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Get your taxes done using TurboTax
The American Rescue Plan does not apply to student loans that were discharged due to being in default. The loans that is does apply to, according to the IRS, the borrowers will not received a 1099-C if it is not a taxable event.
1) Yes, You will need to include this on your tax return unless you qualify as being insolvent as this does not fall under the American Rescue Plan Act.
2) You would fill out this insolvency worksheet to determine if you are insolvent. If you are claiming insolvency, this is not a situation that TurboTax handles, so it is recommended that you contact a professional.
3) No, you would not be able to file online (at least through TurboTax) if you are claiming insolvency as you would need to attach unsupported forms to your return.
- "How to report the insolvency exclusion. To show that you are excluding canceled debt from income under the insolvency exclusion, attach Form 982 to your federal income tax return and check the box on line 1b. On line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation. You can use the Insolvency Worksheet to help calculate the extent that you were insolvent immediately before the cancellation. You must also reduce your tax attributes in Part II of Form 982, as explained under Reduction of Tax Attributes, later". Pub 4681
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