I just recently made a final settlement payment in full to my credit card company.?
I received a letter stating that they had forgiven and had to issue me a 1099-C Form. I don’t completely understand it but am willing to try to understand!
does this mean i will owe alot at income tax time?
When you settled your debt, the company wrote off the rest of amount settled for. Because they are writing this amount off, the IRS requires you to pay taxes on it. This is still going to be less than the amount you settled for.
For example:
If your Credit Card debt was $10,000 and you settled for $6,000 you will receive a 1099-C for the remaining $4,000. This $4,000 must be reported on your taxes as unearned income.
Depending on your bracket would determine the tax you pay. If your tax bracket is 10% you would pay $400 in taxes, but if your tax bracket is 28% you would owe $1,120 in taxes.
Remember the above is just an example, plug in your numbers to find out how much you would owe. If you have last years taxes you can use that as a guide for your tax bracket if you have not had a major change in income this year.
Credit Card Debt Settlement
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