Single client has $65k in income.
Client expects to get a 1099-C for cancellation of $25,000.00 in debt.
I did a sample tax return, entering $25K on line 2 (Amt. of debt discharged) on the 1099-C form.
Doing so increases client tax liability by approx. $4600.
I understand that using Form 982 will reduce client's liability. However, I'm unable to generate the reduction....not sure what I need to fill out.
How do I use form 982 to reduce client's tax liability?
Thanks in advance,
Michael De Freitas
Professional has a Canceled Debt Worksheet (that you link to from the 1099C worksheet) with an Insolvency section to complete (or Bankruptcy if thats the case), the amount of Insolvency will transfer to the 982 and reduce the taxable amount.
Id look for a similar worksheet in Basic.