Kae
Falcon Heights,#2Consumer Comment
Thu, January 10, 2008
Robert is on point.
Robert
Irvine,#3Consumer Comment
Thu, January 03, 2008
First of all sorry about your situation. However, the IRS is correct and it is not a mistake. Anytime you make a settlement on a debt(such as a Credit Card), the amount you got "knocked off" is considered unearned income and must be reported. Unfortunatly, the excuse "I had no idea I was supposed to report this" will not matter to the IRS. As to your other questions. "Doesn't this mean that everyone has to pay tax on anything considered a cancellation of debt??? What about all the foreclosures?" Yes EVERYONE who has a debt cancelled is required to report it as income, if the amount is over $600. If they don't the IRS will eventually catch up to them, and send the same letter they sent you. The best thing you can do is talk to the IRS and explain your situation. You probably won't get out of the debt, but they may be able to give you options to settle this bill.