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Cancellation of Debt

Minvest
Level 3

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

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3 Replies 3
IRonMaN
Level 15

You might want to start with reading the instructions to see if it applies to your situation:

form 982 - Google Search

ACME Taxes, Tatoos, Tires and Tomatoes (I had to get rid of the turtles - they kept running away)
Just-Lisa-Now-
Level 15
Level 15

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.


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Minvest
Level 3

Thank you so much!!! That helped!!