I'm wondering how this works? For instance, if you owe $2000, and the creditor settles for $1000, does the government consider the unpaid $1000 as income which you must pay taxes on?
2006-09-02 11:04:18 · 6 answers · asked by Anonymous in Business & Finance ➔ Credit
Yes.
Generally the creditor will send you a tax form for the unpaid amount.
2006-09-02 11:11:23 · answer #1 · answered by echo 7 · 0⤊ 0⤋
Any debt that is settled at a discount of $600 or more, must be reported to the IRS as income. The creditor will send you a 1099 if this is the case.
2006-09-03 00:20:14 · answer #2 · answered by Celeste 6 · 0⤊ 0⤋
Depends on whether the creditor issues you a 1099 form at the end of the year and reports your "discount" as income to the Internal Revenue Service.
Perhaps you should ask the creditor their intentions. . .
2006-09-02 18:20:01 · answer #3 · answered by DaMan 5 · 1⤊ 0⤋
Yes, you pay taxes on the amount of 'forgiven' debt. The IRS considers it as income to you. Be sure to declare it because the creditor certainly will declare it in order to get a tax break on the "bad debt." Still, the tax bite is much less than repaying the full debt.
2006-09-02 18:15:11 · answer #4 · answered by not the real me 4 · 1⤊ 0⤋
I used to be a collector for a bank. Yes, it is considered income and will be reported as such to the government. Sorry
2006-09-02 20:35:30 · answer #5 · answered by sadie13 1 · 1⤊ 1⤋
Speak to your tax advicer.
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2006-09-02 19:32:34 · answer #6 · answered by Anonymous · 1⤊ 0⤋