Keith D. LeCroy, Certified Public Accountant
I DIDN'T KNOW THAT!
In this bad economy, many people are receiving offers from their lenders, especially past due credit cards and unsecured loans, to "settle" the debt for a lesser amount than what is owed. Sounds good? Wait a minute. There are two major downfalls to taking them up on their offer: First, it could, and most likely will hurt your credit score in the same way a write off or bankruptcy might. The effect will probably not be as harmful as a write off, but it certainly won't look good on your credit report. Secondly, the amount the lender writes down your obligation is taxable income to you and, if $600 or more will be reported to the IRS as such. There are few exceptions, outside of filing bankruptcy, that you will not have to pay tax on this money. So, carefully consider your options before settling a debt. The same implications will be if you become involved with any type of credit counseling that seeks to lower your debt. The lowering of an interest rate, however, does not create a taxable event.
In this bad economy, many people are receiving offers from their lenders, especially past due credit cards and unsecured loans, to "settle" the debt for a lesser amount than what is owed. Sounds good? Wait a minute. There are two major downfalls to taking them up on their offer: First, it could, and most likely will hurt your credit score in the same way a write off or bankruptcy might. The effect will probably not be as harmful as a write off, but it certainly won't look good on your credit report. Secondly, the amount the lender writes down your obligation is taxable income to you and, if $600 or more will be reported to the IRS as such. There are few exceptions, outside of filing bankruptcy, that you will not have to pay tax on this money. So, carefully consider your options before settling a debt. The same implications will be if you become involved with any type of credit counseling that seeks to lower your debt. The lowering of an interest rate, however, does not create a taxable event.
Charitable Contributions Documentation:
Single contributions of less than $250 can be substantiated with a canceled check, credit card slip, or written receipt from the charity.
All contributions $250 or more must have written acknowledgement (receipt or letter) from the charity. Your canceled check/checks are not acceptable alone.
Non cash contributions over $499 must be substantiated with a written, detailed receipt and this contribution must be identified on your tax return on a separate form 8283.
Single contributions of less than $250 can be substantiated with a canceled check, credit card slip, or written receipt from the charity.
All contributions $250 or more must have written acknowledgement (receipt or letter) from the charity. Your canceled check/checks are not acceptable alone.
Non cash contributions over $499 must be substantiated with a written, detailed receipt and this contribution must be identified on your tax return on a separate form 8283.
LECROY CPA can design an accounting system for your small business or not for profit organization to meet YOUR needs. We can do as much or as little of the daily or monthly work as you want, including payroll and payroll tax service / compliance. Call for a quote!
