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RobOli
New Member

Audit risk

My return includes a Form 982 for debt forgiveness which raises my audit risk. I had no debt forgiven and never claimed such. Why is a Form 982 included as part of my return?
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2 Replies

Audit risk

Did you enter a 1099-C?  

 

Cancelled, forgiven, and discharged debt is considered taxable income, unless it qualifies for an exclusion or an exception.

 

Normally the debt is reported on Form 1099-C. Make sure you enter your 1099-C in TurboTax even if it qualifies for an exclusion or an exception.

 

Exclusions

  • Cancellation of qualified principal residence indebtedness, better known as mortgage debt relief;
  • Debt cancelled in a Title 11 bankruptcy;
  • Debt cancelled during insolvency (the amount exceeding your assets);
  • Cancellation of qualified farm or real property indebtedness.

If the debt qualifies for any of these exclusions, TurboTax will complete Form 982 and include it with your return.

Exceptions

  • Certain qualified student loans;
  • Money excluded from income by law, such as gifts or bequests;
  • Cancelled debt that if paid by a cash-basis taxpayer would otherwise be deductible;
  • A qualified purchase price reduction given by a seller;
  • Any Pay-for-Performance Success Payments that reduce the principal balance of your mortgage under the Home Affordable Modification Program.

Tip: If your creditor is still trying to collect on your debt, it's not considered cancelled, forgiven, or discharged. There is no taxable income to report, not even if you got a 1099-C from the creditor.

Related Information:



GEN85393

Answered by TurboTax FAQ to this question

Anonymous
Not applicable

Audit risk

if there is no debt forgiveness,  there should not be a form 982  which would not be created automatically. It is used to reduce the taxability of the forgiveness by reducing the tax attributes of certain items which the taxpayer selects. 

 

 

could you have gotten a k-1 from a partnership that reported debt forgiveness which would flow thru to your return.   it would be on the k-1 line 11e

 

if not you have probably mis-entered something which could be anywhere in return.

 

  

 

 

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