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Insolvency CPA explains Cancellation of Debt | IRS Form 982 and 1099-C tips | Reduction of Tax Attributes

Insolvency CPA Form 982

Unfortunately, insolvency and Form 982 became a tax niche for us during the Recession. And it seems we’ll have lots of 1099-C(s) arriving in 2018. Don’t pay tax on debt cancellation without exhausting every possibility on Form 982. Need a free consult with a cancelled debt CPA?  (910) 399-2705.

Hi, I’m Gary Bode, an insolvency CPA accountant with a virtual office to help you wherever you live. Yes, I prepare debt cancellation tax returns. I’ve done so since 2009.

Form 982 became a niche for us during the Recession, probably because of this website drawing clients from across the country. But, sadly, I’m still seeing lots cancelled debt in the 2018 tax season (for 2017 tax returns). That’s based on proactive calls from Folks expecting a 2017 Form 1099-C, chatter from other CPAs and my early 2017 cancelled debt tax preparations. I’ll present the most common FAQs I field on IRS tax Form 1099-C and Form 982. Plus a few tips I’ve learned over the years as an insolvency CPA. The Form 982 instructions get complex quickly and you’d have to know some tax and accounting concepts to have them make sense. Form 1099-C instructions are for the lender, not the taxpayer.

Form 982 issues

  • Cancellation of Debt on IRS Form 1099-C, Cancellation of Debt,  automatically becomes Taxable Income on Line 21 of Form 1040.
    • The 1099-C instructions are for bankers.
  • IRS tax Form 982, Reduction of Tax Attributes, may allow exclusion of cancelled debt from taxable income.
    • Insolvency is just one exclusion available on IRS Form 982, Reduction of Tax Attributes.

Note: there’s an update on this post for zombie cancelled debt and zombie 1099-C(s).

Note: there’s an update on a new twist for avoiding Form 1099-C cancelled debt. Sometimes you don’t have to rely on insolvency.

Note there’s an update on the qualified principal mortgage debt relief exclusion for the 2017 Form 982.

Please note our testimonials and post comments feature CPAs and other tax preparers.

Debt cancellation in Box 2 of  Form 1099-C automatically becomes Taxable Income on Line 21 of Form 1040 unless you file Form 982

Cancelled debt springs from bad luck and financial distress. So, the IRS making cancelled debt taxable income seems unfair. Especially since it feels like you’re being taxed on money you never had. The IRS has multiple exceptions and exclusions that may allow you to avoid being taxed on some, or all, of the cancelled debt listed in Box 2 of Form 1099-C. Insolvency, called on line b of Form 982, Discharge of indebtedness to the extent insolvent (not in a title 11 case), is one exclusion reported on Form 982. However we often use the insolvency exclusion with other exclusions on Form 982. For example on a rental property foreclosure we use:

  • Discharge of indebtedness to the extent insolvent (not in a title 11 case). Wouldn’t it be better to just call it insolvency?
  • Discharge of qualified real property business indebtedness.

Update for 2017: line e of Form 982, Discharge of qualified principal residence indebtedness is still available for your 2016 tax return. But it’s gone for your 2017 tax return. We can sometimes play with the date on a Form 1099-C, Cancellation of Debt.

If you had a short sale of your home and the written agreement is dated in 2016, we can use the 2016 date even though the bank issues the 1099-C in 2017 or 2018. Don’t give up using discharge of qualified principal residence indebtedness exclusion of Form 982 until you work the date issue thoroughly.

Update: Some states don’t honor the federal Form 982. So you may have change the way you file the State return to get some exclusion on the State level. No worries, we handle that. Doesn’t work with all States. But we make a call to check.

How much tax might you pay on cancellation of debt?

20-35% of the amount of Box 2 of Form 1099-C, Cancellation of Debt. Ouch. Depends on your marginal tax bracket and what state you live in.

What is IRS insolvency?

Per the IRS insolvency worksheet, it’s what you owe, less the Fair Market Value of what you own; as of the date on the Form 1099-C. You can exclude cancelled debt income to the extent of your insolvency. There are three scenarios for cancelled debt, it’s not an all or nothing issue.

  • Full exclusion. Your insolvency is equal or greater than your cancelled debt on Form 1099-C. The entire cancelled debt goes on Form 982, and becomes non-taxable income, and $0 flows to Line 21 of Form 1040.
  • Partial insolvency. If you have, say, a $150,000 Form 1099-C and you were $100,000 insolvent, the $100,000 goes on Form 982 and is non-taxable, but the $50,000 goes to Line 21 , Other Income, of Form 1040 and becomes taxable income.
  • No insolvency, The entire amount in Box 2 of Form 1099-C flows to line 21 of Form 1040 and becomes taxable income.

The IRS insolvency worksheet

The IRS insolvency worksheet uses some antiquated questions, some silly questions (like how much did you have in your purse on the date shown on Form 1099-C), estimates of fair market value and few devious questions. We help you understand it during a conference call together. We help you understand what’s required for documentation. So, you’ll have everything you need if you’re audited. We’ve never been audited. But it’s much harder to find 2017 data now instead of finding it in 2021 for the audit. I think maybe the reason we haven’t been audited is that I look for IRS red flags. Most red flags are actually legitimate and I provide proactive documentation and explanations.

The Insolvency Exclusion for Cancelled Debt on Form 982

Per the IRS: you were insolvent immediately before the cancellation to the extent that the total of all of your liabilities was more than the FMV of all of your assets immediately before the cancellation. I like my explanation above better. The IRS insolvency worksheet seems straightforward, but becomes complex in some cases. The IRS provides some good examples in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abadonments. Pay special attention to the reduction of tax attributes section since Form 982 isn’t always a free ride. Sometimes there are future tax consequences. If your insolvency CPA does not address future tax consequences you’re talking to the wrong CPA.

Use the IRS Insolvency Worksheet to calculate your amount of insolvency. With Clients I go through the insolvency worksheet together by phone, because it isn’t always straightforward. Plus I tell the Client what underlying documentation for the insolvency worksheet he or she needs to have if audited. Most cancelled debt Clients think using Form 982 raises IRS red flags. But maybe 40 million (yes that’s right) 1099-C(s) got issued in the Recession and I think the IRS now regards a 1099-C tax return as ordinary, if that’s the right word. So the risk of an IRS audit is small. I’ve never had an IRS audit on any cancelled debt return but I’m sure it will happen eventually. So we try to bulletproof the return with supplemental explanation and documentation even on straight forward insolvency cancelled debt.

Note your insolvency CPA might use other Form 982 exclusions and exceptions too.

IRS tax Form 982, Reduction of Tax Attributes

Form 982 is a typical IRS Form. It’s used for multiple circumstances. It has significant consequences. It requires sub-schedules. Verbiage in the Form 982 instructions intimidates some Folks. But it’s the only way to prevent debt forgiveness from becoming taxable income. The Form 1099-C instructions aren’t even written for the taxpayer.

My advice is to relax before preparing Form 982. Hard to do sometimes.

What is Cancelled Debt?

Publication 4681 defines cancelled debt but here are some typical examples;

  • You negotiate your credit card debt, getting the company to accept $4,000 to settle $10,000 balance. That “forgiven” $6,000 is cancelled debt, reported on Form 1099-C,  and gets automatically included on Line 21 of Form 1040 as taxable income. We use insolvency as the defense on Form 982 to avoid tax on the 1099-C’s amount in box two, $6,000 in this example.
  • This is almost obsolete. You have a short sale on your home and the mortgage company “forgives” the remaining mortgage amount of $6,000.  That “forgiven” $6,000 is cancelled debt, reported on Form 1099-C and can completely avoid all tax consequences for the IRS if we can somehow use a 2016 date. Please read the above explanation for 2016 discharge of qualified principal residence indebtedness.
    • Please read the note above. It’s possible we can use a 2016 date despite the 2017 tax cut bill.
  • You had a loan modification, typically on a home or rental property. The bank adjusts off some or all of a second mortgage.  That adjusted amount is debt cancellation. 
  • You a car loan of $15,000 and stopped making payments. The bank repo(s) the car, sells it for $5,000 and forgives the $10,000 ($15,000 – $5000). The $10,000 becomes cancelled debt.

We deal with S Corporation and Partnership cancelled debt too, but don’t cover it in this post.

What is Form 1099-C, Cancellation of Debt?

The lender, in the above examples, reports the cancelled debt to both you and the IRS on Form 1099-C. The Form 1099-C lists:

  • Your name.
  • Your Social Security number.
  • Date of cancellation. Sometimes your insolvency CPA can help establish a “better” date for you.
  • Amount of debt discharged, the infamous Box 2.
  • Was debtor personally liable for repayment of the debt?
  • The lender’s information.
  • For secured debt, like a car loan or rental property mortgage, Form 1099-C may list the Fair Market Value of the secured property. The FMV is the most frequent figure I battle on Form 1099-C.

