Before committing to a debt settlement agreement with a third-party provider, it is important to understand the legal ramifications of your decision. Across the United States, many states and federal agencies have launched investigations into the debt settlement industry, prompting a number of strict reform efforts at the state level. In addition, some analysts have predicted that federal debt settlement laws may change in the near future. Currently, there are a number of federal provisions that impact the way that debt settlement companies can do business. One of the most significant provisions of federal law in this regard is the little-known fact that the IRS considers forgiven debt over $600 to be taxable income. In other words, if a debt settlement company is able to help you achieve total debt forgiveness of $5000, you must report $4400 of that amount as taxable income for the year. If you have specific questions about the federal laws governing debt settlement or the tax implications of debt forgiveness, contact a debt settlement attorney in your area.