Can I file form 982 to prove insolvency when dealing with several 1099C for Credit Card debt?

Forum|Forum|7 years ago
June 7, 2019
3 replies
15 views

I just don't know where to begin with this and need help.

TurboTax Deluxe Windows

DanielV01

Level 15

Yes, if you qualify. First, you have to determine up to what point you were insolvent. The worksheet can be found on page six of the following document: https://www.irs.gov/pub/irs-pdf/p4681.pdf (It is a PDF file). This worksheet is manual, and usually requires some investigation. Look at the discharge date on the 1099C and the amount of debt that was cancelled. The worksheet is based on the amount of attributes and debts you had on that date. You will need to see what your bank account, credit card debts, car debt, house debt, etc. were on that date (unpaid medical expenses, etc.) If your llabilities are greater than your assets, (do not include the debt amount canceled), you are insolvent. That is the number you will put in the 982 form under insolvency and goes with your return. If your insolvency is greater than your canceled debt, you have no canceled debt will not be taxable. I recommend mailing in the return to include both form 982 and the worksheet.

If your canceled debt is more that your insolvency, that is claimed as other income (line 21). In TurboTax you will see this as Miscellaneous Income.

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Lili9

Level 2

do you file the worksheet with your return? It says keep for your records on it but some accountants say you have to file it.

Lizard68

Level 2

I have a 1099C for one credit card in the amount of $894. I am unemployed with many unpaid bills for ambulance companies that I cannot pay due to my present situation. Does it mean that I am insolvent and should use form 982.

Regards,

J youmans

DMarkM1

Level 15

Yes, being unemployed and having unpaid bills is definitely a sign of insolvency. Basically, if you were "insolvent" prior to getting the debt relief that generated the form 1099-C, then the debt would be excluded from income using the form 982.

Here is a link to the IRS discussion of "insolvency". You can also link to the instructions for form 982 from there, and scroll down to the instructions for line 1b.

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bensonfun

Level 2

so im confused. if i was insolvent which is what caused the debt that is now beyond statue of limitations (almost 20 yrs) but im not insolvent now and now 20 yrs later is when they decide to discharge the debt does insolvency not apply? i still have to even verify the debt because im not certain its even true.

lflammia3

Level 2

Does filing a 982 for insolvency on canceled student loan debt have any effects on your credit or credit report?

npierson777

Level 10

No, filing the form itself doesn't affect your credit score. However, If you’ve received a 1099-C, the damage to your credit has most likely already been done.