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Debt Settelment and taxes


jim6350
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Im Thinking about debt settlement,but need more info on end of year taxe's.What is the tax rate,and is it state and fed. And is there a straight shooting debt settlement company out there.Looking for less years in getting out of debt,and never using credit cards again. Thanks.

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There are no straight shooting debt fixers....that's an oxymoron. They get paid to make you believe that what they're doing is in your own best interest. Ain't gonna happen.

As for taxes, when you "settle" with a creditor, they are required by the IRS to send you a 1099c for the portion of the debt that is "forgiven". If they include penalty and interest in the total, its supposed to be listed separately.

You then list that amount on your 1040 next year as "income" and its subject to all the normal adjustments that the IRS puts us through every year. You pay taxes on your "adjusted gross income"...at whatever rate is appropriate for your bracket. State and local taxes are another matter. Each taxing authority gets to screw with it themselves...(some base their taxable income on the federal AGI, others don't).

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