“Insolvency immediately before the debt cancellation is one of the IRS exclusions on Form 982.”
Gary Bode, Insolvency CPA

Form 1099-C Tips:

  • Don’t panic over a Form 1099-C, Cancellation of Debt. The IRS offers generous leeway on Form 982, Reduction of Tax Attributes, to keep cancellation of debt from becoming taxable income. So despite researching the IRS tax reporting rules, you’ll sometimes find there’s no additional tax due from the cancelled debt.
  • Make sure it’s your Form 1099-C. A few clients got tagged for someone’s credit card debt write off. The bank refused to acknowledge this. We asked the IRS to help. Cancelled debt gets sold in secondary markets. Sometimes the last credit collection can’t verify the cancelled debt is yours.
  • Check the date of identifiable event that Form 1099-C shows for the cancelled debt. Some institutions use a default date of December 31st, 2017, which could limit your insolvency exclusion on Form 982, Reduction of Tax Attributes. Sometimes we can challenge the Form 1099-C date if that different date works better for the Client. Again, we’d look for documentation to establish that date.
  • Banks may still pursue you for the debt after they file Form 1099-C.
    • It doesn’t seem to happen often and it’s usually a mistake.
    • One tax court case denied the bank’s right to collect on the debt once it issued Form 1099-C. Other cases allowed it. This is an example of emerging IRS tax regs.
  • Is the amount of debt discharged (cancelled debt correct)? A higher amount helps the bank increase its bad debt expense, but could result in you paying tax on some of the debt cancellation. The IRS thinks Form 1099-C, Cancellation of Debt, is Gospel. Generally you have to get the bank to issue a correct Form 1099-C.
    • Note most Folks can’t get that information and I’m sure there are lots of hidden fees on box 2 of Form 1099-C.
  • IRS Form 1099-A, Acquisition or Abandonment of Secured Property, is different from Form 1099-C, Cancellation of Debt.
    • Form 1099-A doesn’t report cancellation of debt. But it has the same information as a Form 1099-C. The bank can still pursue you for the debt.
  • The bank might cancel only part of the debt on Form 1099-C.
  • Be aware of a potential 1099-C. Just because you didn’t receive a copy doesn’t mean the IRS didn’t. Call the bank or pull your IRS record of account. But the IRS understands you may not have received your 1099-C. So, they send out an IRS CP2000 notice.
    • The IRS knows some taxpayers didn’t get their copy of 1099-C.
    • I sometimes amend the prior tax return or provide the missing Form 982 in simpler cases.
    • Even if don’t receive the 1099-C the IRS requires you to present it on your current tax return. So you have to infer it based on your best information.
      • Doing so shows good faith but sometimes requires an IRS letter when the actual 1099-C arrives because, no matter how good the CPA is, the actual amount is always a few bucks different
  • The Form 1099-C can arrive years beyond the triggering event. The most extreme case I’ve heard as an insolvency CPA was where the caller stated the 2012 Form 1099-C identifiable event occurred in 1992. He said a friend worked at the bank that forgave the debt, and claimed the bank issued 30,000 2012 Form 1099-C(s) in March 2012 for cancellation of debt going back to the 1990(s).
    • Statue of limitations exist at the State and IRS level.
  • In general, the IRS doesn’t give up taxable income without due diligence. Bullet proof your return. We anticipate what a skeptical IRS Agent might want to see as corroborating evidence and provide it through supplemental information.
    • Our tax software allows us to upload PDFs with the tax return.
    • Our tax software allows us make notes to the IRS from within the return.
  • If you can’t get the bank to correct an incorrect Form 1099-C you can make a case for your figures on the cancelled debt tax return.
  • If you receive a Notice CP2000 proposing more tax on a Form 1099-C you didn’t receive, consider amending the return to include both the debt cancellation and form 982.
    • I sometimes amend the prior tax return or provide the missing Form 982 in simpler cases.
  • Update: your creditor has to prove the debt is actually yours. If they can’t, we still include the Form 1099-C on your tax return, so the IRS knows you’ve dealt with it. But then we explain the situation, including your contact with the creditor, and there’s no taxable income.

The Reduction of Tax Attributes Facet of Cancellation of Debt and Form 982; future tax consequences

The IRS tries to ensure that Form 982 doesn’t actually eliminate future tax liability. Often you’re required to change the basis (purchase price) of your remaining assets. That can mean higher gains or lower losses when you sell those assets. So the IRS gets another shot at you in the future. Tax attributes is the least logical aspect of Form 982. One way to tell if you have a good insolvency CPA is if s/he asks about future tax consequences.

UPDATE: There are now tax court cases that, if you qualify, may allow you to get around insolvency, but not the reduction in tax attributes. This is a response to the Zombie debt issues of 2016 and 2017.

UPDATE: Your lender must be able to prove the debt is yours. Cancelled debt gets sold and re-sold to collection agencies. If they can’t prove it was your debt, you’re off the hook.

IRS Form 1099-C sometimes triggers an IRS reportable “sale”

Sometimes Form 1099-C does more than report cancellation of debt to the IRS. If you had a rental property short sale or foreclosure, you essentially sold the property, even though it might not have been voluntary. The bank provides a Fair Market Value of the property in Box 7 of Form 1099-C, Cancellation of Debt. Use Form 4797 to report the sale and calculate the gain or loss. You may have an ordinary loss on the property transaction that can offset ordinary income on Form 1040. Or, you can carry it forward to future tax returns. But the IRS gain/loss calculation takes a nasty turn because you have to adjust the tax attributes (cost) any remaining rental property. And you pay tax on any gain. Rental property calculation of gain or loss is more complex than a logical person might assume, LOL.

We sometimes challenge the fair market value on, say, rental property cancelled debt. Why, it’s common to see, say, $175,000 listed as the FMV of the rental property but sold a few weeks later for $100,000. We’d use the $100,000 and provide the IRS with additional documentation and explanation.

Form 1099-S

We’ve had a few Form 982 cases where the impetus was a Form 1099-S reporting a real estate sale to the IRS. In one case, when we pulled the IRS transcript, there was also a Form 1099-C lurking there as well. The client received neither Form 1099-C or Form 1099-S because they got issued two years after precipitating event and the realtor and bank had a bad address.

Form Disclaimer

Things become more complicated if the cancelled debt is business related because insolvency factors in IRS “tax attributes”, which involves adjusting the basis of your remaining assets. As with many IRS issues, there are wrinkles within wrinkles. You can’t reasonably use this simple post as a basis for self tax preparation on a complex tax issue. At the very least you’ll need to do substantial research on info presented on IRS.gov, starting with Publication 4681. This is just a primer. We advocate self preparation of tax forms when it reasonable to do so. But insolvency / cancelled debt / Form 982  is an area where it might be unreasonable to self prepare your tax return. Many Clients think a CPA signature helps prevent an audit. I’ve never heard an IRS Agent confirm that.

If you’d like a free initial consult with an Insolvency CPA, please call us at (910) 399-2705.

Caution in using Insolvency and Form 982

Anytime you’re excluding income from Taxable Income, it is probably a matter of interest to the IRS.  Remember, cancelled debt is automatically Taxable Income unless you can use an exception or exclusion on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). It is prudent to recognize that the IRS may scrutinize and then audit such a return. But again, per the above comments, that’s unlikely. We look for possible red flags, and if they’re legitimate, I try to explain them away on a supplemental schedule. And sometimes we include additional documentation as well. If you self prepare, think of Form 982 as a High School project with a grumpy teacher.

Update: Zombie cancelled debt and zombie 1099-C(s)

  • Zombie cancelled debt means debt collect has to stop once your State’s situate of limitations has passed.
  • A zombie 1099-C just means it’s for an old debt.

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780 comments to Insolvency CPA explains Cancellation of Debt | IRS Form 982 and 1099-C tips | Reduction of Tax Attributes

  • Nice information. Thanks for that.

  • This is without question the best blog post I’ve seen on this topic. Good work. Continue the good writing!

  • Sergio O Diaz

    Very good Job, this was helpful to understand about the cancelation of debt. thank you so much for your help.
    GOD Bless


    what about a 1099c on federal student loan?
    can it be excluded?

    • Sure Corey, potentially anyway depending on the result of Form 982.

      • Steven Bradford

        This was a very helpful page. I have discovered I am insolvent. LOL I qualify for a debt cancellation of all my student loans to the sum of $101,000.00. After calculating my insolvency, The FMV of all my assets is only $5,000. So $96,000 would be exempted and I’d have to pay tax on just $5.000. By George, I think I got it! Correct me if I am wrong.

        • Hi Steven. You would add debt, if any, into the calculation. And maybe the exemption and standard deductions on Form 1040 might decrease taxable income.

          • Steven Bradford

            I used the insolvency worksheet. The debt I have was included in that calculation. Are you saying I can use my credit card dept again as deduction?

          • You can only use the credit cards once Steven

          • Sue R.

            Hi Gary,
            We (joint filing) received a 1099-c for cancelled debt on a credit card which we have not paid since 2011, when I fill out work sheet to see if we are insolvent, do I include the amount of this credit card debt in addition to all our other credit cards? Also what do I do fill out in Part II on form 982 ??

          • Hi Sue. yes you would include it. The 982 question is too vague for a comment sorry. But I think I’ve covered your main concern Tries anyway.

  • Lai Luangkhot

    I filed Chapter 7 bankruptcy in Feb 11′, discharged May 11′, case closed Jan 2012.

    At the time of filing:

    -residence: FMV 220k; mtg 275k (195k+45k+35k HELOC) — purchased 261k in 2006
    -rental: FMV 120k; mtg 128k; basis 135k —– purchased 150k in 2008
    -Unsecured cc 80K

    -Did not want to lose home; Per bk attorney still living/paying first mtge only so they won’t foreclose.
    -Rental still tenant occupied (can’t sell as underwater FMV @ april 2012 = 105k). Looking to do assumption.

    can you look over my numbers to see if I got this right?

    * COD income 135k (debt on residence 275k minus 220k FMV plus 80 cc debt). On form 982, Part I ,I check off box 1a; 135k goes on line 2. Part II line 4, I back out the 135k. Should this be a positive or negative #? Or does it matter?

    * Reduction of tax attributes (here’s where I get confused). I refer to IRC 1017(b)(2) limitation in title 11 case.
    – aggregate bases; residence $? (how to calculate?), rental – 135k
    – aggregate liability = 183k (residence 55k, rental 128k)

    I’m stuck here as I do not know how to calculate the basis for the residence.

    To my understanding if aggregate liability > aggregate bases hence reduction to bases = 0. Thus leaving the rental basis at 135k.

    What am I missing?

