Are credit card debt settlements taxable ?
May 20, 2010 by admin
Filed under Debt Settlements
i settled my credit card ,i heard i gotta pay taxes,im student never worked and filed taxes before,dont have any assets,live with my parents
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If they forgave part or all of your debt, it is taxable. But if you don’t have income, that may not be large enough for you to have to file taxes. Check on irs.gov site.
Possibly – it depends on whether the credit card companies report the settlement to the IRS. You will know if you get a 1099 come tax time. The IRS looks at written off debt as income (you were supposed to pay and you didn’t, so that is that much less money out of pocket, the same as having more money in pocket).
If you receive a 1099-C for more than $900, it’s taxable. In the case of credit cards, you might get this form up to 7 years from now. You report the income in the year that you get this form.
See publication 4681 for an explanation on how to claim insolvency which allows you to exclude the income.
PS, what foolish company loaned you money and thought it would be paid back?
It you will receive a Form 1099 at the beginning of next year, and you need to report it on your income tax. If your parents claim you then they need to report it on their tax return.
Why would you get a CC if you didn’t work, then it means you lied on your application, not a good start with credit.