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sddavis66
New Member

How can i claim insolvency on credit card debt

How do I claim insolvency on credit card debt
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2 Replies
LiliY
New Member

How can i claim insolvency on credit card debt

Under these circumstances and in order to file the Form 982, we generally recommend using the CD/Download version of TurboTax Deluxe or a higher edition.

Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) reports the amount of cancelled debt to excluded from taxable income. We'll automatically generate Form 982 if your cancelled debt is due to:

  • Cancellation of qualified principal residence indebtedness, aka 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.

In addition, you should have a 1099-C to report the amount of cancelled debt.

In order to the switch from online to CD/download. please see the following link: https://ttlc.intuit.com/questions/1901476-how-do-i-switch-from-turbotax-online-to-the-turbotax-softw...

Once you have done the above you can access the forms mode of your desktop program using these steps:

To switch to Forms Mode, open your return, and then click the Forms icon in the upper right corner of your screen (or choose Forms from the View menu at top).

The Federal Information Worksheet will display and all the forms in your return will be listed on the left side. Then click on Open Form and type in the search box : Form 982.

To make sure its excluded within your return, you will need to fill out the following forms:

  • Form 1099-C (Cancellation of Debt), fill out accordingly
  • Form 982, you will need to indicate the reason for the discharge within Part 1 General information and you will need to include an amount within Part II Reduction of Tax Attributes (accordingly to the reason)
  • Canceled Debt Worksheet (fill out the Part accordingly to your reason or exclusion)
    • Part VIII Exclusion for Insolvency (must fill out the Statement of Insolvency)
  • Then check Form 1040, look at Line 21 Other Income, should be 0.
Regal23
New Member

How can i claim insolvency on credit card debt

If I purchase the 2018 Home & Business, does it allow you to file for insolvency?  

You mentioned the Canceled Debt Worksheet.  I've read elsewhere that people were suggesting to mail in this form separately (with a possible explanation) to the IRS.  Will Turbo Tax submit this worksheet directly to the IRS  with a 2018 filing (using CD)?  I've also read that experts recommend to send in your financial statements to show your balances on credit cards, etc. at the time the debt was cancelled to support your worksheet calculations.  Do you advise to do that?  If so, I assume that is sent in separately from your return if you file online (?).  Or it might work as well just to mail everything in in this case?  Thanks.

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