Insolvent

[ChrissyF]

I keep seeing posts that say insolvent, what does this actually mean & is there a way to see if you are?

[Flamingo]

Insolvent means "broke." When your debts exceed your assets.

[ChrissyF]

I guess that would be me. Thanks!

[AngelinaCat]

Or when your 'income' can't keep up with your 'outgo'.

Good luck to you!

[Flamingo]

Also, the IRS has a format to determine (for their purposes only) if you are insolvent for tax purposes. If you go to IRS.gov and do a search, you can find that information. Otherwise, if you take all your bills and amounts owed and compare it to all your assets and your debt exceeds the worth of your assets, there you go...

[ChrissyF]

If you are declared to be "insolvent" then do you not have to pay taxes on that money that was issued on the 1099?

[frogger]

Or when your 'income' can't keep up with your 'outgo'.

Good luck to you!

When your outgo exceeds your income, then your upkeep has became your downfall.........

[catleg]

Insolvent means your debts exceed your liabilities.

You can be insolvent and yet still have enough income to service your debts.

Normally once you're insolvent people are no longer willing to loan you money to rollover your debts.

Unless you happen to be a Too Big To Fail financial institution.

[OHBOY]

If you are declared to be "insolvent" then do you not have to pay taxes on that money that was issued on the 1099?

ChrissyF: it depends... IRS standards are 'different' ....
i.e.: by IRS standards you need to include your IRA as assets (exempt by bk standards).
Hence it is very important to first go to the IRS site and check out their definition of 'insolvency', and also to run the numbers using their standards.

[justbroke]

Insolvent: n. See JustBroke

(Just kidding. The IRS definition was provided by catlet. Yeah, look what the cat dragged in!)

[catleg]

Oops. Goofed it up. Meant to say:

Insolvent means your debts exceed your assets.

Be careful because the IRS definition of assets picks up things which are normally exempted in bankruptcy court, i.e IRA and 401k money, and they don't provide for net value after taxes either.

Here is the link to the IRS doc including worksheet: Pub 4681

[treehugger1]

And I suppose if you owe the IRS money and are on a payment plan, this also counts as liability...