April is coming, so taxes are on most people’s minds. You may be asking yourself about forgiven or canceled debt. I am not a tax professional, nor do I claim to be one. So please, seek the help of a qualified professional to prepare your taxes. But we can still talk about the T. word.

It is still a jungle out there, in terms of the recession. With the tougher new bankruptcy laws, debt settlement is a better bankruptcy alternative for many consumers. Why? A trained debt management professional fights for you and often, the debt reduction is usually about half of the original debt. The remainder is forgiven, but in some cases you may be responsible to pay taxes on the savings.

Don’t panic, but canceled debt is considered taxable income. Creditors are required to report forgiven debts greater than $600. You do this on the old 1099. The IRS wants to know that you settled your debt for less than the full balance. Yes, the IRS views this canceled debt as taxable income and wants you to pay taxes.

But debt negotiators have good news. The reality is that those who qualify for debt settlement are usually suffering from a legitimate financial hardship, and in most cases end up not being liable for taxes on the forgiven debt. You should consult with you tax advisor or CPA for more details and to see if you qualify.

If you meet the requirements (your debts exceed the value of your assets) you are likely insolvent. You can consult with a top debt settlement company for more information on how you can benefit from debt relief.

What I really want to convey is that if you’re buried in debt and considering debt settlement to eliminate your financial struggles, the possibility of a tax liability shouldn’t be a deterrent. Whether you’re required to pay taxes on the savings its important to understand that you will still save a substantial amount of money.

UNCLE! I did not go to school to become an accountant. Let’s talk about something warm and fuzzy after all this tax talk.

As you and your debt counselor work to get your life back on track, I want to warn you about something that can drain your pocketbook- PETS.

A free puppy can put you back into debt. Americans spend a whopping 47.74 BILLION dollars on furballs and other slimy things. There is food, shelter, grooming, vet bills… Divert your eyes from the adopt-a-pet commercials until your finances are more fluid. Or maybe take a rock for a walk. Remember, I am looking out for you, dear readers. Let’s hear it for financial freedom! It may be lonely, but it pays the bills.

Written by Terri Kruger

Similar Posts:

• How settling debt can affect your taxes
• A fresh start with bankruptcy? Lenders holding your credit report hostage after a BK.
• 5 easy steps you can take to reach your savings goals
• What to Do: Drowning in Debt
• Debt relief – The processes through which you may get relief