Dr. Friday warns about the implications of receiving a 1099-C for debt cancellation. While forgiving debt might feel like a relief, it can lead to unexpected tax liabilities, turning your debt into a bill from the IRS. Learn how to navigate the deadlines and tax consequences of canceled debts, and avoid trading one financial burden for another.
Transcript:
G’day. I’m Dr. Friday, president of Dr. Friday’s Tax and Financial Firm. To get more info, go to www.drfriday.com. This is a one-minute moment.
1099-C, cancellation of debt—be very careful about these. First, they’re going to come out by January 31st if you have done this, and they’ll get them to the IRS by February 28th. That being said, cancellation of debt sounds great. You call the credit card company, they say, “Sure, we’ll forgive $10,000.” Next thing you know, that year or the following year, you now have a 1099-C, and you’re paying tax to the IRS. And if you don’t have the money, you’ve gone from owing a creditor that couldn’t really do anything to owing the IRS.
Call us if you need help at 367-0819. You can catch the Dr. Friday Call-In Show live every Saturday afternoon from 2 to 3 p.m. right here on 99.7 WTN.