Written-Off Debt and Taxes
One of the most debated questions when it comes to credit reports is, what to do with debt that has been written off? Do you still have to pay that? Yes, you do, and it’s not just out of a sense of moral obligation. You really do need to get that financial monkey off your back - the specific reasons are another topic for another day.
As we enter the tax season, it is important to remember that written-off debt should be reported as taxable income. This written-off debt is technically going to be reported by your lender as a profit loss on their end, so the IRS might look for that to line up with your tax filing, reporting the written-off debt as profit. You’ll probably have to pay about 15 percent of the written-off amount. It’s an important tip to remember so your financial records stay neat and tidy and no financial nightmares return to haunt you years later.