  • Charlie St Clair

    Hi Gary — I received a 1099-C for my wife’s forgiven college loans. They were forgiven due to to total and permanent disability to her on major head injuries she received after surgery in 2007. I am now her legal guardian as of 18 months ago. What can I do about this? Does my guardianship play a role? If joint assets go in I dont believe I can hit the insolvency. if her alone, then yes, it is insolvent. Ive spoken to two tax pros here and they do not have an answer. By the way, we have two children that I have taken care of since her injuries as well. Please help. Thanks, Charlie

  • rivardau

    I got a 1099-C and it was a whopper! I’m supposed to pay about 32,000$ in to the US IRS next month. Which I don’t have, of course.

    My tax preparer thought of this program but needs to find the details and form, so your site helps quite a bit!!!

    My question, is the “date of insolvency” going to be the date of the 1099-C? Or is the date of looking going to be now, when i am preparing the 1040 form and can’t pay it?

    Although in this case, I didn’t have money before Mar 2012 (when the student loan was cancelled due to permanent disability), nor after Mar 2012. Nor now, since I am on a federal disability monthly payment as my sole income.

    One question is – since the government gives me a disability annuity (on a 1099-RRB), can the government hold or garnish that for IRS and think that I can pay this extremely high tax?

    Second, should I take my money out of my checking account now to pay bills in advance, or to hold in cash, if I have to show assets as of today? Or are my bank accounts going to be checked as of the March statements?

    • OK, you’d use the date on the 1009-C. I don’t know about the IRS garnishing disability payments. But you’re probably jumping the gun. We generally exclude the 1099-C cancelled debt from taxable income by using Form 982. Hope that helps.

    • Debbie I

      Hi! I am today in the exact situation that you were when you wrote this post- on a Federal disability annuity, and my discharged student loans bringing my taxable liability to more than my annual income. Needless to say, my annuity leaves me below the poverty line. I am in a panic. How did you come out when you filed? I’m just wondering if I should prepare for a prison sentence because I can’t pay what I will owe!

      Thanks for your insight!

      Debbie 🙂

  • Ryan

    My wife and I are being hit with a 1099-C for cancelled credit card debt. I’ve read form 982 and publication 4681 backwards and forwards, but can’t seem to get a simple answer on filing an insolvancy. Our house is about $200,000 underwater. Is that basis enough for filing the 982? Trying to figure out the recourse vs non-recourse debt and what is allowed is pretty much trying to figure out a foreign language, it seems! Thanks!

    • Sure Ryan. The house and the mortgae factor into the insolvency. Their terminology is confusing. I don’t see any other question in your comment except the usual and customary frustration. Let us know if you need help with the retur. 910 399-2705.

  • Mitch

    I too received a 1099-c for a short sale on my home in 2012. I’m trying to determine insolvency.

    My question is:
    I currently receive a monthly annuity (I retired from the Post Office about 4 years ago), do I have to include these payments on the form 982 worksheet (Interest in a pension plan, or anywhere else), and if so, how would I compute this? I heard somewhere that once an annuity has been “annuitized” (converted to monthly payments)it is no longer considered an “asset” on form 982, it is considered “Income” which is not part of form 982.

    If I don’t have to claim my monthly annuity I’m certain I qualify for “insolvency”.

    I anxiously await your reply.

    Thank you!

  • Olivia

    I just received a 1099c for when Bank of America forgave 47,000 on my home modification in which my home was upside down, in other words I owed more than the house was worth. I am currently in a Chapter 7 to clear up debt that I can’t pay as this has been an albratross around my neck since I lost my job of 20 years in 2009 and was out of work for over a year. I am now working two jobs to pay the mortgage and current bills and I don’t have 11,000 taxable income on this 1099c. Is there any help for me? I haven’t filed my tax return yet, but H&R Block had estimated what it would be with the 1099c on my tax return. Please help! Thanks.

  • Mike

    I received a 1099c for a forgiven debt on student loans of $150,000.00. I am on permanent disability. I had no assets directly before the debt cancellation. I owe on my car and have a few credit card debts. I do not own a home. Would I be considered insolvent?

  • Michelle

    Boa sent a full mortgage forgiveness we never asked for on a 2nd mortgage in both mine and my husbands name. Although I alone filed chapter 7 two years ago we continued to pay this loan each month. Then they just sent us a1098 showing interest paid for 2012 and showing paid off loan mortgage interest. We did not get any 1099. All we got from broward county was a filed satisfaction of mortgage. Since we did not get a1099 do we list this dismissal on our tax return and if so,is my husband still liable for tax

    • OK Michelle, just because BOA didn’t send you a 1099-C for cancelled debt on your mortgage doesn’t mean the IRS doesn’t have a copy. I suggest pulling your IRS transcript for the tax year to check. In the last six months we’ve had three similar cases. I believe the Banks use 1099-C to justify their bad debt expense on their taxr returns, so my guess is that a 1099-C is coming. Sometimes they arrive the following year. Hope that helps.

      • Michelle

        How do you pull a transcript. Should w e still do a 982 if no 1099 c was sent by boa? If we report this forgiveness would my husband still be liable for 1/2 of forgiven amount

  • Milissa

    I had a short sale – my 1099-C debt discharged is 130,735.31. My total liabilities were 74,134 and my assets were 8,800. So that leaves me with 65,334 as total insolvent. I am confused on what figure to put on the 982 on line 2. I have read three different variations. Help! I already owe 2700 to Uncle Sam and cannot afford to pay any more than that.

    • Don’t panic Milissa. If the $65K is correct, that’s what goes on line 2. But you may be able to exclude the remainder of cancelled debt by another route. Don’t forget the sales of the property. Generally we generate a loss on the sale that reduces the tax due. Hope that helps.

  • in determining insolvency for myself do i have to include wifes assets (ie. house she purchased and is in her name only). We are filing jointly and this involves a cancelled student loan that was in my name only.

    • The answer depends on what State you live in Wayne. When possible, we start with a Married filed Seperately tax return and then add the spouse if it doesn’t advsersely affect the reurn. MFS is usually a mistake because you pay more tax as a Family. But cancelled debt can be an exception. Hope that helps.

  • rendall

    Great information. My situation is similar to Charlie St. Clair’s. My wife has $80k forgiveness in student federal loans due to being totally disabled… We always file married/joint. I want to include my Assets/liabilities because I have more liabilities/assets right before her forgiveness date than she would by herself. Is it ok to use the 982 form for insolvency and use our combined debt.

    What are red flags to the IRS using this form and what do you include on the attached worksheet? I assume I would keep all statements of loans etc… to prove debt and assets.

  • sabrina

    I received a 1099-c for student loan debt for $22,000. I am filing form 982 due to being insolvent at time of debt. I have a question. I have very basic deductions, 3 children, no property. Insolvency worksheet gives me $32600 in liabilities and $9934 in assets. I see that doing the math i would not owe anything on the debt, but how do i move forward with the reduction in tax attributes and do i need to claim the student loan under the liabilities of the insolvency worksheet (i haven’t so far). Any help would be soooo appreciated!!

  • Taz

    I have completed the insolvency worksheet and it proves that I was insolvent but my headache is form 982 question 10a. I have a mortgage, paid car, student loan debts, and I don’t really have any assets. My question is what do I put in line 10a on the 982 form and can you answer in laymens terms because the wording on the form is very confusing to me, thx in advance!!!

  • Amy

    Hi there. I received a 1099-C from Chase bank canceling a large amount of credit card debt. I started the process of declaring chapter 7 bankruptcy about two years ago, and did everything except the last batch of paperwork, which I still haven’t completed, and apparently in the mean time, Chase did this debt cancellation which I’m supposed to list as “other income”. I am self-employed and live well below the poverty level, and adding this onto my income throws my tax return into a terrifying state – it now looks like I owe over $5000.00. I want to fill out a 982, and a 4681 to show insolvency, which I would hope applies to me(!), but I don’t see a way to do that using the online tax service I was using. Also, I’m confused about whether I can successfully demonstrate insolvency if i don’t own any property – no house, no car, nothing. I’m terrified, and don’t know what to do…there’s no way I can pay the amount I now supposedly owe, without a 982. I’m not sure where to turn with such a short window in which to act.

    • Sorry to hear of your problems. Clients tell us that most tax software programs don’t support Form 982. My guess is that they do, if you know exactly what the return should be. You have two choices Amy. One is to extend your tax returns and then get the tax return correct before filing (as late as) October. Or filing your tax returns “as is” and then amending them. It sounds like you could get rid of that cancelled debt through Form 982. Don’t pay any taxes on the cancelled debt of Form 1099-C without exhasuting every possibility on Form 982.

      • Amy

        Thanks…do you think it’d be a better choice to file my tax return through the online program in which I started it without including the 1099C and without doing any 982, and then amending it later? Or is it wiser to not include the 1099C, file for an EXTENSION (without the 1099c’s “other income”, I would be getting a refund…with the “other income” I’m supposed to pay $5000 that I do not have), and figure out the situation between now and October? In general, if I include the 1099C without figuring out how to do a 982, I end up being told I have to pay money that I don’t have. Thanks so much.

        • OK Amy. Well an extension costs you nothing except a delay in your refund, if you have a refund on the final return. Amending isn’t a big deal, but it’s harder than the original return. Hope that helps!

  • Michael Rochin

    I am on disability and have been forgiven of a $150,000 government student loan. I received a 1099-c. I have no house or other large assets. I do have a car but owe $18,000 on it and it’s KBB is $10,000 so I am upside down. I walked through my house and figured I may have $10,000 in clothing, tools, etc. I am wondering if my disability income is a part of my assets. Also, because I own nothing of value, will this be a red flag to the IRS? What is the likelihood of me getting audited as this terrifies me? I was going to attach a supplemental page to my forms but I really have nothing to write down. Should I do it anyway? Thanks for your help!

    • Well Michael, we try to make a tax return with cancelled debt bullet proof. So we do often use supplemental information. Owning nothing of value isn’t always a red flag. Please don’t pay taxes on the $150,000 of cancelled debt form 1099-C without exhausting every avenuw available on Form 982. Hope that helps Michael.

