Creditors are often willing to negotiate a significant discount to settle a debt they know the customer can’t pay in full. Millions of Americans buried in consumer debt took advantage of such a settlement offer last year.
Now it’s time to pay taxes on the part of the debt that was forgiven.
“If you had any debt that was forgiven and the amount you saved was more than $600, the IRS considers that taxable income,” said Bill Hardekopf, CEO of Lowcards.com. “You need to claim that on your tax return.”