Tax Consequences of Unpaid Taxes Settlement in Northridge, CA

Also known as ‘Unpaid Taxes adjustment’ or ‘Unpaid Taxes relief’, Unpaid Taxes settlement relates to settling your outstanding Unpaid Taxes; for example, your credit card payable amount or a business loan, for less amount than originally owed to the creditor. This is usually done by agreeing to pay a lump sum amount that is often significantly less than the original amount due. At times, your creditor may simply stop making efforts to collect Unpaid Taxes in case, for example, you become bankrupt with no hope of making the payment.

In other cases, you may be asked to pay anywhere from 10% to 70% of the outstanding amount in exchange for settlement of the whole Unpaid Taxes.

While getting a Unpaid Taxes settlement looks good for a while, it can have serious consequences in the near future. For example, Unpaid Taxes settlement is reflected in your credit report, which ultimately goes on to damage your credit rating/ score. But more importantly, there may be serious tax consequences of Unpaid Taxes settlement in Northridge, CA, as well as other parts of the United States.

Let’s look at these tax consequences of Unpaid Taxes settlement in further detail.

Tax Consequences of Unpaid Taxes Settlement in Northridge, CA

If your creditor allows you a tax settlement for a discounted payment, your creditors will claim the lost amount of money as their expense for tax purposes. Hence, they get partial relief in the form of reduced tax liability on their part. But in your case, the IRS shall treat non-payment of outstanding Unpaid Taxes as your income and ask you to pay additional tax on this amount. 

Suppose you had a payable amount of $20,000 against your credit card usage, but your financial circumstances deteriorated, and you became unable to pay the whole amount. Your credit card provider agrees to settle the whole Unpaid Taxes if you pay only $12,000. Since the offer seems attractive, you somehow managed to gather $12,000 in order to settle the whole Unpaid Taxes of $20,000. The credit card company shall treat this $8,000 loss in Unpaid Taxes collection as bad Unpaid Taxes and claim it as a tax-deductible expense with the IRS. 

Now the IRS has lost tax revenue on $8,000, but it will try to recover this tax from you. It is treated as if you bought goods worth $8,000 for your use but didn’t pay any tax on it. 

For a Unpaid Taxes of $600 or more, the creditor issues a 1099-C tax form when it agrees to settle the Unpaid Taxes. This form tells about the exact Unpaid Taxes settlement benefit you received in dollar terms. Now the IRS shall have its eyes on you for taxing you on this amount.

So, if you receive a tax settlement, be prepared to see this amount appearing on Line 21 of the upcoming tax returns, under the head of “other income”, and, ultimately, on Line 43 under the head of “taxable income.”

How Mortgage Forgiveness and Unpaid Taxes Relief Act 2007 Provides Relief in Northridge, CA?

While the tax consequences of Unpaid Taxes settlement in Northridge, CA, and other parts of the country are substantial, there may be certain reliefs/ exceptions. The Mortgage Forgiveness and Unpaid Taxes Relief Act 2007 has been the major exception in this regard. This Act provided temporary relief to those who had mortgaged their property or used a loan to build, buy or improve their residence. Similarly, certain exceptions may be available in the following situations:

  1. Loan has been regarded as a gift.
  2. The Unpaid Taxes or becomes insolvent.
  3. The Unpaid Taxes has filed for bankruptcy.
  4. The Unpaid Taxes has been cancelled by a qualified individual.
  5. The Unpaid Taxes has been qualified as ‘principal residence in Unpaid Taxes.’
  6. The loan was forgiven under a ‘student loan cancellation’ program.

Overall, the amount of increase in tax liability will always be less than the settlement amount. So, you must always be honest in reporting the forgiven Unpaid Taxes. 

USA Tax Settlement strives to
help taxpayers get out from under their 
IRS Unpaid Taxes.
Unlike other so called Best Tax Resolution Companies in Northridge, CA that
charge outrageous fees and don’t deliver on their promises. USA Tax Settlement
employs tax professionals, tax attorneys and IRS enrolled agents so we can
provide IRS Unpaid Taxes help in Northridge, CA. Stop stressing over
your Unpaid Taxes and let our IRS Tax experts in Northridge, CA 
settle your IRS Unpaid Taxes for
a fraction of a cost. USA Tax Settlement can help with various IRS 
Tax Relief Programs or Unpaid Taxes Forgiveness Programs.
If you need IRS Tax Relief Northridge, CA then call USA Tax
Settlement today for a Free Consultation. Remember, having one of the 
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