      • Michael Rochin

        Am I a good candidate for insolvency since my cancelled debt plus my car puts me at $160,000 in debt dirctly before the loan discharge and my assets are approximately $20,000? Does my monthly disability check count in the calculation as an asset?

  • Marie

    Hi Gary, thanks for the great resource. Calif Husband and wife each received 1099-C for entire 160k when their HELOC was forgiven. This is NOT qualified mortgage debt. We are trying to exclude COD due to insolvency. Open to filing joint or separate returns to minimize tax bill. They have agreed on how to split the COD based on use of funds (130k to her,30k to him). She has house & mortgage from before marriage that is hers (net=liab of 75k) and he has a union pension 401k account that is his (123k asset). Two questions:

    1. To file separately we do separate insolv. calcs. It seems like they should each get to count the whole 160k since that is what they were each obligated for, but is that right? If they each only get to count half, his pension will make him solvent.

    2. If we file jointly, do we still calc the insolv. separately then add them together? If they each get to count the entire 160k, that doubles it up and that seems way too generous for the IRS! Or do they each only count half (80k)? Or do they count 130k for her and 30k for him because that is how they are dividing the COD?

    3. Or for joint return, do we add it all into one pot? heloc, house/mort, +123k pension = “collectively”

    thanks very much ~Marie

  • Tracy Bates

    2012 1099-C U.S. Department of Education

    Obtained loans for childrens’ college 2003 through end of 2005.

    2006 illness began.

    2/2008 discontinued working per my physicians and filed for SSDI 4/18/08.
    6/29/08 SSDI approved.

    2/13/08 Chapter 7 Bankruptcy filed.
    8/08 bankruptcy completed.

    However, school loans were not dischargeble in bankruptcy.

    2010-2011 Discharge Application: Total and Permanent Disability approved by lender and federal government.

    I am now on 3-year monitoring period with no employment income that exceeds poverty limit 2012, 2013, 2014. After 2014 the loans will be discharged due to disability.

    So can I claim insolvency on form 982 to reduce tax attributes for the discharged debt.


  • Dan

    Hello, Gary-
    As with so many others, I bought a home in So Cal at the peak of the market in 2006, and shourt sold it with about a $350,000 loss in 2012. We could certainly make the case for insolvency at the time of the sale; the question is what is the future impact of that decision? We would like to be able to buy again in the future, so how will the mortgage bankers view the Form 982?

  • Vince

    Like many others trying to do the 982. I have done my own taxes over the years and in January got a $28,500 1099c from a Credit card.

    My business has gone under and I will owe nothing there. We rent an apartment and I drive a old pickup worth $1,455 by blue book standards. I figure my other assets for my furniture , clothes, tvs and computers is probably no more than $5,000.

    My total credit card debt is about $60,000 not being paid. So I figured, I just check 1b put the $28,500 in line 2 and on 10a. Then create a liability list and my asset list and attach it. Is that it?

    If I had money to pay a professional I would have done it already.


    • Sorry Vince about your problems. We don’t help prepare tax returns via comments. We would have all the liability. I’m not exactly sure what Form you’re discussing. However it sounds sound like you can exclude the $28,500. Sometimes that folks. Hope it does for you.

      • Vince

        I was referring to the form 982. I have no other property besides a 1994 truck and some furniture and clothing and tv. Nothing great. I rent. So I’m just trying to figure out if that’s the right format.


  • Beth

    Hi Gary,

    I got a 1099-C for a credit card debt (over $16,000) that I have not paid on since 2001. It was sold to a few collection agencies over the years but has a discharge date of 4/17/12. So for 2012, I now owe about $4500 on my taxes instead of $900.

    I think I want to try the 982 and claim insolvency.
    Also, would other old debts, that are no longer on your credit report, be included as liabilities if you never got a 1099-C for them and still get collection agency letters about them?
    Are you supposed to fill in all of the asset lines? or only list things that have value, such as car & home & money in bank ?
    Also, I would need to try to figure out what exactly I had in the bank on exactly the day before 4/17? How detailed does the IRS want it to be so that it doesn’t look like I am trying to hide anything?

    I do not think that anyone would consider my clothes, screwdrivers, or washer/dryer to be of much value. But I’m getting hung up on the detail needed and I’m worn out trying to decide what to do….and how to do it.
    Would it be better to file for an extension and have professional help? Any words of wisdom here?

  • Debbie

    Hi Gary.
    I appreiate the understanable explanations you offer. Helping adult kids… Their vehicle was repossessed in 2005. Americredit issued 1099-C with a event date of 10/13/12. Unknown value at time of repo and unknown how much they sold it for. Over the years credit reports listed total due from $7530 in 2005 to $8547 in 2010, and the discharged amount was $6948. Liabilites outweigh assets by far… And is Form 982 an information only form? Will the amount on line 10b be used elsewhere?
    Thank you.

  • Carolyn

    Hey Gary,

    I know this is very last minute. I’m going through a debt settlement program and had about $7000 of debt discharged last year. I’ve filled out and attached a 982 and the insolvency worksheet. I read your blog which says to put the discharged debt as a negative on line 27 of the 1040. What I’m getting hung up on is that line 27 says to attach Schedule SE. Do I really need to attach this? Or is the 982 sufficient? If I do need to attach Schedule SE, it seems there are additional forms that go along with that to be filed as well. Can you clarify if and what forms need to be filed along with the 1040, 982 and Insolvency worksheet.


  • scott


    My wife is considering debt settlement, but we are not sure if we would be able to file 982. She makes 10K and owes 37K. Would assets in my name only like some savings or a house be considered her assets. We live in MA. Thank You!

  • Rocio

    Hello Gary, I received the 1099 C from a credit union in which I had an unsecured loan, I qualified for insolvency, so after filing my Taxes what happens next … with the debt, IRS, and with the credit union, can they send me another 1099 C for next years Taxes??? I’m not working taking care of my child with Autism.

    Thank you very much,

    • Hi Rocio: I beleive that once a 1099-C is issued and then excluded through Form 982, the cancelled debt is gone. I haven’t seen any examples where the Bank cancels some of the debt and then in a later tax year cancels more of it. I’m not sure about the credit agencies. My guess is that it shows up on the credit report. I’ll ask some clients about that. Hope I was helpful.

      • Rocio

        Thank you so much for answering my question. Can you please find out about how the agencies take care of this debt. How does it show on my credit report…as a loss debt or charge off? You’ve been so helpful!

        Thanks again!

        • Well I appreciate the offer but we don’t really deal with credit agencies. But enough folks ask about it so we’ll probably take on a client who needs the service this summer.

  • Jeff c

    Are assets such as 401ks that can’t be used to pay the debt counted on form 982?

  • Robert

    The IRS has sent me a request for payment of taxes on some discharged credit card debt that I excluded due to insolvency (form 982). How much supporting documentation should I send to support my claim?

    I converted the worksheet in publication 4681 to a spreadsheet and I also used several other spreadsheets to calculate my net worth. I even have a comparative analysis from my realestate agent to document the value of my home.

    Should I send everything, or just start with the worksheet?


    • Every case is different Robert. But it sounds like the home and associated mortgage are the key figures on the Insovenvy worksheet that backs up Form 982. So, I’d send the IRS those two documents.

  • Ruth

    I called the irs this year to ask for my refund status and tax guy who answer the phone told me that I own 8,000 on taxes I ask why he interest and panity charge and what else he a 1099c form was not reported in my 2010 taxes so I said was not aware of this I never received a letter or a former from the creditor or you.It happen that they had my old address which I had move 3 years ago. It’s took the money and don’t know to reported and do I qualified for exclusion due to its don’t own a home or car.please help I don’t understand any of this which is new to me.

    • What a nasty surprise Ruth. Well they’re right, at least if they have a correct Form 1099-C. The Form 1099-C reports cancelled debt that becomes taxable income. I would amend 2010 to include the From 1099-C and Form 982 which may allow you to exclude cancelled debt. Then, hopefully, it all goes away. Call me if you’d like: (910) 399-2705

  • Shawn M.

    Good evening, Gary. I have read through this article and your comments to the questions that have followed, and I still have a question. I have a car loan debt that was cancelled back in tax year 2010. It was a personal vehicle, I have no business or anything like that. I never received the 1099-C due to my family moving, but I received a notification and a bill from the IRS. I have been in contact with them, and they have told me that I can send a letter requesting reconsideration since it has been generated as a tax bill now rather than having to amend the return from 2010. However, they referred me to form 982 and publication 4681, telling me to include the form and the insolvency worksheet if I want to exclude the debt based on insolvency. After working through the insolvency worksheet, I was finally able to determine that I was insolvent well beyond the amount of the cancelled debt. I filled out form 982 by checking box 1b and indicating the amount of the debt on line 2. Beyond this, I can’t seem to make sense of anything else in terms of what I need to fill out. My tax returns are always simple, no house, nothing to itemize, no business or anything like that. What would be the best way to finish this form? I appreciate any help you can give me!

    • Hi Shawn: I’ve heard of them adjusting a tax bill. It sounds like you excluded the cancelled credit card debt and have Form 982. You’re good to go.

      • Rafael H

        I’m in a similar scenario and cannot figure out part two either. I don’t own property, had a cheap cash car due to the repo and very few assets right before the cancellation. I am insolvent beyond what was cancelled. VERY confused on part two. Please assist.

  • Kristi R

    Hi Gary. You’re a lifesaver.

    I’m about to have about $90,000 of student loan debt discharged due to total disability. Is there anything I should be doing now. I’m single and do not file tax returns because I have nothing to file. Please help. Thank you so much. I’m so lost. I just found out about this.

