Have you received an IRS 1099-C Canceled Debt statement? Does the 1099-C show a creditor has canceled your debt in 2015? The creditor reported this to the IRS but that does not necessarily mean you must report this on your federal income tax return. Not all 1099-C is reportable income. You need guidance and advice.
Your creditor likely gave you warning at the time the debt was settled that you may have a tax impact. The letter you received said this may be taxable; it told you to consult your tax adviser. YOU NEED TO KNOW that Canceled Debt and the 1099-C is a very tricky area and it is often times possible you will not have to report it as taxable income.
Getting the best possible Debt Settlement is difficult. Giving up your hard to come by cash is difficult. You owe it to yourself to be assured that you should not have to pay tax on this forgiven debt; paying tax is rubbing salt in the wound of your difficult financial situation. The tax man wants what is his but he will not hound you for forgiven debt if you follow the rules.
As to canceled debt, factors that come into play are recourse and non-recourse debt, is the debt credit card debt or does it have to do with your mortgage(s) and HAMP or other modification programs? What does the coded entry in box 6 say? That has a huge impact. Did the debt get canceled because of a bankruptcy? You definitely do not need to pay any tax on debt from a bankruptcy but there is a form you need to attach to your tax return explaining what has happened.
There are exceptions and there are exclusions to IRS 1099-C canceled debt that minimize or eliminate the payment of tax on canceled debt. Paying tax on $5,000.00, 10,000.00 or even more canceled debt from debt settlements, repossessions, abandonment of property or mortgage modifications can have a tremendous impact on your financial recovery and well being.
Our office does debt settlement, mortgage modifications, bankruptcy, chapter 7, chapter 13, chapter 11. You do not want to loose the benefit of your efforts by paying the wrong amount of tax. We are available to help you either before debt settlement or now if you have already received the 1099-C canceled debt from Chase, Bank of America, Citi, Wells Fargo, FIA Card Services or any other credit card company, debt settlement agent, debt buyer or mortgage company. Make an appointment. Be sure to bring in your 1099-C and all of your other debt settlement letters and documents. 215-822-2728.