it on my taxes.?"

  1. Wayne Z says:
    Maybe.

    The difference between what you owed and what you paid is called “Forgiveness of Debt” and it is considered income for tax purposes.

    There is an exception if you were insolvent immediately preceding the forgiveness. You basically add up everyone you own and subtract everything you owe. If this number is negative, you are considered insolvent. The forgiveness of debt is not taxable up to the point of insolvency.

    This is not something you want to try on your own. See a tax professional.

  2. thylawyer says:
    Settlement of a disputed amount would not lead to the unpaid amount being income. If it is income, the credit card company will send you and the IRS a 1099A or similar form. The only way to avoid that is to file bankruptcy.
  3. Doctor Deth says:
    you’ll have to wait and see if they send you a 1099/1098 for tge debt forgiveness – that may not come until teh end of February, so don;t file your return too soon and expect to owe $1000-1500 tax (minus any refund you are expecting) if you get whacked with that 10,000 of extra “income”
  4. CatDad says:
    Sit tight and don’t stir up trouble for yourself….As the poster above states, wait and see if they’re going to issue 1099C forms for debt forgiveness. They’ll mail you the forms if they do. Not all collection agencies will do this….Don’t try to calculate the amount yourself because if you do you’ll probably get the amount incorrect…

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