| Every year April rolls around faster than most of us | | | | financial situation. If you answer yes to any of these |
| are ready for. If you owe $10,000 or more in back | | | | questions use this information to take charge of your |
| taxes then tax season can be a very gloomy time of | | | | finances. |
| year. In a year of a troubling economy and | | | | Have you worked through a credit debacle and have |
| unprecedented lay-offs, a large portion of the | | | | your debt forgiven? |
| population is struggling with finances and a mounting | | | | Its important to know that if credit card debt or other |
| debt. Some choose to hide or ignore the problem | | | | loans forgiven, when tax time rolls around you will |
| which leads to intervention from the IRS and a difficult | | | | quickly learn that almost any amount of debt that is |
| future raising your credit score and financial status. | | | | settled for less than the amount owed is available to |
| There are far better options to relieve this heavy | | | | taxation. If your lender sends you a form 1099-C, |
| financial burden. The two most common practices are | | | | Cancellation of Debt, to show you what to report on |
| Debt consolidation and debt settlement. Both have their | | | | your tax return, that sum will be liable for taxation. |
| own pros and cons, and each can help you get out | | | | Did your income drop so much that you now qualify |
| from under a $10,000 debt to the IRS. | | | | for some breaks that couldn't work for you last year? |
| 1. Debt consolidation Debt consolidation consists of | | | | If last year was very difficult, you can qualify for the |
| taking out a new loan at a lower interest rate than the | | | | Earned Income Tax Credit. You must show some |
| price of your other debts and using these funds to pay | | | | income from wages or a job for 2009, and must earn |
| them off. The advantage of this is that you will now | | | | less than a set income limit. Families that had college |
| only pay one consolidated debt at a very manageable | | | | tuition bills in 2009 can benefit on their tax return this |
| interest rate. It does, however, require you to take | | | | year from certain education credits that are not |
| even more loans on money. | | | | allowed once you hit certain higher-income level. In fact |
| 2. Debt settlement Debt settlement is negotiating a | | | | The American Opportunity Tax Credit , initially called |
| settled amount between you and the creditor, that | | | | the Hope Credit, offers up to $2,500 for qualified tuition |
| satisfies both parties. Its better for the creditor to | | | | and fees paid for each eligible student in the first four |
| receive a portion of the sum, as opposed to nothing at | | | | years of college. The American Opportunity Tax |
| all. Creditors often agree to a figure an amount that is | | | | Credit can't be used, however, if your modified |
| thirty to forty percent lower than the amount owed. | | | | adjusted gross income hits $90,000 or $180,000 as a |
| Debt settlement, however, does negatively affect your | | | | joint family income. |
| credit ranking. Even though your debt is handled, future | | | | Remember, just because you weren't eligible in the |
| creditors will often see that you did not pay the full | | | | past doesn't mean you're not eligible now. Information is |
| amount that was initially agreed upon. | | | | power, so to gain financial freedom and peace of mind |
| These are the most common actions taken but there | | | | from $10,000 in debt with tax debt relief and grab the |
| are many under the radar tactics that can solve your | | | | reigns of your finances today. |