Getting into financial trouble can be an extremely stressful experience to go through because you may be facing aggressive creditors attempting to collect extremely expensive bills. Fortunately, there are debt relief programs that can help you to escape this trap and start on fresh financial footing. However, if you have never used these programs, there is as strong chance that you will benefit from having the following couple of questions answered before choosing these services to address your financial needs.
Are There Any Tax Implications Of Debt Relief?
There are some people that may enter into debt relief programs before they consider the tax implications that this can have. As a result, these individuals may be surprised when they are faced with a higher than normal tax bill at the end of the year. However, it is important to note that debt forgiveness is considered to be taxable income, and as a result, you will need to consider this when filing your taxes.
For those who have an accountant, it will be essential to provide them with all the documentation from these services to ensure they are able to properly document the additional income. Failure to do this can lead to expensive fines or may make you are more likely to be audited.
How Are You Charged For These Services?
Another important consideration when deciding to use debt relief programs is their fee structure. Generally, there are two approaches that you can expect to encounter when it comes to collecting fees. Many of these providers will charge their customers a flat fee for their services, and regardless of the amount of your debt that is reduced, you will owe the same amount.
However, there are some people that may be concerned that the flat fee will not be worth it for the amount of debt that is forgiven. Luckily, there is another billing structure that can assuage this concern. A growing trend is for these providers to work on a performance-based billing structure, and under this arrangement, you will be charged a percentage for each dollar that the company is able to have forgiven.
Debt relief programs can be an essential option for those that have found themselves overwhelmed by their debts. However, it is important for you to understand that these programs can have an impact on your taxes and the various billing options you will encounter to ensure that you make the right choice when deciding if these services are right for your situation.
To speak with a bankruptcy attorney, contact a lawyer such as Dennis Lee Burman Attorney at Law.
