I recently recieved a cancelled debt paper from a credit company that cancelled a debt. They did this on their own, I did not request it. I have a cancelled auto debt for 9061.00. I have three children and I qualify for the earned income tax credit. How will this cancelled debt affect my tax return. I usually bring in 5000.00 when I file my taxes. Will this affect my earned income tax credit.
It said that I have to file this with the IRS if it would result in taxable income. I'm not sure if it would. I have never dealt with this before. I am afraid if I file this with my taxes it will take away my tax credit which is used for my children. Is there anyway I can omit this from my taxes and file it later to pay anything I might owe. This is not from a bankrupcy. I had no idea they were doing this until I got the notice.

Elizabeth:

You will add this $9,061 to your Adjusted Gross Income, listing it on Line 21 of Form 1040.

With three children, this income should NOT affect your EIC too much.

If you want help on these issues, contact me at dpmtax@<hidden> with your income figures and I will run a tax return computation for you, no charge.