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It depends. You must use the Insolvency Worksheet to see if you qualify, it is included in the publication link below.
If you do not qualify for insolvency or you the cancelled debt was not included in bankruptcy, then the amount reported is taxable.
I have the same question essentially. With this clarification: my 1099C’s show the discharge of debts on different dates throughout the year because it took me awhile to work thru the settlements. The worksheets I completed for each discharge date show I was insolvent each time. However I’m less insolvent as the year progresses. A couple other past threads here have said to only submit a single 982, but a single 982 can’t reflect a factual and favorable outcome in my case.
please confirm it’s acceptable and expected to submit multiple 982s. One for each cancellation of debt discharge date.
thanks
Form 982 is completed and filed with your tax return in order to determine the amount of discharged indebtedness that may be excluded from your income. Since you would only file one income tax return that may include the discharged debt, only one Form 982 will be filed to cover the entire tax year.
Thanks
I am married and received several 1099-Cs for loans taken out in my name only, prior to 2024. I did not live with my spouse all year and am wondering if I am able to exclude this income based on insolvency if I file as Married Filing Separately. I definitely meet the criteria for Insolvency. Thank you.
To qualify for the insolvency, you must show that all of your liabilities (debts) were more than the Fair Market Value of all of your assets immediately before the cancellation of debt.
To show that you are insolvent and are excluding your canceled debt from income, you must fill out Form 982. Although the form is available in Turbo Tax, it is not available in TurboTax Online. You would have to use a TurboTax Desktop product and fill out the form manually in FORMS mode. There are no interview questions for this situation.
You can Efile with Form 982; however, save the Form 982 Worksheet and your Form 1099-C's for documentation (don't enter them in TurboTax) if the worksheet shows you qualify for Insolvency), along with any other related documentation.
Here's more info on Debt Cancellation and Taxes.
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