topic Thanks so much for your help! in Get your taxes done using TurboTax

I am filling out form 982 for insolvency, and I don't know what to fill in for section II. Can someone explain section II (Reduction of Tax Attributes) for me?

christina-marie5 — Fri, 07 Jun 2019 23:06:41 GMT

Are you trying to do this in TurboTax Online?

MichaelDC — Fri, 07 Jun 2019 23:06:43 GMT

Are you trying to do this in TurboTax Online?

No. I purchased the TurboTax Download so that I can acces...

christina-marie5 — Fri, 07 Jun 2019 23:06:45 GMT

No. I purchased the TurboTax Download so that I can access form 982 - and transferred my tax data.

Good job. Hold for answer.

MichaelDC — Fri, 07 Jun 2019 23:06:46 GMT

Good job. Hold for answer.

You may have most of it done already. LMK

MichaelDC — Fri, 07 Jun 2019 23:06:47 GMT

You may have most of it done already. LMK

I have all the steps completed that are defined in your a...

christina-marie5 — Fri, 07 Jun 2019 23:06:49 GMT

I have all the steps completed that are defined in your answer - My question is do I need to fill anything out for Part II (Reduction of Tax Attributes) if all of my debt was discharged under "insolvency?" (my debt was all credit card debt cancellation) - I just don't want to miss something while submitting this form. Thanks so much for your help.

No, none of Part II would apply to you. Very well done. G...

MichaelDC — Fri, 07 Jun 2019 23:06:50 GMT

No, none of Part II would apply to you. Very well done. Good luck!

Thanks so much for your help!

christina-marie5 — Fri, 07 Jun 2019 23:06:59 GMT

Thanks so much for your help!

Cancellation of Debt and Insolvency are a little complex...

MichaelDC — Fri, 07 Jun 2019 23:07:03 GMT

Cancellation of Debt and Insolvency are a little complex but not complicated. Following the reasoning and steps below will keep things straight for you, produce a clean return and shouldn't take too long. If you have any other details regarding this question, please feel free to post them in the comment section.

Just a little background to cover the bases:

A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent

However, the debt cancellation must be reported and you must claim that you're insolvent on your return. The canceled debt will then become excluded from income.

If you are reporting any type of debt cancellation other than qualified principal residence exclusion that TurboTax handles, we generally recommend using the CD/Download version of TurboTax Deluxe or a higher edition. With either of these versions, you'll be able to easily make a notation regarding your solvency.

If you started your 2017 return in TurboTax Online and want to switch to the TurboTax download/cd version, click here.

Note: if already paid for TurboTax online, contact our support representative ; otherwise proceed with the desktop purchase.

Once you have the Download/CD version, there are four steps to claim your exclusion.

There are 4 steps to ensure that your income is excluded:

1. Enter Form 1099-C

2. Create the Insolvency Worksheet

3. Check entries on Canceled Debt Worksheet

4. Check Form 982

1. Enter Form 1099-C

To enter your 1099-C:

1. Open (continue) your return, if it's not already open.

2. In the TurboTax program, search for 1099-C or 1099C (lower-case also works) and then click or tap the "Jump to" link in the search results.

3. Select the type of canceled debt (main home or other) and then click or tap Continue.

o If using Free Edition, follow the prompts to upgrade to Deluxe.

4. Follow the onscreen instructions to enter information from your 1099-C.

It will say that "Your Debt is Taxable", however, the following workaround will exclude it from income.

2. Create the Insolvency Worksheet

Click Forms in the upper right corner of your screen

Click "Open Form” (button on the top Left).

In the “Type a Form Name” box at the top, type “insolvency”.

Select the form that pops up and click Open Form.

Fill out the form which will give you the Amount of insolvency at the end on Line 7.

3. Check entries on the Canceled Debt Worksheet

In "Form Mode", scroll in the left column to Canceled Debt (Copy 1) and Click. It will open the form.

Scroll to Part VIII - Exclusion for Insolvency

On Line 53 "Were you insolvent? Make sure it's checked Yes

On Line 54 "Amount of Insolvency" carried from Line 7 of Insolvency Worksheet.

On Line 57 "Amount Excluded"

If your total liabilities exceeded the total FMV of your assets at the time of the cancellation, you may exclude the canceled debt to that extent. Complete the "Statement of Insolvency" to compute and document the amount of insolvency.

4. Check Form 982

In "Form Mode", scroll in the left column to Form 982 and Click. It will open the form.

