What is Cancellation of Debt?
The forgiveness or cancellation of all or part of a debt can create a taxable event through the imposition of a tax for cancellation of debt on discharge of debt (also known as COD on DOD). This occurs when a debt is forgiven in whole or in part, resulting in the issuance of a Form 1099C, which then becomes part of the taxpayer's individual income tax. In other words, to the extent a debt is forgiven, it becomes income to the taxpayer relieved of the debt and taxable at the applicable income tax rate for the year in which the 1099 event occurs. This can result in significant liability and attendant tax problems.
At the Law Offices of Neil Crane, LLC, we can explain the tax burden you may be facing after the cancellation of a debt. Our attorneys can then help you through the process of handling or avoiding that tax liability. Contact us online, call us at 203-230-2233 or toll free at 888-249-3027 for a free initial consultation.
Avoiding Tax Liability for Cancelled Debt
Despite the dangers created by this tax, experienced counsel can provide invaluable advice on how to properly cope with or avoid taxes resulting from cancellation of indebtedness income. Through careful planning and early analysis, our experienced attorneys know how to take full advantage of all the available options for dealing with the tax ramifications of debt forgiveness, including:
- 1099C analysis
- Homeowners tax relief act
- Tax insolvency
- Bankruptcy relief
Debt relief is an important goal that is hard to accomplish but the tax ramifications of this type of relief can often undermine or eclipse the accomplished goal. This is an ever-changing area of tax law and the early and proper handling of this issue is essential to long-term financial success. In fact, tax debt from debt forgiveness can often be worse than the underlying debt.
In these difficult financial times, many families are seeking debt relief from unsecured obligations like credit cards and secured obligations like mortgage foreclosures and deficiency judgments. Relief from these obligations is more important than ever, but can't come at the expense of serious tax ramifications.
Three Decades Experience Handling Canceled Debt and Tax Concerns
Our attorneys have the experience and knowledge necessary to assure that you get the maximum tax relief available under the current laws. We've been dealing with tax forgiveness problems over the course of three decades and make certain to stay on the cutting edge of changes in this most important area of tax law. Never has this knowledge been more important than it is in today's troubled economic environment.
To speak with a lawyer about tax liabilities for cancellation of debt and how we can help you, schedule your free initial consultation with the Law Offices of Neil Crane, LLC. Contact us online or call us at 203-230-2233 or toll free at 888-249-3027. We have office locations in Hamden, Bridgeport, Ridgefield, Waterbury and Rocky Hill, Connecticut.
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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.