Skip to content
United Settlement
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
Debt Relief & Settlement Programs
Logo
United Settlement
phone icon 888-574-5454
client icon Client Log In
  • More
    • About Us
    • Proven Results
    • Reviews
    • Contact Us
    • Debt Settlement
    • Debt Consolidation
    • Debt Management
    • Business Debt Relief
    • Credit Card Debt Relief
    • Debt Relief by State
    • FAQs
    • Blog
    • Sitemap
    • Careers
Qualify For Debt Relief
Debt Relief & Settlement Programs
  • Manage Your Debt
    • get-startedGet Started
    • settlementDebt Settlement
    • consolidationDebt Consolidation
    • debt-managmentDebt Management
    • bankruptcyBankruptcy
    • credit-cardCredit Card Debt
    • businessBusiness Debt
    • car-loanAuto Loan Debt
    • student-debtStudent Loan
  • Understand Your Debt
    • credit-cardCredit Card
    • business-2Small Business Debt
    • medicalMedical
    • loansLoans
    • umbrellaCredit Card Relief
    • interest-ratesInterest Rates
    • student-debtStudent Debt
  • Tools & Resources
    • faqFAQs
    • credit-cardCredit Guidance
    • calculatorCalculator
    • call-usContact Us
    • contact-usAbout Us
  • More
    • Debt Settlement
    • Debt Consolidation
    • Reviews
    • FAQs
    • About Us
    • Contact Us
    • Blog
    • Sitemap
    • Debt Relief by State
    • Careers
United Settlement » Blog » Debt and Taxes: 3 Tips on Reducing Debt This Tax Season

Debt and Taxes: 3 Tips on Reducing Debt This Tax Season

March 15, 2022
Debt and Taxes
Debt and Taxes Reducing Debt This Tax Season

Unexpected surprises caused by debt can throw tax season into a tailspin. In addition to complicating your return, debt can cause you to owe more than expected. It can even cause you to lose the refund you’ve been waiting on all year. Here’s what you need to know about debt and taxes going into tax season to avoid surprises.

1. Did You Get Debt Forgiven This Year? Don’t Forget to Count It as Income

Does debt affect tax return if it’s been forgiven? Yes, debt forgiveness can alter your taxable income amount for the year. That’s because all forgiven debt over $600 must be reported as taxable income. It’s important to read the terms of any debt forgiveness agreements that you sign in order to understand how accepting forgiveness will impact your income for the year. When you work with tax forgiveness experts, you will have the fine print of your forgiveness program explained to you.

There is a way to avoid getting surprised by taxes and debit if you thought your debt was in the rearview mirror. Try to put aside money after your debt has been forgiven in order to have the funds available to pay any extra you might owe in taxes as a result of your forgiven debt. Factors that can include the amount of debt forgiven and your tax bracket will impact how much more you can potentially owe. Borrowers who had student loans discharged in 2021 may not have to worry about how forgiveness will affect their taxable income when filing in 2022 due to the tax debt compromise program Biden signed into law. Under the American Rescue Plan, any student qualifying for debt forgiveness through the end of 2025 won’t need to count forgiven debt as income.

How does settling debt affect taxes if your debt has been forgiven or settled by a private creditor instead of the government? A creditor will report any amount of forgiven/unpaid debt over $600 to the IRS as taxable income. The savings incurred by the forgiveness will then be reduced by the tax liability. When debt is forgiven by a creditor, a Form 1099-C is provided to the debtor. Don’t forget one very important tax tip! Any debt settlement services that you use to get your debt settled will qualify for tax deductions when filing your income tax.

2. Did You Take Advantage of Loan Forbearance Programs? Be Prepared to Forgo Interest Deductions

If you took advantage of student loan forbearance, COVID-19 mortgage forbearance, or the home equity conversion mortgages (HECMs) extension during 2021, your tax plan may need to be adjusted. People with mortgages and student loans are used to deducting what they’ve paid in interest on their tax returns. However, that deduction won’t be available if you didn’t pay your deductible interest because you utilized forbearance. Leaving those deductions off this year could potentially increase your tax bill if your year-to-year income from 2020 to 2021 was either higher or unchanged.

3. Do You Owe Debt Collectors? Don’t Expect Your Tax Refund to Stay in Your Bank Account

Your tax refund isn’t necessarily safe and sound just because it has landed in your bank account. Debt collectors aren’t legally permitted to go around you to take your refund from the IRS directly. However, they can utilize a garnishment if there’s a judgment. Your level of protection against bank account garnishment from debt collectors varies by state. However, debt collectors are entitled to access at least part of your refund money in all states.

There are ways to keep your tax refund out of the hands of debt collectors. The simplest way is to skip the automatic deposit in favor of a paper check. If you’ve received your IRS refund deposits using direct deposit in the past, you’ll need to notify the IRS of your change in preference. If you’ve already requested an automatic deposit for your tax refund, keeping an eye on your account to detect the funds as soon as they arrive can enable you to withdraw them before a debt collector gets the chance. Your only hope for getting your full refund once a debt collector has garnished the funds may be to go to court to seek protection of your assets.

Don’t Be Surprised by Debt at Tax Time This Year

Does debt affect tax return even if it’s been forgiven? Most people can expect to pay more in taxes after having debt forgiven. What’s more, debt you’re still carrying can impact your access to your 2022 tax return. The one thing that’s for certain is that nobody wants to get caught off guard at tax time. Once you’ve made a plan for managing debt and taxes for this year’s tax season, the focus should immediately turn to using your tax return to pay off debt to avoid any surprises next year.

