Settling old debt can be a relief, especially once the money is out of your account and the bills and calls stop. However, in the United States, settled debt brings with it another issue: extra taxes. Yes, you owe taxes on the forgiven portion of your debt because that's considered extra income.
When you settle, you pay part of the total due, and the unpaid part is forgiven. Because you're no longer sending your income out to pay that debt, it's the equivalent (in the IRS' eyes, at least) to suddenly getting a nice windfall -- just one that appears over time, rather than all at once.
Investment banking starts with an item for sale, usually a property or business. The investor borrows from the bank, and then the investor finds a way to make a profit as quickly as possible. The idea is to pay off the loan taken from the bank and pay as little interest as possible so that the investor can keep as much of the profit as he/she can. That is the basic explanation.
Taxes can be a source of intense and persistent stress for many people. However, managing your taxes does not have to be as difficult as you might assume. In particular, there are many strategies that can help you with both making your taxes easier to manage as well as reducing your overall tax burden.
Consider Tax Implications of Major Purchases or Retirement Account Withdrawals
Throughout the course of a year, you may be forced to make numerous major financial decisions and choices.