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Declaring insolvency

2K views 5 replies 6 participants last post by  NikoSan999 
#1 ·
last year we settled one of our debts for more than 600 less than it was worth. It's my understanding that any debt settled for over $600 can be counted as income and should be reflected as such on your tax returns - unless you can declare insolvency.

Has anyone ever been through this? Is this something we can do on our own or should we see an accountant? I did some cursory googling, and it appears pretty cut and dry, but I don't want to mess around with the IRS.

Thanks in advance for any thoughts.
 
#3 ·
It helped me laugh, does that count? That was GREAT, I could just hear his voice in my head as I read it.

I would not mess with the IRS, maybe can ask at the free tax preparing places? Our library has free tax preparing assistance during tax time. Some people come in and help others fill out their forms. Maybe call H&R block? Our H&R block is super nice and helpful.
 
#5 ·
My dh did this a few years ago and correct about the 600 and counted as income. Who ever you settled with should send you the info in the mail for your taxes. If they haven't I would contact them.
 
#6 ·
Correct. We did this with Chase on a card last year. It is claimed as income BUT you do not pay the written off amount. You pay only the taxes in the tax brackett on the amount. Say $1000 was "written off". You would pay YOUR tax brackett of taxes owed on the $1000.

They should send you a 1099C ( C stands for cancellation of debt ). If they haven't then call them and ask if they are going to. They have until April to do so. Otherwise you will be filing an amendment. April is not fair but they have that right to hold up the works. Been there and done that.

Unless it is a huge amount you are going to owe or get back quite honestly I would just pay it and NOT call attention to myself. This is the IRS. Red Flag and all that crap. Do you want an audit? Do you want to take the chance?
 
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