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ID #1018
What is the effect on my taxes?
We're not an accounting firm, so for advice please talk to a professional accountant on this matter. But, we know that in some instances, the creditor will deduct the loss as an expense, in which case you must record it as income. If the creditor is expensing the lost debt, you will get a Form 1099 from the creditor and you must file this with your income tax return. However, most of our clients are technically insolvent (meaning assets < liabilities). If this is the case, you can file a Form 982 with your tax return and exclude the discharged debt from your income. In order to make sure you qualify for the Form 982 exemption, please visit www.irs.gov or speak to an accountant.
Tags: taxes, accounting
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