IRS forms 7 years later

[Dsc123]

Just thought I would share the one downside that I have found to cleaning up your credit.  We just got both my wifes and my credit reports squeeky clean in 2021.  For tax season just recieved to CC companies sending us tax forms for "write offs" that were listed as much more than we actually owed.  Don't want to engage them, so I guess we just suck it up and move on.  First downside I have seen to making it to the magic 7 years number.  My wifes numbers barely improved when her reports got cleaned up for 2 30 and 60 day lates on 2 accounts, but mine took a major hike upwards (40pts) when my B of A nasty came off (they hate me and dinged me as late on my credit for the entire 7 years and made nasty comments on my reports about us "dodging what we owe" in a derogatory manner- someone was mad when they made the comments!).

Bummer we also took a business loan, so between that income and this added to our regular income, taxes are going to HURT this year!  Ugh being self employed really does have some drawbacks, taxes is a major one.

FYI for Data points I am at about 748 FICO with about 3% utilization  and my wife is at 728 with 30% UT.

[gdale6]

Be sure to use the form to see if you even have to pay taxes on them, if you are considered insolvent at the time of the write off there are no taxes due.

[FireMedic1]

If you got the 1099c's. The the IRS got them also. So they know. Its between you and the IRS now. You dont want penalties and interest added for not reporting. I let back taxes go for 16 yrs, never got a refund, and had to file BK when the garnishment showed up.  The IRS wont stop once it goes into collections mode. So 7 yrs is not for the IRS. Its 10 years from date of last assesment. The reporting of the negative credit account is 7 yrs, not the IRS. We pay out income every 2 weeks from our paychecks. Happened to a friend who had a auto repair shop. It caught up to him. You can set up payments before it goes collection mode.

[satio]

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@gdale6 wrote:

Be sure to use the form to see if you even have to pay taxes on them, if you are considered insolvent at the time of the write off there are no taxes due.

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I have been self employed for a long time and have always used a trusted CPA to manage all my taxes.

In years past as I cleaned up some baddies via settlement for less for both myself and then the spouse and had concern over the tax consequences. We had near 0 tax implications from these settlements.

Depending on your situation, you may very well find that you can be considered "insolvent" as Gdale suggests.