    • Hi Kristi, sad to hear you’re on total disability. We’ve had multiple cases like yours. If you’ve qualified for total disability, generally your financial condition is bad enough to exclude the student loan cancellation of debt from taxable income through the Insolvency conduit of Form 982. Of course I don’t know your specifics.

  • Kristi R

    Is there anything I should be doing now or should I wait until the loans are cancelled and then do the form and complete a tax return at that time. I am not required to at the present.

    • There’s two issues that could help you. Form 982 uses financial data at the time of debt cancellation. So if they haven’t canceled the debts yet you could decrease your assets or increase your debts. But it sounds like you’re already set. Try not to worry.

  • Russ C

    Greetings! Thank you for having this out here!
    I’ve been working on my insolvency for a bit and I’m having issues with figuring the value of all my miscellaneous household stuff. I read somewhere online that $10,000 is an acceptable estimate for household value, but I only saw that once which makes me very wary of trusting it. How does one estimate household value, without literally inventorying every spoon, t shirt and paperback? Thanks!

    • Good question Russ. Well the value is what you could sell these items for in 30 days. So, paperbacks might be a buck each. We generally document the big ticket items and estimate things like clothes. For example where could I sell my used shirts? A yard sell or consignment store. So my $60 LL Bean shirt is only worth a few bucks. Hope that helps.

  • Donna Muniz

    Hello Gary
    Due to my father-in-law becoming very sick, and not being able to make payments on their home, we had to move them into our guest house in June of 2010. Prior to that they had the house on the market for a year and 1/2 with no luck. In February 2011, my father-in-law passed away. He did not have an insurance policy and very little money in the bank. Bank of America turned the mortgage over to a collection mortgage company who is now telling my mother-in-law that they will 1099 her after the short sale of the home. They do not acknowledge that her husband has even passed away even though we faxed them all that information. She receives $1,100 a month social security and that is all. She did have a small 401 that she drew money out to pay for his burial leaving her with a few thousand. She is 80 years old.

    They, the mortgage “bill” collectors are telling me that if she does a “Deed in Lieu” that she will not have to pay as much to the IRS. Because the Court system already gave a “final Judgement” on the home saying that her and the children of the deceased no longer have any interest in the home. I am afraid if we do that Deed in Lieu, that it will “re-open” the case somehow.

    Any suggestions?

    • Hi Donna. Well it sounds like the disposition of the house is already final. I don’t understand why the bill collector would say that. But it sounds like your Mother in Law wouldn’t have to include the debt cancellation as taxable income. My guess is that they will send her a Form 1099-A and she’ll have to report the “sale” to the IRS. Once the bill collectors realize there isn’t anything to attach to she’ll probably get a Form 1099-C which actuals cancels the debt which we can probably eliminate through Form 982. Hope that helps.

      • Donna Muniz

        Yes Gary this does help, and Thank you for such a quick response. So if I understand you correctly by us filling out this Form 982 through you, that this will possibly eliminate her responsibility for this debt.

        My question now is, since the “Final Judgement” was issued back in December of 2012, what should I tell the Mortgage Debt collectors who keep sending the deceased and my mother-in-law a very large bill for the back mortgage payments, the lawyers fees AND the insurance on that house? They call at least 4 times a day asking for the deceased even though we sent them the death certificate at least 2 years ago.

  • Dave Sklover

    Great info Gary. Hopefully easy question: I am filing form 982. Received 10,000 cancellation of credit card debt. I am insolvent by more than 90,000. Line 10a is the problem. Could the instructions be more perverse? Lesser of A) basis of prop 145,000 B) 10,000 C) negative 80,000. I’m going to leave line 10a blank, my thinking is that lesser is zero, which is C, a negative number. If you know what I mean. I think this must be a very common question. Thanks. Much appreciated.

  • Donna Plitch

    My husband owned a house before he met me and wants to short sell it. The 2 separate (2 banks) mortgages are underwater by over $120K. He does not have assets and is disabled permanently but I have a 401K and a car. Please tell us how the insolvency works. Do we simply have to file separately for that year and each of us declares our own assets and liabilities? And he would do the form 982?

    • Hi Donna: I generally start a Form 982 assuming you’ll file separately. But often I’ll add the spouse if insolvency or another conduit in Form 982 works with filing jointly. Hope that helps.

  • Mark Kramer

    A client of mine received a 1099c in March of 2013 for the year 2012. Their income tax return was already filed, processed and the refund received.

    Based on the instructions on form 982. You have to amend the return within 6 months. You are telling people that they can file an amended return beyond 6 months. You told Ruth she can amend her 2010 return with a form 982.

    Please explain

    • Hi Mark, what was the 1099-C for? I believe that section of Form 982 instructions pertains to certain real estate transactions. For primary residence, insolvency and bankruptcy options Form 982 is just another form and can be added to an amended return. Hope that helps.

  • Todd

    Hi Gary,
    I am in my 3rd year of a mortgage loan modification program. The bank will be cancelling about $20,000 each year for three years. I just received my first 1099-C which explains that I need to claim it as income.

    I have two questions:
    1. Do I need to file a 982 for each of the three years or can I file one for all three combined. This tip was mentioned on another site http://www.cbsnews.com/8301-505145_162-57566301/avoid-paying-taxes-on-forgiven-mortgage-debt/

    2. I normally file with Turbo Tax on-line, do you reccommend that I use a tax account for my tax filing until this issue is past?


    • Hi Todd, interesting question. The option to declare the entire amount, $60,000, is for the year when the HAMP-PRA became permanent. Which in your case is the 2011 tax return. But, if your HAMP conditions qualify, you’d claim it all on the 2012, which can be amended to include Form 982. We’d be happy to handle that for you. Hope that helps Todd.

  • Camille Uliano

    I am about to have my student loans discharged with a permanent disability. I have no assets to speak of ( no car, house, property, and no savings or checking account). I owe owe the IRS close to $50,000 in back taxes for which I currently have an installment agreement in good standing. I have a disability pension and in September I will begin receiving ssdi benefits.
    Do you think I will qualify for insolvency? Do I put my future ssdi payments on the form?

  • Jim

    Hi Gary,

    Great job on this site.

    Question is for 2013 tax planning. I have 3 properties. 2 properties in Vegas (rentals) and live in IL with primary res. Have mortgages on each. Last year had re-mod of one Vegas property and used form 982 and Insolvency.

    I would like to start process with other Vegas property, but will this IRS forgiveness option be available in 2013 or 2014?

    Also since I have your attention, should I consider forming a LLC or Corp for my rentals? And if so, could I use Forgiveness programs then?

    Appreciation in advance, Jim

    • Hi Jim: I’m unaware of any change with cancellation of debt and Form 982 except that the primary residence provision is gone. Some speculate Congress will bring that back. But no guarantees exist with taxes and things change fast.

      Holding the properties in Partnership, Corporation , LLC adds a layer of liability protection, so, say I sue your Corporation over some rental property issue, my lawyer would have a harder time attaching to your personal assets.

      Hope that helps.

  • Mark

    Hi Gary-
    This site and the comments are invaluable. I divorced in 2009, tried to pay all the debts (they were all in my name), cc/car/rent. In 2010 I fell behind and negotiated 4k per credit card on 10k per card debt along with 7k on a private 20k student loan. I was renting at the time and had a car that was valued at 7k I owed 8k. I had stocks that were worth 25k when I made the deal with the companies. The remaining 10k I used to completely payoff a personal loan through the bank.

    1) I’ve paid the taxes on these over the past few years as they’ve been showing up from the IRS. Can I go back and claim insolvency for prior years if I’ve already paid?
    2) Is there an income limit? I was making decent money but with the compounding interest/late fees etc I was living paycheck to paycheck. Would I just need bank statements and sale of stock information along with all the debtor information?

    thanks for your help

  • John

    Hello Gary,
    Trying to sort through the canceled debt maze. We short sold a house. Question: My wife and I both received 1099c’s for the same amount. Do you know why that is?
    Thanks, John

    • Hi John: Sorry you’ve had problems. If you mean both your wife and yourself received a Form 1099-C for the full amount, here’s the answer. It’s standard operations policy to send full amount 1099-Cs to anybody on record. You’ll only need to report the full amount once as taxable income on your 2013 Form 1040. Just attach an explanation on a supplemental worksheet. Remember Form 982 could exclude the cancelled debt from taxable income John. Keep me in mind if you need help preparing the 2013 Form 1040.(910) 399-2705.

  • Matt

    I had debt forgiven in 2011 and received several 1099-c’s. My general question is this; I had at that time nearly $50K in student loan debt and only about $13K in assets. To this extent I was $37K insolvent at that time. So, if the balance of the forgiven debt is less than $37K then I am in the clear (also wondering if my student loan should be considered in this calculation.


  • Trish Adams

    What are your options if the bank still wants you to pay them after the 1099c and your found insolvent?

    • Well Trish it sounds like the bank only forgave part of the debt. I’m not a lawyer, but they shouldn’t pursue once they issue a tax Form 1099-C, at least for the part they wrote off. IRS insolvency will help keep the amounts on the tax form 1099-C from becoming taxable. Insolvency for bankruptcy is different. Hope that helped.

  • Trish Adams

    I actually asked them if they only wrote off part then and she said no they wrote off the entire amount, but that they only reported it because I hadn’t paid on it and the debt was still mine. She said I needed to take her settlement amount. Do I need to get a lawyer? Just doesn’t make sense if they reported to the IRS that it was a cancelled debt why they are wanting me to settle with ten too.

  • we were considering filing bankruptcy. now are talking to a debt
    consoling service. he says that since each credit card is under
    20000.00 we can file the 982j and won’t be held responsible for
    the remainder of the debt because of the insolvancy. this doesn’t sound quite right after reading some of your comments.
    can you adress this. thanks

    • Sorry to hear of your troubles Scott. I’m unaware of any $20,000 threshold on cancelled credit card debt. You’re responsible for all credit card debt until the bank writes it off and files IRS tax Form 1099-C. You may be able to excludes some or cancelled debt through IRS insolvency which is different from bankruptcy. Note that bankruptcy might take care of the actual credit card liability but Uncle Sam will try to tax you on any cancelled debt. I’d run the case by a CPA or tax attorney who deals with credit card cancelled debt. Hope that helps.

