Pay Taxes on Canceled Debt


If you have been forgiven a credit card debt, don’t be too quick to celebrate. Did you know you have to pay taxes on your canceled debts? Any canceled or forgiven debt is deemed as income by the IRS, so you have to declare it as such. If you don’t, you can expect the IRS to come after you.

The way it works is like this – when you are forgiven of a debt amounting to $600 or more, the creditor issues a form called Form 1099-C, a copy of which is sent to the IRS. Using this Form 1099-C, the IRS keeps track of those whose debts have been canceled and will expect you to declare it as income.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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