Make sure that Box 1b is checked to exclude your income to the extent insolvent.

Once Form 982 is complete you will want to review Form 1040 "Other Income" line. This is the amount of your canceled debt that's taxable. If you were insolvent, it should be zero or at least less than the total canceled debt from the 1099-C

I just received a notice CP2000 from the IRS for a Wells...

terijowheeler1 — Fri, 07 Jun 2019 23:07:04 GMT

I just received a notice CP2000 from the IRS for a Wells Fargo credit card that was charged off in 2016. How do I file all of this through my past taxes? I did them here on turbo tax, it would be 2016 tax year.

Did you get a 1099-C for 2016?

SweetieJean — Fri, 07 Jun 2019 23:07:06 GMT

Did you get a 1099-C for 2016?

I got a notice from the IRS saying "We are proposing cha...

terijowheeler1 — Fri, 07 Jun 2019 23:07:08 GMT

I got a notice from the IRS saying "We are proposing changes to your 2016 Form 1040A tax return. This is not a bill"

Is the IRS correct? If so, just pay what you owe. But yo...

SweetieJean — Fri, 07 Jun 2019 23:07:09 GMT

Is the IRS correct? If so, just pay what you owe. But you may need to amend states taxes for 2016.

I also got a notice recently from the IRS about my 2016 r...

el_malifico — Fri, 07 Jun 2019 23:07:11 GMT

I also got a notice recently from the IRS about my 2016 return containing a 1099C from a student loan. I only recently graduated from University and at the time am still considered insolvent (liability>assets). is there anyway to file a 982 retroactively? I don't have the money to pay at the moment.

Re: Cancellation of Debt and Insolvency are a little complex...

EKC — Wed, 20 Nov 2019 23:20:48 GMT

On Form 982: does anything else need to be done besides adding your name, identifying number and checking box 1b? Does the insolvency amount or 1099-C amount needed to be added anywhere?

Re: Cancellation of Debt and Insolvency are a little complex...

cmwilliams442 — Thu, 06 Feb 2020 18:50:56 GMT

my vehicle was repossessed in 2014. i received the cp2000 form 2020. for a tax return for 2018. when i explaining my liabilities vs. assets, i should be referencing all financial trouble in 2014 correct?

Re: Cancellation of Debt and Insolvency are a little complex...

GiseleD — Thu, 06 Feb 2020 20:56:14 GMT

Are you referring to the insolvency worksheet (inside Publication 4681)? If so, you will fill it out with the information about your liabilities and assets as of immediately before the debt was cancelled.

For example, let's say that your debt was canceled on 01/31/2018. When filling out the insolvency worksheet, you will include your liabilities and assets as they were on 01/30/2018. You may have to do some digging to do this information, but it is imperative that your entries are as accurate as possible. You will then report the insolvency on Form 982. Keep the insolvency worksheet and all of your supporting documentation in the event that you are audited and the IRS/state tax authority wants to see it.

If you had canceled debts in multiple years, you will need to determine if insolvency was a factor for each year. For example, if you had debts cancelled in 2019 and 2018, you will need to determine insolvency for Form 982 for 2019 and 2018.

Please visit Publication 4681 and Instructions for Form 982 and read the rules and restrictions very carefully.

@cmwilliams442

Re: I am filling out form 982 for insolvency, and I don't know what to fill in for section II. Can someone explain section II (Reduction of Tax Attributes) for me?

Taylore1 — Mon, 16 Mar 2020 23:45:10 GMT

I just got the same form. Did you have any luck filling out the forms bc I’m having trouble 😭

Re: Cancellation of Debt and Insolvency are a little complex...

Taylore1 — Mon, 16 Mar 2020 23:46:16 GMT

I just got the same letter. Did you have any luck filling out the forms bc I’m having trouble

Re: Cancellation of Debt and Insolvency are a little complex...

RobertG — Tue, 17 Mar 2020 00:01:24 GMT

Part II of Form 982 refers to a reduction of tax attributes.

This means that when you exclude a cancelled debt from income you are not allowed to get an additional tax benefit from losses attributable to the debt, such as carryovers and net operating losses.

The instructions for Form 982 part II say:

"If you check any of the boxes on lines 1a through 1c, you can elect, by completing line 5, to apply all or a part of the debt discharge amount to ..."

If you are not intending to use any of those tax attributes, just don't check any boxes in Part II. Just complete Part I.

@Taylore1