It depends. You may end up with a tax liability because when a creditor cancels a debt, the IRS considers the canceled debt as income. Your canceled debt may be excluded from your income if you meet one of the exceptions, which are:
- Debt discharged in Title 11 bankruptcy
- Canceled debt on real business property and qualified farms
- Forgiven debt on a qualified principal residence between January 1, 2007 - January 1, 2021
- Debt canceled due to insolvency.
Refer to the TurboTax articles When to Use Tax Form 1099-C for Cancellation of Debt and Guide to Debt Cancellation and Your Taxes for more information.
If you can exclude your canceled debt, refer to TurboTax article How do I report excludable (non-taxable) canceled debt?
Don't amend your tax return until your tax return is fully processed, which means you have received your refund or if you have a balance due, it's deducted from your account. If your tax return is pending, don't make any changes.
For more information and instructions, review the TurboTax articles How to Correct Federal Tax Returns , How to File an Amended Tax Return with the IRS and Video: How to Amend Your Tax Return.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