  • Kelley


    I just had $58,000 in student loan debt forgiven due to disability. I am single, disabled, and only receive ssdi. I have no assets. What do you recommend for the form 982 and do you think I will have a problem?

  • Tom

    Why would a person choose to use 1b in lieu of 1e? Is there an advantage in some cases? It seems that the basis gets reduce in either instance.
    I had a second mortgage that was forgiven for 240,000, not all of which was money to improve my home. When it says, “The insolvency exclusion does not apply… to a discharge of qualified principal residence indebtedness UNLESS YOU ELECT TO HAVE THE INSOLVENCY EXCLUSION APPLY INSTEAD OF THE EXCLUSION FOR QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS. Do I need to check both boxes? Should I only check one? Which one? Both?
    Thanks, and thanks for addressing this subject.

  • Mary J

    Three questions: (Im filing for insolvency)

    1. I have 4 creditors who didn’t issue a 1099c. Do I include them on my taxes, if I know the amounts.

    2. Short Sale: In addition to entering 1099c from a short sale transaction , do I enter it as a sale of property as well?

    3. Do I enter all 1099c as income, even though I’m filing form 982?


    • Hi Mary: you include the Form 1099-C(s), Cancellation of Debt, in the year they’re issued. I’d check to see if the IRS received a copy. If they did, include them, if not wait until they do. I’m cagey about this because new IRS tax Form 982 clients sometimes report never receiving their copy. You do have a sale of the property. If you do have cancelled debt income, the only way to exclude it is through Form 982. Be sure the Form 982 numbers flow into Form 1040 properly. Hope that helps.

  • carla

    hi, i’m in the process of getting a student loan forgaved (16,000) I own my home giving to me by my now deceased mother, The only income I have is ssi and ssdi, will I be able to qualify for insolvency by using form 982.

    • I’m sorry to hear the circumstances in which the student loan debt cancellation occurs. We’d have to run the numbers for insolvency but my guess, from the info here, is that you aren’t insolvent. There are provisions for some types of student loan. Check them out too before you pay tax on the $16,000.

  • Tom

    quick question – regarding insolvency, filed form 982 – canceled debt has multiple dates, how do i fill out the insolvency worksheet listing assets and liabilities – filed one form 982 – do i fsend in several worksheets ? all cancellation dates are close to each other , within 4 months. Not much will change on each one, Tom

  • Tom

    I am being audited by the IRS right now. They want a worksheet showing my insolvency. My question ios I have numerous 1099-C with different dates. I filed one 982 form – do I file an individual insolvency worksheet for each 1099-C ? Do I send in all my backup or supporting files now or should I just send in the worksheets as asked ? How close do my numbers need to be, all 1099c’s are about 4 months apart, so not much changed other than some debt was forgiven before the latter ones hit. make sense? Looking forward to your response, Tom.

    • Well Tom, if there’s a lot of potential tax liability for cancelled debt, that the IRS might disagree on, I’d be meticulous with my reply. I’d present things exactly as they’ve asked for. If you didn’t use multiple insolvency worksheets, prepare them now. I’d provide backup documentation for each insolvency worksheet, at least the major figures. Think of it like a high school project for a grumpy teacher. An IRS audit is serious. Don’t open your self up such that they expand the scope of an audit. Maybe you need a cancelled debt CPA with IRS resolution experience. If so call me.

      • Tom

        Regarding canceled debt and the insolvency worksheet – what does the IRS consider “immediately before the cancellation”. ? I ask because it is hard to get exact numbers when you have multiple dates going back 2 years. Does 30-45 days work ?

        • Hi Tom. I think the IRS scrutinizes cancelled debt and Form 982. We always use correct numbers when possible. Sometimes with multiple dates some numbers stay the same. Like the value of your books for example. My guess is that the IRS doesn’t care about prep time and they probably figure that if you want the cancelled debt exclusion you’ll do the leg work.

  • Charmaine

    I hope you are available to help. Just so you know I went to a professional who obviously isn’t familiar with the 982 for someone in my situation.
    I had to short sale my rental last year, received a 1099C- for $78K+ with a FMV $30K. I am unemployed and is definitely insolvent. My main home purchased for $200K, did a modification, lost my job and finally got approved for a hardship program to help with the mortgage. I have no other assets, except for a 2001 Honda civic currently with a lien for a loan I took to repair the rental condo sold. I want to file insolvency…please let me know if this is possible and where in Part 2 of the form do I add information. Thanks

    • Hi Charmaine. I think you have two issues. One is the “sale” of the rental property. This often produces ordinary losses for tax purposes. The next is cancelled debt. Insolvency might help. But there’s another IRS Form 982 provision you can use as well. Hope that helps.

  • dc

    I did a Ch 7 BK in 2012 which discharged the debt on my heloc second mortgage (and other unsecured debt). I have an opportunity to settle the second for a discounted rate with the bank. I will be receiving a 1099c for the amount forgiven. Since the second mortgage debt was discharged in BK, will I have to pay taxes on the forgiven amount, and/or diminish the basis on my residence? Or is the exclusion for title 11 discharge all the info that is necessary (form 982), and no tax or basis reduction occurs? The heloc was not used for home improvement.

    • It sounds like you need a cancelled debt CPA to help you with Form 1099-C and IRS Form 982. But you should be able to exclude some or all of the cancelled debt from taxable income. There are tax attributes issues as well. So this is beyond the scope of a post comment. But I’d be happy to prepare your 2013 Form 1040 and Forms 982. (910) 399-2705.

  • Kevin

    I have a client that will be receiving a 1099C in 2014. He wants to declare insolvency to exclude the amount reported on the form. How do we report it without the form 982, as it will be obsolete after 12/31/13.

    • Hi Kevin. I’m not understanding the question perhaps. What’s obsolete please?

      • Kevin Barty

        I thought about that being a little vague, sorry.

        I am referring to form 982 expiring at the end of 2013. Basically I am referring to tax year 2014 and a client receiving a 1099C for a second mortgage his is being partially forgiven. But this will not happen until next year and we want to try to exclude this from income based on insolvency. Without the aid of form 982 for tax year 2014, how do we submit to IRS that he is claiming insolvency. Do we file on paper with an attached letter, etc.

        Thank you.


  • Kevin Barty


    Never mind. I did not realize that form 982 had such history. I had never used it until this whole economic mess came about and thought it would phase out with the end of the mortgage forgiveness era.

    Thanks for your time.

  • Kimberly G

    Hi Gary,
    After searching for quite some time, you have the best information in terms I can understand! We received a 36 month loan modification through Chase Military and after filing taxes in March, received a 1099c in May. We sent it to the IRS and just got a second “bill” along with a late notice (two letters the same day) in November. It is a 2% loan for 36 months but just for 3 (Oct, Nov, Dec 2011) we owe $2000 in taxes! Would this qualify as cancellation of debt and would I use the form 982? My tax preparer does not know (we will find a new one). I am dreading what 12 months of “saving money” will cost us!
    Thanks! Kim

    • Hi Kimberly: I know the Form 1099-C comes as a shock. I wish the banks would discuss the whole cancelled debt issue becoming becoming taxable income. That would help with cash flow planning. It does sound like you could use Form 982 for 2013 or amend 2012 to include Form 982, Reduction of Tax Attributes, and Form 1099-C, Cancellation of Debt. Hope that helps.

  • Diane MC

    Hi Gary. I received a 1099-C for student loan cancelled debt. Will I receive a 1099-C every year for not paying this debt or just this year? I am also not sure what to put on line #28 of the 2013 insolvency worksheet. It says “Interest in retirement accounts (IRA accounts, 401k accounts and other retirement accounts)”. Does that mean I report the current amount in my IRA minus the purchase amount? If you can answer these tax question Gary it would be so helpful. Thank you so much!

  • Julia S

    I rec’d a 1099-C, well the IRS did from Citibank (I have yet to receive). For a credit card debt that I am unable to pay back after a job loss and unemployed for over 2 yrs, but now employed ;). At the time of the debt and at the time of the write off I would claim insolvency. That being said, my taxes for the year 2012 were filed and I rec’d this notice from the IRS that states I owe 437.00. Its not a large sum of monies but I do not have any extra to pay this amount. I am wondering do I file an amended tax return for the tax year of 2012 showing the extra 1099 income and then also fill out form 982 not claiming the additional income. I am confused and I am not sure how to file/fill out these forms. Or do I just do the form 982 part I #2 only??? and #3 how to answer I do not own anything, then what about part II and part III. And also send it back to the IRS with a copy of my 2012 return HELP! Thank you Julia

    • Sure Julia you could amend the prior tax return to include both the Form 1099-C, Cancellation of Debt, and Form 982 , Reduction of Tax Attributes.

      • Julia

        Hi Gary, Just read your reply, and I am unsure how to fill out the form 982 and when I amend my tax return where would I include the 1099C. I am just not sure. Do you do taxes?? I have called a local company where I live and they were NO help and said they have not heard of for 982 before??? Thank you, Julia

  • Sherri

    What about a Short Sale closing in 2014? We are having problems with documents being filled out properly by Title Company, Real Estate Agents, Buyer and this has been going on since offer was made in August 2013, along with changing of bank representatives. The actual offer/purchasing contract from buyer was extended several times but the extensions expired on 12/31/13 so the buyer is really no longer obligated, so I don’t think the document completion mistakes are on purpose, unless there is another purpose like holding our home hostage with this offer. Bank keeps requesting corrections and still more corrections. Which are legit, they all are completing the documents improperly.
    Would it be better to go with a consent judgement or Deed in Lieu instead of Short Sale this year as far as taxed income is concerned for 2014?
    Thank you for your time

    • Hi Sherri:

      Sounds like a anxious time for you. Doesn’t sound like you’ll get any cash out the deal regardless of how you structure it. But it would be better if the Bank agreed to cancel the remaining debt. So I’d talk to them to see what they might offer.

