This article will assist you with entering a Form 1099-C with insolvency in the Individual module of Lacerte.
First, you need to determine if you need to report the 1099-C—and how you need to report it. After that, you can use the steps below to enter 1099-C in Lacerte.
Refer to IRS Topic No. 431 to determine whether a debt cancelation is taxable.
Refer to this article for instructions on generating Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.
Follow these steps to enter Form 1099-C as nontaxable:
- Go to Screen 14.1, SS Benefits, Alimony, Miscellaneous Inc.
- Scroll down to the Alimony and Other Income section.
- Enter the Cancelation of debt (1099-C) as a positive amount.
- Enter the same amount as a negative amount in Other income (Ctrl+E).
- For example, if the amount you entered for step 3 was 5,000, you should enter -5,000 for step 4.
- This will generate a statement on Form 1040, line 8. The statement will show the amounts you enter for steps 3 and 4 offsetting each other.
Follow these steps to reduce a capital loss for Schedule D:
- Go to Screen 17, Dispositions.
- Scroll down to the Overrides section.
- Enter net amount of loss after insolvency in Total gain (loss) [O].
Follow these steps to enter a portion of Form 1099-C as taxable and the rest as nontaxable:
- Go to Screen 14.1, SS Benefits, Alimony, Miscellaneous Inc.
- Scroll down to the Alimony and Other Income section.
- Enter the Cancelation of debt (1099-C) as a positive amount.
- Enter the nontaxable portion as a negative amount in Other income (Ctrl+E).
