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Entering Form 1099-C with insolvency (Form 982) in ProConnect

SOLVEDby Intuit6Updated February 23, 2022

This article will assist you with entering a Form 1099-C with insolvency in the Individual module of Intuit ProConnect.

For tax year 21 taxpayers that received eligible Student Loan Forgiveness may not have to report this as income on their tax return. Per IRS Guidance the creditor should not issue a 1099-C to these individuals. See IRS and Treasury issue guidance for students with discharged student loans and their creditors for more information.

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 ProConnect.

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:

  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose SS Benefits, Alimony, Misc. Income.
  3. Scroll down to the Alimony and Other Income section.
  4. Locate the Cancelation of Debt subsection.
  5. Enter the Cancelation of debt (1099-C) as a positive amount.
  6. Enter the same amount as a negative amount in Other income (Click on button to expand).
    • For example, if the amount you entered for step 5 was 5,000, you should enter -5,000 for step 6.
    • This will generate a statement on Form 1040, line 21. The statement will show the amounts you enter for steps 5 and 6 offsetting each other.

Follow these steps to reduce a capital loss for Schedule D:

  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose Dispositions (Sch D, etc.).
  3. Select Schedule D/4797/etc.
  4. Click the blue Details button to expand the input screen.
  5. Click the three dots at the top of the screen and select Less Common Scenarios.
  6. Locate the Overrides section.
  7. Enter net amount of loss after insolvency in Total gain (loss) [Override].

Follow these steps to enter a portion of Form 1099-C as taxable and the rest as nontaxable:

  1. Go to the Input Return tab.
  2. From the left of the screen, select Income and choose SS Benefits, Alimony, Misc. Income.
  3. Scroll down to the Alimony and Other Income section.
  4. Locate the Cancelation of Debt subsection.
  5. Enter the Cancelation of debt (1099-C) as a positive amount.
  6. Enter the nontaxable portion as a negative amount in Other income (Click on button to expand).

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