Forgiven Credit Card Debt Usually Has To Be Cited As Income
If a credit card holder has $600 or more of debt forgiven, then they have to report the debt as income, using tax form 1099-C.
This can be tricky, as those who originally had problems paying their debt now have to pay large amounts of money in taxes. Forgiven credit card debt can be very important and could relieve stress, but the balance isn't going to go completely unpaid.
It is necessary for someone to claim the forgiven debt, because the IRS receives the information in a tax return. If it doesn't see the balance claimed, it will go to the taxpayer and question them about it, said Jim Van Grevenhof, senior tax analyst for Thomson Reuters, told the Detroit Free Press.
The IRS has reported that less than 1 million people used 1099-C forms in 2003. Since then, the number has skyrocketed to more than 1.9 million in 2008. It is believed that about 2.8 million of these forms will have to be filed during this tax season, according to the news source.
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