You could owe taxes on forgiven debt — here’s what you need to know

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“Roughly one in three Americans have delinquent debt according to 2022 credit data from The Urban Institute. At 16%, medical debt makes up the highest percentage of debt delinquency, but consumers also default on student loans, auto loans and credit card debt. If you are able to get a settlement that’s significantly less than your total debts owed, you will be taxed on any forgiven debt over $600. ‘The creditor is required to file a 1099-C form with the IRS, which will detail the amount of your settled debt,’ says Tayne. Similar to income tax forms, you will also receive a copy of the 1099-C forgiveness of debt form from the forgiving creditor in the tax year the final payment is made.”

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