
Originally Posted by
Melonie
^^^ yup, and it gets even more cryptic because of the 'progressive' tax rates.
For example, say there is a person who earns $40k a year but who also owes an aggregate of $40k on a delinquent car loan, credit cards etc. Her normal income taxes would probably run about 25% or $10k a year. However, if she were to accept a 50 cent on the dollar settlement on her debts, she would in effect have $20k added to her $40k income ... increasing her tax liability to the 33% or $20k ballpark.
Needless to say, these 'settlements' are automatically reported to the IRS.
Bookmarks