[judy_mac]

I had a credit debt of $14,000 and settled to pay 7,000, which I had borrowed from my brother. How does this affect me filing my taxes? The 1099 C is for $7,000. By adding this as other income, I think it will make me owe quite a bit ot the IRS. Can you shed some light on this.

[AtlantaTaxExpert]

Yes, you must claim the $7,000 as other income on Line 21 of Form 1040. The IRS has a copy of the Form 1099C and is expecting that entry on Line 21.

It could be worse! The IRS could claim that the income was also self-employment income (as on a Form 1099-MISC), which would make you liable for a 15.3% self-employment tax.

As it is, you will pay at your marginal income tax rate only.