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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 had a 1099-C for about $135,000. My husband didn't have any withholding on Social Security. His employer couldn't withhold due to incompetence. I felt utter dread wash over me. Memories of owing the IRS before were constantly on my mind. I called a local CPA. Besides being clueless, he wanted to charge me for every question I had about insolvency. I looked on line and found little hope of the countless stories of permanently disabled people like myself getting their student loans forgiven only to be asked to pay taxes on it as if it were income.
Somewhere, somehow, I find an article by Gary Bode. I bookmarked it for when it's time to do the actual taxes. With his excellent help in how to do all of this out of a virtual office I get my part of the work done. My questions got answered, for free. I give a retainer, do what I said I did and wait. I hear from Gary. I go into shock! How can this be? Not only do I not owe on the 135,000....Gary itemizes and after paying what was almost nothing in taxes we get $950.00 back! No more hubby doing the taxes online! I will use Gary Bode as long as he will agree to work with me!
It was so easy, no worries, but professional and top notch. I know I have thanked you Gary but I am so grateful. Thank you ever so much again!

Carla Bray

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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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