I had a settlement aggreement and paid it in full.

3 Answers

Yes, you have to. SInce you saved the entire forgiven amount through debt settlement, this will certainly be considered as income and therefore you have to pay taxes on this amount.

You will have to pay tax on the forgiven amount. IRS regards the foriven debt amount as taxable income. So, you'll have to pay the tax. In fact, this is one major disadvantage of debt settlement. 

For example: if the debt amount is $10,000. You have settled it at $6000. Then you'll have to pay tax on the remaining $4000.

The forgiven balance will be considered as your income by the IRS. So, you will be liable for paying taxes to the IRS for that forgiven debt.

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