My husband and I were in a debt settlement program. I am wondering if we'll have to claim this on our taxes? I know we'll have to claim it, but will we have to pay? This is what our debt program states on their website and what we were told by them:
Creditors are required to report canceled debts exceeding $600 to the IRS and you are supposed to report the same as income on your annual tax return. However, the IRS permits you to write off any “income” from canceled debts up to the amount by which you were “Insolvent” at the time. Therefore, unless you have a positive net worth, then you ordinarily will not be obligated to pay taxes on the forgiven amounts. Additionally, if you do not qualify as insolvent non principal amounts such as fees accumulated on the account may be deducted from the amount reported.
We've never had to pay but always received money back. Will this deduct from the money we should receive?
2007-01-22 09:40:07 · 3 answers · asked by amber 1 in Business & Finance ➔ Taxes ➔ United States
I couldn't find the form mentioned in the first answer. Page 21 of the linked IRS Publication appears to address the issue.
2007-01-22 11:22:21 · answer #1 · answered by STEVEN F 7 · 0⤊ 0⤋
Income from Debt Cancellation goes on Line 21 of the return.
It will reduce your refund.
You do not have to claim it as income if you were insolvent at the time. Insolvent means your debts exceeded your assets and the IRS has a form for that though I can not remember the form number.
2007-01-22 17:52:27 · answer #2 · answered by Wayne Z 7 · 0⤊ 0⤋
check out this site, it let's you shop for different debt elimination offers and select one that suits you perfectly!
2007-01-22 19:46:16 · answer #3 · answered by little L 1 · 0⤊ 1⤋