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Cancel debt and income tax

Long Beach, CA |

Hey guys I just went to the hospital recently and the bill is around 14 grand. I can't pay because I have no job, so I was wondering if I could get the hospital bill waived. My question is if I am successfull of getting my bill waived do I have to fill an income tax return next year even If i don't have no job? If I get the 14 thousand waive and I do have to file a tax return how much will I owe the irs for the waive 14 thousand dollar bill? I don't have a job and is worried about oweing the irs. Thanks if you guys could give me a range of what they would tax me.

wow thank you Mr. Harrington Jr you explained it beyond my expectation and thanks again great answer.

Attorney Answers 3

Posted

You gave a well constructed question.

Hey guys I just went to the hospital recently and the bill is around 14 grand. I can't pay because I have no job, so I was wondering if I could get the hospital bill waived.

If you can convince them that you will not pay it, they might. Who knows what they are thinking.

My question is if I am successfull of getting my bill waived do I have to fill an income tax return next year even If i don't have no job?

Job has nothing to do with it. Its INSOLVENCY which means that you have more liabilities than income.

You should always file an income tax even if it is for zero income. It starts the statute of limitations and serves as a record of your earnings that you won't have to re-establish after the statute of limitations run.

Also, you have the California Insolvency exemptions working for you if your net reachable worth is less then the insolvency exemptions.

If I get the 14 thousand waive and I do have to file a tax return how much will I owe the irs for the waive 14 thousand dollar bill?

Income is based on EXTENT OF INSOLVENCY. If you have $15,000 assets and $14,000 liabilities you are solvent by $1000. Then a 14,000 bill might produce $1000 income by cancellation of indebtedness.

I don't have a job and is worried about oweing the irs.
Again, even the IRS must respect the state exemptions. If you have no money, they have nothing to collect. If you have a little money, but not more than the solvency limit, you can block collection.

Tf you guys could give me a range of what they would tax me. If you are solvent by X, then when X is written off you have income of X.

Additional information what does insolvent mean? see above

Please remember to designate your question's BEST ANSWER.

Curt Harrington
(562) 594-9784
curt@patentax.com
http://patentax.com/curt/index.html

Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.

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Posted

Although forgiveness of debt is taxable, there is an exception to paying this tax if you are insolvent. I would refer you to the IRS website for more information at www.irs.gov

Hope this perspective helps!

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Posted

Discharge of Indebtedness is taxable but there are exceptions for discharges in bankruptcy or if you are insolvent. I hope this helps.

Andrew J. Wyman
www.wymanlegal.com

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