We have a bankruptcy this year and the 1099-C forms are coming in. TurboTax Home & Business does not appear to allow me to show exemptions for debt cancellation. In fact, when entering a 1099-C TurboTax says "In some situations, canceled debt can be excluded from taxable income. These situations may include bankruptcy or insolvency. If you think one of these exclusions apply to you, we recommend you have a tax pro review your situation."
Is this telling me I cannot use TurboTax to file?
Yes, you can use TurboTax to report cancelled debt and help determine if that debt can be excluded from your taxable income.
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
The following post describes the process in some detail. Importantly, it recommends that you use a Desktop (CD/Download) version of TurboTax Deluxe (or higher, like Home and Business). It will allow you easier access to the necessary forms and worksheets.
I have a 1099c for a cancelled debt. I want to file for insolvency. How do I do that?