Get debt relief help! Get your questions about how debt settlement and forgiveness can affect your taxes answered now by contacting United Debt Settlement. Give us a call at (888-574-5454) or fill out our online contact form for a free savings estimate.

Gabriel Gorelik, CEO & Co-Founder
Gabriel Gorelik

Gabriel Gorelik paves the way for customer service and operations at United Settlement. He is passionate about numbers and holds a strong belief in helping anyone with their debt. Before United Settlement, Gabriel received his BS in Finance & Economics from Brooklyn College. After graduation, Gabriel went on to build his first financial services company where he managed over 1,000 business clients. He understands the importance of client satisfaction, professionalism, and exceeding expectations.

Share this:

  • Click to share on Twitter (Opens in new window)
  • Click to share on Facebook (Opens in new window)

Related

Search Blog

Are you in debt? we can help

  • Amount
  • Contact

How much do you owe?

Excellent

Based on 377 reviews.
Overall 4.4 out of 5 stars

View All Reviews

Annette Huggins

March 14

That when it seems like nobody can help United will.

This was a great experience for me. I am just starting but Madelene Gallon made me feel like we were friends for years. She tried to make me feel that she would help me and make sure I got the best deal...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Kiirstin

March 01

Kind and caring

Had been searching for a while for a company I could trust to get me out of crippling debt. Really didn’t think it was possible. Spoke to Ben at United Debt and he assured me that not only was it possible,...

Dylan

February 28

Quick, easy assistance!

I've been working with Ben at United Debt to help me organize and get out of debt for once - I've been dealing with debt for ages and Ben showed me some simple ways to begin dealing with things to keep...

Takota Carrie

February 14

I need help

I really appreciate

JONICA Amber PIRON

December 21

Great!

Renika went above and beyond today to help me. She is wonderful to work with! Thank you again Renika for all of your help today! Happy Holidays to you!

Jayvon

December 20

Paying back

They where great listeners

Shawn abetha

December 14

Everything

Thanks

Robert Phillips

November 23

Do your home eork

Paid several thousand dollars and nothing done. Ended up settling 90%by myself. This is a preatory company. So do your homework. This will never post.

Dm

November 18

Customer service is truly helpful

Renika was so helpful. My account was paid off but I kept receiving notifications. She cleared up the situation.

Jose Rosa

November 16

Great Customer Service

Renika did a wonderful job handling my questions and transactions. She is very patient on the phone and took care of my needs accordingly.

Russ

November 03

Very helpful

Renika did a great job in answering all of my questions in a timely manner. She was polite and friendly. Keep her on the payroll.

Anthony Desoto

October 31

What's Important to me is United Settlement Costumer service !

United Settlement Costumer service is Amazing Everyone is Professional . I am so happy choosing them with my card Debt. thank you all for helping me out .

Ri cky

August 23

That this company has integrity!

A responsive company that keeps it clients up to date and fully informed. I like the fact that I can send them a text and be guaranteed an answer within 24 hrs.

Jerry Bolandis

June 04

Professional and focused on facts and truth not hype. Excellent. We want to know facts.

Great work very professional and great updates. Communication is excellent.

janice head

October 25

trust them

Excellent. Also each time i call there they treat me with respect even though they are probably thinking jerk . You sure have made mess of your life. but they have been taught to smile smile smile. this...

Scott W O'Neill

August 01

Thanks for all your help and negotiations.

Thanks for the update! I have faith in you guys and will continue my payments. Thanks for all your help and negotiations.

Cassandra Robinson

July 30

That A Settlement Was Entered.

I Absolutely Love You All At United Settlements. You All Have Saved My Credit Solutions. I Would Refer Everyone To You Services.

Mildred Yvonne Sherron

July 16

The results of the settlement attempts.

So far, I have found United Settlement more than satisfactory. Very conscientious and very efficient in providing a service in debt settlement. Thank you and all the members of your team who are assisting...

Diana Cardona

July 16

Tough Financial Hard Times During Covid-19

I signed up with United Debt Settlement because of large credit card debts, which had taken a financial toll on my credit. UDS has an outstanding reputation assisting clients like me achieve financial recovery...

  • Contact Us
  • 240 West 37th Street
    Suite 400
    New York, NY 10018
  • (888)-574-5454
  • [email protected]
  • Privacy Policy
  • Terms & Conditions
  • Debt Relief Services
  • Debt Settlement
  • Business Debt Relief
  • Credit Card Help
  • Debt Consolidation
  • Debt Management
  • Student Loan Help
  • Careers
Learn more about debt relief


    • facebook
    • Google Plus
    • Twitter
    • YouTube
    • Instagram
    • Linkedin
    • facebook
    • Tools & Resources
    • Contact Us
    • About Us
    • Blog
    • Debt Calculator
    • Frequently Asked Questions
    • Sitemap
    • Reviews
    • Client Login
    Free Savings Estimate
    Apply Here
    Clients who stay according to debt relief program can realize approximate savings of 50% before fees, or 25% including fees, over 24 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for reasons such as: their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period. We do not assume consumer and/or business debt, provide tax, bankruptcy, accounting, legal or credit repair services/ advice. Our program is not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. If you have any additional questions please contact us. NMLS ID: 1947026
    Copyright 2023. United Debt Settlement, LLC
     

    Loading Comments...