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Income tax considerations for cancelled credit card debt Atlanta, GA

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Income tax considerations for cancelled credit card debt

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If your credit card debt has been canceled or forgiven, you likely (and understandably) think that you will no longer have to deal with it. Unfortunately, that may not be the case. Under federal income tax filing guidelines, credit card debt that been eliminated through cancellation or forgiveness is considered taxable income.

Specifically, taxpayers who receive a 1099-C form from a creditor must pay taxes on that cancelled debt, unless they can prove to the IRS that the debt was discharged through bankruptcy or that they were insolvent at the time of the cancellation.

One common issue with 1099-Cs is that they often contain errors or are in regard to debt that was cancelled years ago. Some taxpayers have reported receiving 1099-Cs for the same debt. And attempts to resolve the errors are often tedious and ultimately fruitless.

If you are in this situation, you are not alone. According to IRS projections, creditors will send 6.4 million 1099-C forms to taxpayers in 2012, a significant increase from the 3.9 million forms that were sent in 2010. In addition, it is estimated that the country’s six largest credit card companies wrote off more than $75 billion in uncollectible balances in 2009 and 2010, as debtors struggled with the aftermath of the economic recession.

Under a current tax exemption, homeowners are not required to pay taxes on cancelled mortgage debt for a principal residence if that debt was forgiven in a foreclosure, short sale or loan modification. However, that exemption is scheduled to expire at the end of 2012, and unless Congress takes action, residents of Georgia and other states in which foreclosure rates are high could find themselves in an even more precarious financial situation.

Source: USA Today, “Canceled credit card debts come back to haunt taxpayers,” Sandra Block, Mar. 4, 2012

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They did an excellent job with my case. Jamie took the time to really listen and understand things. She delved into the details and was extremely knowledgeable and non judgmental. Very professional and they know what they are doing. Would definitely recommend!

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Mr. Gingold was recommended by an attorney I had worked with previously. I met with Ira Gingold to discuss credit issues. He went over each specific issue thoroughly. He advised me of the potential outcomes. He did all this in one meeting for a very reasonable price. When we finished I was confident in moving forward with a resolution. He definitely wants to help people take the appropriate course of action for their circumstance.

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I thought the process of filing bankruptcy was going to be a difficult one. However, Gingold & Gingold treated me with respect and dignity from the moment I walked through their door. I had the pleasure of working with Jamie. She is very responsive, professional, and knowledgeable. She took the time and listened to my every concern and handled each and every one of them to my satisfaction. My experience with filing bankruptcy under Gingold & Gingold's representation exceeded my expectations in a major way. They gave me such a peace of mind. I am very pleased with my decision of going with Gingold & Gingold to represent me when I filed Chapter 13 bankruptcy.

Julie T.

Wow! I am finally out of debt and can say that I am debt free after completing my chapter 7 bankruptcy case with Gingold and Gingold. Mr dangled was very knowledgeable and direct with regard to my debt situation. there were no surprises and the case went as I was advised. The staff was also very helpful whenever I had a question. I will definitely recommend them in the future to my friends.

Sherard W.

I cannot say enough about this law firm. From the initial consultation to our discharge, the entire office kept me updated with every step of the entire process. I came to the Gingold after a bad experience with another law firm. Ira and Jamie immediately began treating me like family through this experience. In the end, they assisted with eliminating many debts including my 2nd mortgage. I cannot say enough about the experience and knowledge that Ira brought to the table from the office visits to the court time. Thank you very much for helping me through this tough time. Thank you.

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