If you’ve ever settled a debt with a credit card debt reduction company, you’ve probably had to fill out an IRS 1099 form. What’s this for? The form is actually for the credit card debt settlement tax. The IRS wants to tax you for every settlement you make with a credit card company. They do this because, well, because they can, but also because the money you save on the settlement is actually recorded as income. There’s not really any way to avoid the credit card debt settlement tax.
And it’s not like you’re going to lose everything you’ve saved. It’s just that the IRS wants to get their taxes, and it’s still better than giving all of your hard earned money to the credit card companies. So whether you’re calling the credit card companies directly or you’re using a credit card debt management company, you should be prepared to pay a credit card debt settlement tax.