  • jennifer flores

    Mr. Bode…are you available to take this time of the year to discuss an extremely different casr tham those posted regarding 1099c?

  • Fay

    Mr. Boda, do I include the student loan debt amount (70k) in my calculation on form 982 for the canceling of my student loans due to permanent disability? Thanks so much!

  • Cassy

    Hi Mr. Bode,I got a 1099 C for a student loan that was done in 1986. I didn’t settle but it was conditionally discharged with a 3 year monitoring period. Once that monitoring period is up it will be perm discharged. I am on SSI and have been total and perm disable since 1993. I have never had to file a return because social security income is not taxable. I never did this before and don’t know where to begin or what to do. The only income I have is SSI. Also I don’t understand if the loan was only conditionally discharged why did I get this now vs when it is permanently in another 2 years. I am so anxious because I don’t know what to do.

  • Kay

    We live in NC; my husband is totally disabled and received $70k 1099-c. His name is on home title (required in NC). The mortgage is in my name. He as no other assets except for our checking account and an IRA.
    How would we handle the home as far as asset/liability since his name isn’t on the mortgage? And I’m still confused as to do I only list his assets and if so how do I know what is his? We have been married for a very long time. The cars are in my name.

    Also, the discharge date on the 1099 is six months after the date we were told it was being discharged. I worked very hard to pay off a great deal of debt that changes the liabilities. Should I get them to reissue?

    Can you email me your fees?

    • Hello Kay. I always look at filing separate returns and compare that to a joint return with cancelled debt tax return cases. It sounds like that’s what you’re really asking. You can call me about fees. I generally look at the prior year tax return and talk with a potential client about the Form 1099-C and IRS Form 982 specifics to arrive at a fee. (910) 399-2705. I’m easy to talk to.

  • Patt

    I got a 1099-C
    Alway file jointly with husband; We own our house that we are still paying.
    My question is do I do the worksheet with all his and mind liabilties ans assests?
    If the answer is yes, do I put both names on form 982?
    If the answer is no, do I still put the house as liability and asset?

    • Hi Patt: sure if you’re filing a joint return you’d have to include all assets. But in cancelled debt tax return cases I always, when possible, look at filing separate returns to see which approach works best for the Client. Hope that helps.

  • Ricard

    What should i include with form 982 before mailing it out? Should I include the insolvency worksheet and a copy of the 1099-C?

    • Hi Ricard: I don’t send the IRS Insolvency Worksheet with a Form 982. But I do send documentation and explanations depending on circumstances. My guess is the IRS manually looks at cancelled debt tax returns and some IRS officer has to process them in five minutes or less. So I imagine what the officer would need to see to make the decision to put the tax return in the “good” pile. Sorry, I know that’s not specific but every case is different.

  • Kay

    I would like to talk to you about completing our forms; can you provide fee information?

    • Hi Kay: I look at Form 1099-C, Cancellation of Debt, and Form 982, Reduction of Tax Attributes, as add ons to the base tax return. Generally I’ll look at the prior year’s tax return and talk to the Client about the cancelled debt specifics to arrive at a price. Call me if you’d like. Thanks.

  • Denise

    I received form 1099C for $6,606.87 from a bank due to unpaid credit card. Here is my situation, I have been receiving SSD and SSI for many years as I am permanently disabled. The amount I receive yearly is $8,304 but do to an overpayment I only get $7,944. I live below the poverty level in Ohio. I also receive help on utilities and food. I have not received tax forms from the government in years as I am exempt from filing. How does this affect me? Is there an exception in this situation to not have to report it or not to owe anything? Thanks.

    • Hi Denise. Most CPAs wouldn’t know the minimal filing requirements off the top of their head. I’d Google it. The IRS has clear definitions. But if you do have to file I doubt there would be any tax due.

  • Suzanne

    Hi Gary…I am pulling my hair out over my 1099-C for school loan cancelled due to permanent disability….I tried running our numbers thru an online taxact program and filled out the insolvency worksheet, but am not sure if I did it correctly. I am filing joint return, checked that this debt cancelled is just mine and filled out the worksheet…not sure about numbers…since debt is just mine do I have to cut joint liability amts in half along with assets and then still use debt amt to be forgiven in full…and for retirement interest can I list just mine or do I need to include husbands amt too? Makes a big difference in numbers…owe over $11,000 if I have to include husbands retirement in the numbers, but am insolvent if using debts and assets in full with just my retirement interest. Filing seperate caused big amts owed too! Not sure how to procede? Should I be hiring a tax attorney or tax professional even tho we have no cash on hand?

  • Theresa Duck

    Hi Gary, Great website! I am not sure how to proceed with the 1099c that my ex-husband and I each received. We settled with our 2nd mortgage company in 2013, so we now have 1099c’s for $31,000.

    Obviously, we are filing separately. But, if we each use the $31,000 figure that is on the 1099c, then the IRS would “double dip” and tax us both for the full amount, right?

    I need to read more about Form 982. I paid off the 1st mortgage in 2013 as well, so I am not sure if Form 982 is appropriate for me.

    • Interesting point Theresa. You’d claim half, the bank or the IRS can’t double dip. If you pay or exclude half the cancelled debt in Box 2 of Form 1099-C, Cancellation of Debt, the IRS can still hold you liable for your husband’s half too if he doesn’t pay or exclude it. It doesn’t sound like you’d have any tax liability for the 1099-C in any caseBut Form 982, Reduction of Tax Attributes, is the only way to exclude cancelled debt. Hope that helps.

  • Michael

    Hi Gary,

    I just received a letter from chase saying do to non payment they are going to charge off my credit card, cancel the debt and report the principle to the IRS and then send me a form 1099 C. It totals about 6,000. Should I file a form 982 or am I better off including it in my total income and paying the tax on it? My total income is about 15K for the year not including pending taxes for game show prizes that I got and an early 401K withdrawl. I’m still paying on a car but I don’t own any property. What if I don’t get the form by April do I report it anyway? Will they go after me later for the amount? Thanks!

  • Maim

    I have a question I recently filed for bankruptcy a year ago and my mom was a cosigner for me. She recently received a 1099c for 11000 since the car got repo. Bc since I filed for bankruptcy she was reliable for the payment.. My question is my parents file married filing jointly and the only assest with her name is the house which is paid for already and she haven’t been working for 2 years will she end up paying it all back and will my dad be responsible?

    • Hi. Well it doesn’t sound like your Mom would get any Insolvency benefit as I understand the scenario. So married filing separate wouldn’t work for her. My guess that they can avoid some cancelled debt though Form 982 filing jointly. Your Dad might be able to protect himself in that situation by also filing as an Injured Spouse. But your Dad has the right to file separately if he chooses.

  • Sarah

    In 2010, my ex-husband was drowning in debt due to surgery. He received a 1099-C for a repo of his car and filed Form 982 with his taxes. He was then audited and did everything that was asked of him, but apparently he did it incorrectly. After a few letters and a couple phone calls, they sent him a final letter saying he owed a certain amount. He then called again and was told that it was too late, he owed the tax and they set up a payment plan. Before the first payment was due, the entire amount was withheld from his next refund. He had zero assets, as he had to move in with his mother at the time and his only vehicle was repossessed. He owed $30,000+ just in medical bills. He was the true meaning of insolvent. Is this something he can revisit with an accountant or is it really too late? Plus, he just now received a notice from the state on the same matter.

  • Thomas

    My wife and I settled with our mortgage company in 2013 and did a deed in lieu. We received a 1099-c with a debt discharge amount of just under $45,500. I’ve looked at form 982 but our Identifiable Event Code on the 1099-c is F, which is not included on form 982. Does that mean we will need to pay taxes on the 45k? The house was our only place of residence and we have no assets.

    • Hi Thomas, happy weekend. It sounds like you can exclude all that cancelled debt in Form 1099-C, Cancellation of Debt, probably without future tax consequences from the reduction of tax attributes of Form 982. No worries. We’d be happy to prepare that tax return.

  • Donna Amy

    Hello Gary,
    My mother passed away in 2012. I was told by a cpa that since her only source of income was SSI that I did not need to file a tax return for that year.
    In 2013 I settled a credit card debt she owed and have now (in 2014) received a 1099-c form.
    I don’t know what to do…………Please advise

  • Zaneta Dodd

    Hello Gary,

    In short my husband received an automobile loan from Navy Federal Credit Union. We paid on the vehicle until the vehicle became completely inoperable and the cost to repair is more than the car is worth. We have tried to voluntarily turn the car in, however the bank states that they do not repossess cars that are inoperable, instead they will charge off car and utilize the form 1099 c. the FMV of the car is roughly $7800, however we owe NFCU 14k. What does this mean for us being that they wont take the car back. Once they do this do we now own the car and have to try to sell it. Will we be able to get the title. I am confused on this process

    • Sorry Zaneta, maybe you need to ask a lawyer or a car salesman. I don’t know much about the title process. My expertise is Form 1099-C, Cancellation of Debt, and how to exclude the amount in Box 2 from taxable income through Form 982.

