One topic of discussion I have encountered recently is debt forgiveness. Is debt forgiveness taxable, does it have to be included with my income? As a CPA in Reno, I wish I had a general answer, but it is a very complex topic.
The IRS Website states, “The tax impact of debt forgiveness or cancellation depends on your individual facts and circumstances. Generally, if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes.”
When looking at debt forgiveness, you have to take into consideration mortgages, credit cards and many other types of forgiveness. As a CPA in Reno, the best advice I can give you is contact an accountant if you are in this situation. The topic is very complex, definitely unique to each individual case and must be handled by someone with experience.
You do not want to get in trouble with the IRS for not including forgiven debt on your tax return. In addition, if you do need to include information you may need the lender to take certain actions. The sooner you figure out what needs to be done, the sooner the process can be started. If you need a lender to take action, it is better to give them plenty of notification, that way you are sure that your return is complete.
The last thing you want is the IRS hounding you. Therefore, call Reno’s Best CPA today and get help with how to handle your forgiven debt. Taxes are a very complex topic, but when debt is involved they can become more complex. Make sure you are being proactive. Once the IRS finds a problem, they will try to get the most money out of you as possible.
Until Next Time,
Reno’s Best CPA