Image via Wikipedia

Gone through debt settlement? Did you include it on your income tax return?

If you went through debt settlement, you need to make sure you receive your 1099-c for it. If you don't include it on your tax return and you should have you could be looking for trouble.

Don't count on the debt settlement company to get this to you. You need to ask for it if you don't have it. Read on to learn more. And don't forget to talk to your tax professional to verify whether you do or do not need this on your tax return.

Stay on top of things. Your friends at No More Mortgage

Settled debt overlooked as income source on tax forms

Tax advisers are warning that many Americans could be at risk for audits or other penalties, simply for overlooking settled debt as income.

Tax advisers worry that people might overlook 1099-C forms or "cancellation of debt" tax notices. Persons who reached a settlement with lenders in 2009 for credit card, mortgage or auto loan debt receive this form to file with their taxes as a source of income.

Since it isn't the IRS, but debt collectors and creditors that issue 1099-C forms by the mail, many accidentally throw it out.

"Depending on the amount of debt forgiven, the taxpayer's income level, deductions and other factors, the consumer could face a sizable tax bill come April 15. Few consumers are aware of the tax implications of settling to pay a lesser amount than they owe in credit card debt, and never expected their debt settlement would be considered income," says Ben Woolsey, Director of marketing and Consumer Research for CreditCards.com.

The amount of 1099-C forms filed is expected to go up for 2009. In 2008, 1.987 million filed this form, but for 2009, it is expected that 2.5 million need to file.

To make sure this form isn't overlooked or misunderstood, speak with tax advisers before settling debt, check snail mail closely and discuss what exempts a person from this form with tax advisers.

Link to Source Article here

Related articles on line.

• Here's the tax bill for forgiven debt (money.cnn.com)
• FTC Tips for Consumers Weighing How to Settle Their Credit Card Debts (ftc.gov)

No More Mortgage Debt Settlement Tip – including settled debt as income on your tax return. is a post from: No More Mortgage News on Debt Settlement

Image via Wikipedia

No More Mortgage on Realistic Expectations in Debt Settlement.

Debt settlement, like everything else, has positives and negatives.

If you have to go through debt settlement, do some research and get a realistic idea of what your expectations should be.

Your credit score is going to take a hit. It will most likely bit a considerable decrease to your credit score depending on how many debts are settled in the process. The first two years will probably have the harshest hit to your score. Although it will improve over time, it won't magically come back to where it was at the 2 year and one day point. Many debt settlement companies will tell you that your credit will be damaged for 2 years but have neglected to make it clear that after 2 years your credit will still be damaged. Some don't talk about the point beyond two years making it sound like it's only two years you'll have credit score damage.

You'll be signing a power of attorney. This gives the debt settlement company the ability to work on your behalf. You need to read it very carefully to make sure you aren't giving up anything you weren't planning on.

Payments to your creditors may stop. The debt settlement company will typically have you stop paying your creditors and start paying them the money instead which goes into a trust account. Then they pay themselves part or all of their fee, which is usually based on a percentage of the money they expect to save you. Their experience has shown them how much they need to pay certain creditors giving them an idea of how much they'll save you. They let your money build up in the trust account until they have a certain amount of cash they can make a settlement offer with to one of the creditors. Unfortunately some of your creditors could charge off your debt harming your credit even more while your money is building up in the trust account.

There are no guarantees. A creditor can choose not to accept the settlement offer and sue you. Just because you want to settle your debts doesn't mean your creditor has to go along with it.

You can't settle all types of debts. Debt settlement companies settle unsecured debts, which are debts with no real asset behind it. A secured debt would be a home with a mortgage or an auto loan with a car behind it. Unsecured debts are like credit card debt where you owe money for the use of the credit and it isn't for a specific item.

Anytime you about to take a large step financially you should do your research first so you know what you are getting into. And check the FTC and BBB for complaints before you move forward.

Your friends at No More Mortgage.

Related articles

• Here's the tax bill for forgiven debt (money.cnn.com)
• Challenge to debt payoff tactics (news.bbc.co.uk)

Related articles by Zemanta

• Challenge to debt payoff tactics (news.bbc.co.uk)

No More Mortgage on Realistic Expectations in Debt Settlement is a post from: No More Mortgage News on Debt Settlement