Settled a debt? You may have to count it as income
Have you recently settled on a credit card debt?
Debt collectors and creditors who agree to accept at least $600 less than the original balance are required by law to file a 1099-c form with the IRS. Tax payers have to report the “income” on their federal income tax returns. While consumers may say “but they never told me,” the collectors and creditors will say they are not lawyers or accountants and that is not their job to notify you of tax ramifications.
One good note is that a small percentage of the taxpayers who receive a 1099-c may qualify for one of several exclusions that will allow them to reduce the amount of taxable income from the settled debts. Homeowners who default on mortgage loans may also receive a 1099-c form. Make sure you consult an attorney and tax advisor/accountant before you go into a settlement or cancellation agreement. Make sure you open all your mail and if you don’t know what something is, call and ask. This is one piece of paper you do not want to throw away.
For more credit help or to see if you qualify for a home please contact us at http://UtahCreditCoach.com
