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In the above scenario, ahead of time saved $7,500, but the irs considers it income. If for example the amount is expired $600, a new creditor must send that you form 1099-C. How has it been income? The government considers "debt forgiveness" as income. Exactly how can you out of increasing your taxable income base by $7,500 with this settlement?

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Now, I am hardly suggesting you go to the store and take up a life in identity theft. Tax issues are minor in order to spending time in jail. Frankly, it just isn't worth it, but may be at least somewhat interesting and humorous notice how brand new uses tax laws to try after illegal conduct.

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