Can an unpaid debt be classified as income and taxed as such?
by 
robinsnest
ANSWERS: 6
-
No. Money owed is not income.
-
clydewolf Registered User Join Date: Oct 2001 Posts: 780 Crews4, When the 1099-C is issued to you and to the IRS, you must claim the indicated amount as income in the year the debt was forgiven. Once you pay the income tax on the forgiven amount, the creditor can not come after the same amount again. The debt is forgiven. Yes, taxes are not simple and not always straight forward.
-
No, But, Depending on the deal you could have some write off potential.
-
No
-
Well I'm going to have to say yes to this one simply because of a situation I had a couple years back. We were having some financial difficulties and couldn't pay some of our credit cards. One of the companies was going to send us to collections. On the advice of a friend we called the company and settled for half the amount. We paid that off but then come tax time we got a letter from the company saying we had to report the unpaid portion as income on our tax return. I hope this old gal was able to help!
-
If it is a closed debt, written off by the company, then yes. If it is an ongoing debt, such as your credit card balance, no. If you are in business for yourself and owed this money, it is not income unless they are paying in payments, then only the monies collected are considered income. Which should all pan out in your profit and loss statement. Same as a paycheck, it doesn't count until it is given to you. If you get paid on 1-2-07 for work done Dec 15-31st. It is considered income for 07, not 06.
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC