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?

[cmwilliams442]

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?

[GiseleD]

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

[Taylore1]

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

[Taylore1]

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

[RobertG]

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

[JenF49]

Hi!  I was super happy to find this thread.  My husband and I filed for bankruptcy last year 2019 and was awarded.  Say we had 60,000 in credit card debt, 40,000 was personal, 20,000 was from his home improvement contractor's business.  All of the debt was from credit cards and 1 large equipment.  My husband received 5 1099-C's under my husband's company's EIN # .  Somehow our bankruptcy included all of our dept, business and personal combined.  The business was listed as a co-debtor on the business debt.  My husband's business is closed.  He sold the large piece of equipment on 1/6/19.  I have zeroed everything out on the 2019 for his contractor's business.  When I enter the sale of equipment I am left with $3,000 depreciation for 2019 which is showing up as a loss for the company.  I plan on mailing in our return with the 1099-c's since Turbo Tax will not let me put in my husband's EIN numbers.  Right now in Turbotx I have one with all the totals entered with his social.  I filled out the Debt cancellation worksheet, 3 of them, one for the business debt, one for husband's debt, one for my debt.  The numbers flow through to Form 982.  I just don't know what to do with Part II of form 982.  I know I need to get rid of the $3000 depreciation loss on my husband's business.  How do I do that?  and should the $3000 be on Form 982 part II?  Should I have anything else on Part II?  Also, my husband's company had a loss of $20000.  I haven't done anything to carry forward the loss.  I know it shouldn't be done bc of the bankruptcy.  Turbo Tax doesn't automatically do that does it?  I don't see the numbers anywhere.  Thank you so much for your help!  So to clarify 1.  What do I do with the depreciation loss for the year.  Can I delete it in the company section somehow or does it have to be on Form 982 Sect II?  2.  Is there anything else that needs to be on Form 982 Sect II?  3.  Do I need to do anything else with last years company loss if it looks like nothing is coming through automatically on TurboTax.  Thanks again. 

[Richard1979]

Hi, I have two types of canceled debts, my main home was in a short sale during 2019 and generated two 1099-C's ( for my first and my second mortgage). Also, I have two 1099-C's from credit card debts that were canceled during 2019. I bought the TurboTax desktop edition for Mac however, there is an error saying that Ultra tax does not support two types of canceled debt. For the record, I was insolvent during 2019. How can I report it to my taxes?

[Mburton51]

I am filling out form 982 and my cancelation of debt is $10,395.00 is this the amount that I put on line 1b?

[KristinaK]

Line 1b of Form 982 is for the Discharge indebtedness to the extent insolvent. It's a check box (you can't put an amount there). If that is the reason for the discharge for you, then yes, you will check box on line 1b. The amount goes to line 2. 

Here are instructions to the Form.