If you’ve just gotten yourself into a debt settlement plan, congratulations! You’re definitely on your way to really improving your finances for the long haul ahead of you. However, this doesn’t meant that you will not have anything to think about — you might want to take some time to really think about your new debt settlement plan and taxes — two things that can really ruin your chances of getting things done. The last thing that you will want to do is skip over this information entirely — believe it or not, this can actually hurt your finances in the long run.
It’s better to get as much information as possible when it comes to debt settlements and taxes. Even though specific information would have to be received from a tax professional, there are a few general points that you should know when you’re trying to pursue debt settlement.
The first thing that you need to know is that you might be on the hook for all the money that you were forgiven during the debt settlement program. If you live in the United States, you must understand that the IRS considers this to be earned income, and thus would expect you to pay taxes on it. Now, you might be to the point where you’re not sure whether or not debt settlement is actually a good idea after all.
Yet it actually can help you get started moving in the right direction. Think about it — if you know that you’re making less money than you really should be making, you will not be in a high enough tax bracket to where you will be paying a lot of taxes anyway. Also, you will still have access to all of your deductions, which means that you may end up not paying any extra tax at all when you bring those into play. There are also payment arrangements that can be made with the IRS if you do end up owing money because of the forgiveness, which means that you will still be able to consider whether or not debt settlement is right for you.
Overall, if you know that you’re ready to move in the right direction with your finances, you will still need to consider debt settlement as a viable option — it’s really the only way!