"Colorado IRS Tax Forgiveness", sure are sweet sounding words - especially, if you are the one with the debt.

The IRS will forgive you your financial trespasses if you fall in certain categories such as if you are declaring bankruptcy or are insolvent. "Other exceptions include:

• Home mortgage exception
• Seller financed debt exception
• Debt forgiveness for student loans
• Qualified farm debt
• Deductible interest
• Nonrecourse loans" ( www.debt-elimination-program-reviews.com)

Bankruptcy, for those fortunate enough to not have had to undergo through that process, is "a legally declared inability or impairment of ability of an individual or organization to pay its creditors." (www.wikipedia.org) The old saying "Don't kick a dog when it's down", is very applicable here. Justly enough, the Colorado IRS Tax Forgiveness program will include you if you have filed either a Chapter 7 or Chapter 13 Bankruptcy. Additionally, "the income that you get through discharged debts is actually exempt from being taxed by the government, which means this can lessen IRS tax debt." (www.debt-elimination-program-reviews.com)

Insolvency means the inability to pay one's debts as they fall due. Usually used to refer to a business, insolvency refers to the inability of a company to pay off its debts. Business insolvency is defined in two different ways - cash flow insolvency, which is the inability to pay debts as they fall due and, balance sheet insolvency involving having negative net assets - i.e., liabilities, exceed assets, etc." (www.wikipedia.org)

Colorado IRS Tax Forgiveness considers you insolvent, as a natural person, when "your total debts exceed the total fair market value of all of your assets. Assets include everything you own, e.g., your car, house, condominium, furniture, life insurance policies, stocks, other investments, or your pension and other retirement accounts." (www.irs.gov)

In order to be considered for Colorado IRS Tax Forgiveness due to insolvency, "use Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) to exclude canceled debt from income to the extent you were insolvent immediately before the cancellation. You were insolvent to the extent that your liabilities exceeded the fair market value of your assets immediately before the cancellation.

To claim this exclusion, you must attach Form 982 to your federal income tax return. Check box 1b on Form 982, and, on line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately prior to the cancellation. You must also reduce your tax attributes in Part II of Form 982." (www.irs-gov.)

BEWARE though! With regard to taxable income, Colorado IRS Tax Forgiveness deems that when someone has cancelled or forgiven a debt you have with them "you may have to include the canceled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender." (www.debt-elimination-program-reviews.com)

The exceptions are:

• "Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
• Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
• Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
• Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
• Non-recourse loans: A non-recourse loan is a loan for which the lender's only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences." (www.irs.gov)

There are other tricky areas which may or may not be included in the Colorado IRS Tax Forgiveness clauses, and which you need to check out. Other debt cancellations include:

• Credit card cancellation debt cancellation is only applicable if you were undergoing a Chapter 13 Bankruptcy or were insolvent just before the cancellation.
• Student loans: "Your student loan cancellation will not result in taxable income if you agreed to a loan provision requiring you to work in a certain profession for a specified period of time, and you fulfilled this obligation." (www.irs.gov)
• Mortgage: The Mortgage Forgiveness Act of 2007 "allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence." (www.irs.gov) Also, this special debt relief is only available to 2012.
• Foreclosure: The losses on the sale or foreclosure of your home or other personal property are NOT deductible." (www.irs.gov)