1099-C Debt cancellation

[momskittykat]

Hello

So We had a repossession back in 2013, but the bank did not handle it correctly or per the laws

They brought us to court and tried to sue us for the balance of the repossession and we fought the lawsuit and won - court said we owe no money

Now the bank sends a 1099-C to IRS calling it debt cancellation even though we won against them in courts and IRS says we have to pay taxes on it? How is this debt cancellation when I won in court and didnt owe the debt??

[ThomasM125]

I'm not sure of the legalities of your situation, but you can enter the Form 1099-C in TurboTax and the cancellation of debt may not be taxable depending on whether it was your main home that was foreclosed on and whether the loan was recourse or non-recourse. You enter the Form 1099-C in the Wages and Income section, then Less Common Income, then Miscellaneous Income, 1099-A, 1099-C. TurboTax will ask you the questions necessary to determine if the income is taxable.

[momskittykat]

This was non recourse and it was a vehicle and box 5 is not checked

[ThomasM125]

You would have to use the desktop version of TurboTax to see if you could exclude  taxation on the debt, by completing Form 982. There are several worksheets listed on the top of the form you can work through: