Ask A Memphis Cpa About Debt Elimination

Have you got credit cards that are out of control? Thinking about using a debt elimination service? Better check with a Memphis CPA.

I'd like to talk about cancellation of debt. This is a very timely topic. As a Memphis CPA we get a lot of questions about this.

Let's say you engage a credit card debt elimination firm and they go out and get your credit card debt reduced. Lets's say you owe $15,000 on a credit card and they settle with the credit card company and your going to pay them $2500. So that leaves $12,500 that is forgiven. Well guess what, that $12,500 is income as far as the IRS is concerned. The way that works is, $15,000 worth of debt got reduced down to $2,500 you got $12,500 which is the result of cancellation of debt and at the end of the year you will get a 1099 from that institution that said "we forgave this debt". The IRS then gets a copy of that 1099 as well. You have to pick that up as income on your tax returns unless you can show that this was because of a bankruptcy or you can show that you're insolvent.

Those are the two things that most people go to to keep from having to report that income on their tax return. Insolvent means that your assists are less than your liability on the day that that debt was forgiven. For example, lets say your assists were $50,000 when you count all your assets; house, cars everything. Then you count your liabilities and your liabilities were say, $75,000. You would be considered insolvent. There's a special form to file with your tax return to say that. You don't have to give all the numbers with that, but you have to be prepared to demonstrate that to the IRS if in fact if the question as to why you didn't pick that up as income on your tax returns. As a Memphis CPA we can help you with this. What you do is pick it up as income on your return and then you show it as a deduction so that you don't have to show the debt income of $12,500 on your tax returns.


A Memphis CPA Can Help Lighten Your Burden. If you would like more information about this topic you can go to our web site and while you're at the web site you can enter your name and email address to receive a FREE report concerning the IRS collection process.

If you would like to see free videos on different tax topics that we at the Griffith Firm have made, go to our web site and while you're at the web site you can submit your name and email and receive a FREE report about the IRS process. As a Memphis CPA we can handle the IRS. And if you'll act now we will give you one hour meeting for FREE. This is a one hour free consultation related to tax problems. We're not going to prepare your taxes during this. This is one hour FREE with a Memphis CPA where we'll look for tax problems you may be facing. Maybe you're getting notices from the IRS and you can sleep at night because of the fear of the IRS then we want you to call us. Again the first hour is FREE. During that hour we'll come to understand and help you see what the issues are and map out a solution for you.


Terry Griffith Is A Memphis CPA and he knows how to deal with The IRS
To get more information about this and other tax topics answered by a Memphis CPA at the Griffith Firm.