Canceled credit card debt haunts taxpayers
News from Reno Gazette Journal:

Billions of dollars in credit card debt that was charged off during the recession — some of it decades old — is coming back to haunt borrowers in the form of unexpected tax bills.

Debt that is canceled or forgiven is considered taxable income, something many borrowers don’t realize until they receive a 1099-C tax form from their lender. The IRS projects that creditors will send taxpayers 6.4 million 1099-Cs in 2012, up from 3.9 million in 2010.

The increase likely reflects the rise in credit card defaults during the economic downturn, said Gerri Detweiler, personal finance expert for Credit.com. Moody’s Investor Service estimates that the nation’s six largest credit card companies wrote off more than $ 75 billion in uncollectible balances in 2009 and 2010.

Taxpayers who receive a 1099-C, which also is submitted to the IRS, are liable for the tax bill unless they can prove that the debt was discharged in bankruptcy or that they were insolvent when the debt was canceled, said Jennifer MacMillan, an enrolled agent in Santa Barbara, Calif. Shelley Cartier, 48, of Austin, recently received a 1099-C for a credit card debt that was more than 20 years old. Cartier said she filed for bankruptcy in the early 1990s but no longer has the paperwork to prove the debt was discharged. Numerous calls to the financial institution have gotten her nowhere, she said. continues on Reno Gazette Journal

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You’ll Be Paying Off Your Credit Card Until 2056
News from Lifehacker Australia:

Paying just the interest on a credit card balance with a rate of 17.73 per cent and a balance of $ 4757 could see you spending over 40 years in a constant state of debt. The figures, which you may have noticed are quite specific, are based on the average credit card interest rate in Australia, and the country’s average credit card debt.

Images: Images Money.

The latter statistic was released by the Reserve Bank last December, with the maths highlighted in an article published today on the Sydney Morning Herald. By paying the minimum amount on a $ 4757 balance, you’d be shelling out some $ 12,400 in interest alone over 44 years.

According to The Australian Securities and Investments Commission (ASIC), NSW spends $ 2 billion in interest per year, while Victorians cough up $ 1.5 billion.

It’s no secret that credit cards attract extremely high interest rates and as such, should always be paid off as much as possible month to month — if not completely. What these numbers show is that, on average, we’re not very good at keeping our debts under control.

I always make it a point to pay off my credit card b…………… continues on Lifehacker Australia

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