Many Minnesota consumers don’t know this, but canceled debt often counts as taxable income. This is often an unpleasant surprise for consumers during tax season. After all, clearing a debt through settlement creates a giant sense of relief. So, it is disheartening when you find out that you owe money on the portion of the debt that was cancelled. Also, consumers in Minnesota who don’t know about taxes charged on canceled debt often incur late fees for past-due taxes. Therefore, if you settle a debt with a debt collector for less than the original amount, find out whether or not the canceled portion is taxable. Knowing ahead of time allows you to plan for exactly what may owe at tax time, and saves you from late fees imposed by the IRS.
Why the IRS Frequently Taxes Canceled Debt in Minnesota
When Minnesota debt collectors settle for at least $600 less than the original debt balance, the IRS usually counts the canceled debt as taxable income. Usually, when this happens, debtors file 1099-C forms with the IRS. Then, they send notices to consumers with cancelled debt. Unfortunately, many Minnesota consumers who receive these notices simply toss them out. Believing that they have no further business with the debt collectors, they disregard any letters sent from these agencies.
This is how consumers in Minnesota with canceled debt end up with delinquent tax bills. Of course, whether or not the IRS actually taxes the forgiven debt depends on a few factors. Again, the IRS takes into account the amount of the canceled debt. In addition, it considers the taxpayer’s income level and the size of their deductions. Sometimes, the IRS opts against taxing canceled consumer debt in Minnesota. Yet, when it determines that cleared debts count as taxable income, consumers who receive 1099-C notifications should seek professional help immediately.
What Minnesota Consumers Should Do if it Looks Like They Owe Taxes on Canceled Debt
Most Minnesota consumers don’t know how to handle 1099-C forms or issues related to taxes on cancelled debt. Therefore, if you receive notice that you owe the IRS money on debt forgiven by debt collectors, take all of your documents to a reputable tax preparer.
Some consumers in Minnesota qualify for tax exemptions on forgiven debt. So, you need to know excellently where you stand before paying taxes on this “extra income.” If your tax preparer believes that you qualify for an exemption, you should fill out a 982 form to go along with the 1099-C form. Or, if you wish to dispute the taxed amount, contact the debt collector and request a corrected 1099-C form. Then, if they fail to do anything for you, seek legal assistance immediately.
How Minnesota Consumers Should Deal with Abusive Debt Collectors
Sometimes, even if tax issues are not on the line, Minnesota consumers have trouble dealing with debt collectors. Some debt collection agents conduct their business in a professional manner, but, sadly, others do not. All too frequently, debt collectors use illegal tactics with consumers in Minnesota. They lie to debtors, use abusive language, and threaten them with actions they cannot legally take. Under a federal statute called the Fair Debt Collection Practices Act (FDCPA), these are considered violations.
If, however, a debt collector does any of these things to you, or makes you feel uncomfortable in any way, you can make them stop, and you don’t have to take them on alone. Instead, free, expert legal assistance is just a phone call away. Contact Credit Repair Lawyers of America in Minnesota, and an experienced FDCPA attorney will stop the debt collector abuse – right now. Again, this service, like any of the work we do for Minnesota consumers costs our clients nothing out of pocket.
The Free and Legal way to End Debt Collector Harassment in Minnesota
At Credit Repair Lawyers of America, we’ve had years of experience when it comes to stopping debt collector harassment. We’ve also been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.
Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (612) 235-4458 or sending him a message through our contact page.
For more information about Ending Debt Collector Harassment for FREE, please visit https://creditrepairlawyersam.com/minnesota/debt-collection-harassment/.