Creditors are busily sending out more 1099C’s then ever before according to a story by Jeremy Campbell of Channel 13 in Tampa, Florida this week. The news story “How the IRS taxes debt” explains that debt settlements while good, come with a penalty. Consumers are taxed on the forgiven debt sometimes months or years after the settlement. More than 6 million consumers are expected to receive 1099C’s this year, double last year.
One important point that the story did not address. Cancelled debt is not taxed in a bankruptcy. Just saying.