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We prepare most type of tax returns:


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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

I used Gary’s services to file my 2012 income tax return. This was my first year having an accountant do my return, as I have always done it myself using TurboTax. However, this year I had cancelled debt from my old primary residence which I was forced to convert to a rental property after relocating out of state.

While it didn’t cost me anything to do the short sale, the income tax consequence from the cancelled debt, roughly $50,000 in my case, was enough to move me from the 15% tax bracket to the 25% tax bracket.  Needless to say, I was concerned about that.

Finances were already tight and my husband and I are expecting our first child this fall. So the possibility of owing income tax was stressing me out. However, Gary was great at relieving my fears.

He is extremely knowledgeable, answered all my questions and was very thorough. I knew I was in good hands. He kept in constant contact with me throughout the process, keeping me updated on the progress of my return and letting me know what paperwork he needed to complete my filing.

In my mind, best case scenario would have been to not owe any taxes. Second best would be to only owe a little. Well, you can imagine my surprise and delight when Gary told me I was actually due a refund of a little over $2,700.00!

To top it all off, I found Gary’s fee for service to be fair, competitive and affordable; especially given the complexity of this type of return. I am so glad I did not try and go it alone this year. I am extremely pleased with Gary’s service and would recommend him highly to anyone, in fact I already have. If you have cancelled debt from a short sale or foreclosure, don’t freak out. Take a deep breath and call or email Gary. I am grateful I did.

Angie Falke of Holiday, FL

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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Form 982 CPA discusses Credit Card Cancelled Debt and Insolvency | Form 982 Example

form 982 cpa explains credit debt and insolvency using an example

Gary Bode, CPA: credit card cancelled debt on Form 1099-C becomes taxable income unless you can exclude it on IRS Form 982. (910) 399-2705.

Form 982 CPAs see increased use of the insolvency exclusion for cancelled credit card debt during the recession. Hopefully we’ll see less in 2013. Of course, Form 982 is a typical, multi-function IRS document and credit card cancelled debt is just one part of it. Please note insolvency has a special definition with the IRS; be sure to understand it before attempting Form 982. There’s a link at the end of the post that shows a completed Form 982 example as prepared by our CPA firm.

How do I get Credit Card Companies to cancel my Debt

Most cancelled debt occurs involuntarily, but Form 982 CPAs still get asked this question often. An attorney friend of mine says you just stop making payments. Each time you talk with a credit card representative, stress how cash poor you are. Be consistent with all phone calls. Remember credit card cancelled debt affects your credit score, so plan accordingly.

How does the Credit Card company Report Cancelled Debt?

They send a Form 1099-C to both you and the IRS. Check this document carefully. Sometimes there are errors in the amount and/or date of the cancelled debt.

Is Cancelled Credit Card debt Taxable?

Yes. All cancelled debt becomes taxable income unless you can exclude it on Form 982. For credit card debt, Form 982 calculates how much you can exclude via insolvency.

Does Form 982 raise IRS Red Flags?

“Form 982 has multiple functions. I think the IRS looks closely at excluded cancelled debt. It’s prudent to present it correctly.”
– Gary Bode, Form 982 CPA

Probably not. But I’m confident they check it for accuracy. And it’s certainly easier to get it right the first time to avoid IRS Notices like CP2000.

I’m a Form 982 and insolvency CPA with a virtual to help you with credit card cancelled debt wherever you live. If you get stuck during self preparation consider calling for a free consult. If we can help, we will. If and when you decide to use a CPA, we’ll handle everything for you. (910) 399 2705.

Form 982 example

4 comments to Form 982 CPA discusses Credit Card Cancelled Debt and Insolvency | Form 982 Example

  • russell

    hi, im enrolled in a debt settlement company. i have received a 1099 from a creditor i have settled an account with. since im paying for the services of the debt settlement company, can i use the 982 form to help minimise the amount i pay.

  • marta cuevas

    had short sale this yr reported to credit bureaus when form 982 is done next yr with return does it change credit score in any way since bal of mortgage was forgiven.

    • Hi Marta: I don’t know for sure if your cancelled debt harms your credit. I’ve had a few clients who experienced credit reporting issues. But since I don’t deal with the credit reporting and concentrate on the tax return I’ve had a need to look this issue up. Sorry, I wish I could be more help.

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