A NEW INCOME

A New Income Q&A

Q: Son got a form from collection agency says owes taxes on $900 of written off unknowndebt . Is this legit?

never heard of a tax for "income" based on unpd debt. particularly one in dispute years ago and never settled. if this is even possible how far back in time could these outfits go. is this a new form of intimidation by collection agencies.

A: If a debt is forgiven, it IS considered taxable income in the year that it is forgiven. If the creditor wrote it off as uncollectible in 1007, your son must include it in his income on his 2007 tax return. This is NOT anything new. Forgiven debt has been considered taxable income for decades. It has received public attention recently due to the mortgage meltdown but is nothing new.

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