If your tax attributes relate to the forgiveness of credit card debt, these are generally reported on Line 10a in Part II of Form 982. The IRS uses this line to reduce tax attributes by the amount of forgiven or discharged debt.
To determine if you’re insolvent and can exclude canceled debt from taxable income, use the Insolvency Worksheet in IRS Publication 4681. Insolvency occurs when your liabilities exceed the fair market value of your assets. If applicable, file Form 982 with your tax return. For more details, check TurboTax’s Debt Cancellation Guide.
Completing Form 982 for Credit Card Debt IRS Guidelines:
Part I: Identification of Discharge of Indebtedness
- Line 1: Check the box that applies to your situation. For credit card debt, check "Insolvency" if your liabilities exceeded your assets at the time the debt was forgiven.
- Line 2: Enter the total amount of discharged credit card debt excluded from gross income. This is the forgiven debt not reported as taxable income.
Example (IRS): You were released from $5,000 of credit card debt. Your total assets' FMV before the discharge was $7,000, and your liabilities were $10,000. You were insolvent to the extent of $3,000 ($10,000 liabilities - $7,000 assets). Check the box on Line 1b and include $3,000 on Line 2.
If you need more detailed guidance, here are IRS instructions for Form 982
Completing Form 982 Step-by- Step in TurboTax:
Note: Form 982 cannot be completed in TurboTax Online. You will need to use TurboTax Deluxe Desktop.
Step-by-Step Instructions to Complete 982 in Turbo Tax
- Open TurboTax Desktop and enter your information, including the 1099-C for the canceled debt.
- Switch to "Forms Mode" by selecting it in the upper-right corner of TurboTax.
- Click "Open Form" at the top of the form list on the left.
- Type "982" in the search box to locate Form 982.
- Highlight and "Open" the form.
For a detailed copy of the Turbo Tax step-by-step instructions, refer to this link: How do I report excludable (non-taxable) canceled debt?
