Line 21 used to be for 'Other Income'. Now 'Other Income' is Schedule 1 Line 8. That is the line that should be zero.
On an amended return Form 1040X, line 1 is adjusted gross income.
Changes to Schedule 1 line 8 affect adjusted gross income, and would be reflected in changes to 1040X line 1.
Please see below for how to exclude income from cancelled debts due to insolvency.
Exclusion of income from cancelled debts due to insolvency.
Canceled, forgiven, and discharged debt is considered taxable income, unless it qualifies for an exclusion or an exception.
One of those exceptions is insolvency.
The IRS considers you to be insolvent if your debts exceed your assets immediately before the debt was cancelled.
You don't have to include a canceled debt in income to the extent that you were insolvent immediately before the cancellation of the debt.
To determine if you were insolvent immediately before the cancellation of the debt complete the Insolvency Worksheet in Publication 4681.
If you wish to exclude the cancelled debt from income due to insolvency, you can do so using the CD/Download version of TurboTax Deluxe or a higher edition.
If you started your 2019 return in TurboTax Online and want to switch to the TurboTax CD/Download software, here's how. How do I switch from TurboTax Online to the TurboTax software?
- Once you are in the CD/download version you can switch to Forms Mode by selecting the Forms icon in the upper right hand corner of the screen, or selecting Forms from the view menu.
- The Federal Information Worksheet will display and all the forms in your return will be listed on the left side.
- Select Open Form and type into the search Box 1099-C. You will be asked to enter the creditors name, and then a Form 1099-C will display. Enter the information from your 1099-C.
- When you enter the Form 1099-C information a new form will be created just below the 1099-C called Cancelled Debt (Creditors Name). Select that Form.
- Fill out the cancelled debt Form Part VIII Exclusion for Insolvency.
- You must also complete the Statement of Insolvency. You can QuickZoom to that statement from Part VIII.
When you complete the cancelled debt form, Form 982 will also be completed. You do not have to add any information to Form 982.
To verify that your debt has been excluded, look at Schedule 1 line 8, other income. It should not show any income from cancellation of debt.
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