  • liz

    I live in Pennsylvania and in 2012 my spouse died. We filed a joint return for tax yr 2012-which obviously was his final return. At his death he had no assests in his name. According to PA law the house and cars which are also on my name, reverted to me. He died with no life insurance, no bank accounts or stocks, bonds or any retirement—NO assets. He had no will. After his death in 2012 I informed his credit card companies of his death in 2012. No 1099-c’s were issued from the credit card companies for his last year of life in 2012. However I am beginning to receive them for tax year 2013-since the debt is being cancelled because of his death. Since he was insolvent, according to the IRS’s definition (more debt than FMV of his assets-which ‘he’ died with none), what do I do now for tax year 2013? He was dead for that tax year. HE can’t file a tax return for 2013. You can’t addmend the 2012 tax because the 1099-c is for 2013. The 1099-c’s are (as of now) only for 2013. My tax return will be filed as Head of Household because i’m still the caretaker of my minor child.

  • liz

    i should also add his credit cards were in his name ONLY. I was NOT a co owner of his debt. Does form 982 get filed even AFTER his final tax return of 2012 was filed a year ago.

  • Patricia

    Hi Gary,
    I just received a 1099-c today for a car that was reposessed when I lost my job in 2010. The 1099-c is dated 12/31/14. At this time I’m insolvent by 22,000 with credit cards, a car loan and student loans. The 1099-c is for 7832.00 so I’m definately insolvent. I plan on filing form 982. How often does filing this form trigger an audit?

    • Hi Patricia: It’s hard to say whether filing Form 982, Reduction of Tax Attributes, triggers an IRS tax audit. When I prepare any tax return I assume it will be audited, just to help me stay accurate. Most of the cases I’ve seen involve the IRS sending Notice CP2000. Your Form 1099-C cancelled debt is small by IRS standards (probably). I wouldn’t worry about an audit if Form 982 is the only issue.

  • Louise

    Mr. Bode, I received a 1099-c for for a private student loan. Do I have to count this as income or can I use form 982? Is there a way that I can be exempt? Please help I would love to talk to you? I also live in North Carolina. Please help!

  • korene

    Can I include credit card balances under liabilities on the insolvency sheet if I haven’t gotten a 1099 c from them but I haven’t paid on them for 3 years.

  • vena green

    If I received a 1099 c for 4000 from a bank do I hace to file it and will they take all my refund

    • Hi Vena. Yes you have to report the Form 1099-C, Cancellation of Debt, on your tax return. While the IRS may issue a refund if you don’t they’ll certainly ask you about later. $4000 sounds like cancelled credit card debt? If so you can use Form 982 to exclude the cancelled debt from taxable income. Here’s a nice site with comprehensive examples of the tax reporting rules for cancelled debt. https://www.form982.com.

  • Keith Engelk


    I have a duplex that I short saled in August 2013. I used the FHA Short Sale program and they cancelled the debt for $182K which corresponded to the 1099-C the 1099 does not have a FMV or interest forgiven on it. My question is two fold. 1) on form 982 should I use a FMV of $0 and past due interest of which was approx $32K at $0 since it is not on the 1099? or should I report the FMV at the sales price along with the interest past due at the time? 2) I did live in the property as primary residence for 2 out of last 5 could I use the mortage forgiveness act for half of the property or all of it? I did file schedule E for half of the property but never for the primary part was just vacant. Also could I offset any COD income with a Sch E loss from the short sale up to $25K? My head is really spinning on all the possibilities.

    • Hi Keith, these are cancelled debt issues beyond a post comment, but here goes. The FMV value of Form 1099-C is one of several imputed sales prices used by the IRS. I don’t what it would be in your case. Loss on the sale of rental property is ordinary loss not capital loss. Hope that helps.

  • Ken

    Sorry to disturb you but I wanted to ask you this question. Last year on primary property I got DOJ loan modification that I fought for 5 years on my first house. Last week I got a 1099-c tax statement for the loan modification that they took of my loan which was $132,552. I think I am covered under the mortgage forgiveness debt relief act of 2013? So can I fill out the FORM 982? Are there any other steps I have to take for this? I was approved for a principal reduction loan
    modification under the U.S. Department of Justice and State Attorneys General national mortgage settlement for my house. I live in my property and rent a room out as I am single which is my home. I am confussed about the 1099-c and stressed out. Any advice, I appreciate your help.

    • Hi Ken: I know Form 1099-C, Cancellation of Debt, causes stress. You’ve got some IRS wrinkles because you’re out a potion of your home. Form 982, Reduction of tax Attributes, should exclude the amount in Box 2 of Form 1099-C. So you have a convoluted tax reporting issue but it should end up with $0 of additional tax. Hope that helps.

  • Hello Gary. I received 2 1099c forms from chase saying they have discharged/cancelled my debt for 2 student loans I received back in 07 & 08 one for 7000 and the other for 11000. I’m really confused bc they said the date of the identifiable event is 12/31/2013. I just spoke to a specialist from chase last week January 27 saying that in order for my debt to be resolved I have to pay a lump sum of 2300 by the middle of February 2014. My case is not settled so why did I receive a 1099c form? Are they trying to make me pay both Chase and the irs. Please help me I believe I received the form by mistake. Any advice will help thanks, Emily

  • Tammy

    Hi Gary,
    I just found your site and am so happy. I filed my taxes last week for my husband and I jointly. We are getting a refund. We have 3 kids. I’m a stay at home Mom and I used turbo tax. Well yesterday I got a form 1099c from a cc charge off debt years ago for 16000.00. But it says it was charged off last July. How can that be? Anyway I’m beside myself with worry. Couldn’t sleep last night. Should I amend my return? The form is in my name and since I don’t have a job will my husband have to pay the taxes? I’m so worried about this that I can’t think straight. None of our vehicles are in my name but our house is that we still owe over 20 years of payments too. We live in N.C. if that makes a difference. Please help. I’ve been so worried that I’ve been crying. So happy to see this page.

  • Justin

    Hello Gary,
    My father passed away in 2012. My mother used and attorney and went through the entire estate process. His estate did not get closed until the beginning of 2013. Now she is getting 1099-c’s for some of the credit cards that were in his name only. There was nothing in the estate. She filed a tax return for him last year. Does she need to file another tax return for him this year as well or does she have to include these on her tax return? Sorry if this has been asked already. I tried to read through carefully.

    • I think your Mom could put those Form 1099-Cs, Cancellation of Debt, on her tax return and file jointly. But she may be able to file Married Filing separately. The key points are to shut down all the financial for 2013 without paying taxes on it and saving your Mom future stress if the 1099-Cs aren’t dealt with. Maybe you need a CPA on this. (910) 399-2705.

  • Stephanie

    I received a 1099c today after I’ve already filed ugh. It’s for a timeshare we had. It was our understanding since it was financed through them that we were giving up the property to them for getting out of the remained of the loan. The remainder was 18801 and fmv was 43800. So they got the property back and we’ve paid them $25000, I can’t figure out what this falls under or what to file.

    • Ugh is right Stephanie. You have a three pronged tax reporting problem. 1) You need to amend those tax returns to include Form 4797 to calculate the gain or loss of the time share. 2) and Form 982 to exclude the cancelled debt from taxable income 3) and determine your tax attributes, if any, and allocate them per IRS requirements. This sounds like might want a CPA’s help, me hopefully, to handle that. Call me if you’d like 910 399 2705. No real worries, just aggravation.

  • Lynne Murrell

    Hello Gary,

    I was approved for a short sale for my condo. I paid 140k for it in 2007, it is now worth about 30k. The bank agreed to pay all of my debt except for $11,800. They want me to sign a promissary note agreeing to pay the 11k and I have up to 5 years to pay. I want to get rid of the condo because it has become a financial burden to keep it and pay bills in my current home. I currently have a renter staying in the condo. Here are my questions:
    My realtor said that the bank will not file the 1099 until I pay off the 11k. Is this true?
    If this is true, and the 1099 is not filed until a few years from now, should I document all of my debt this year, so that it can be used to file the form 982? Or will I report debt that I have only in the year that the 1099 is filed?
    What can include as debt? I have the condo, credit cards, a car, student loans, and house bills. Thanks!

    • Hi Lynne. Sorry to hear of you troubles. My guess is that the bank won’t issue Form 1099-C, Cancellation of Debt, for your rental property until you pay the $11,800. Why? It’s part of the agreement Not paying would invalidate the deal? But I’m not an attorney. You would only file Form 982, Reduction of Tax Attributes, once the Form 1099-C arrives. You report a Form 1099-C in the year listed on it. For example, if your debt cancellation occurs in 2015 you’d file Form 982 with your 2015 tax returns using 2015 data, not 2013. Hope that helps.

  • Lynne Murrell

    I just want to be as prepared as I can…

  • dmc

    I received a 1099-C for a creditor debt discharge of nearly $16,000.00.
    Is there anyway I can just pay the taxes on this without my partner knowing?
    There are no write-offs….
    I am claimed jointly on our returns.
    I would just like to pay the taxes and be done with this with know one knowing.
    Is that possible?

    • With a Form 1099-C, it’s rare for us not to exclude at least some debt through Form 982. So paying taxes on the whole $16G seems odd to me, CPAs hate to see Folks pay unwarranted taxes. Your partner would have to sign the amended return. If it was me, I’d prepare the amended return, cut a check and then present it to him or her in the best way. I think forging a signature might be a crime.

  • Heather

    Hi Gary.

    My husband and I filed Chapter 7 bankruptcy in 2007. We didn’t reaffirm our mortgages but continued to stay and pay our mortgages. We recently settled our 2nd mortgage at the end of 2013 and the lien has been released. I was expecting a 1099C but have not received one and the debt settlement company said that they don’t think I will get one this year. Should I still claim the settlement and complete form 982 on my taxes or do I wait to see if a 1099 C shows up? Thank you so much!

    • Hi Heather. I’d extend the tax returns. And then ask the IRS if they received a Form 1099-C. The bank rep might not have access to the pertinent information, so I don’t rely on negative responses from them. If you can be sure the debt is written off you could file Form 982. But it’s difficult to say when the bank actually writes off the debt. The exact amount is probably different that what you might expect. Hope that helps.

  • Michael

    Thanks for the useful information! However, I have a question I can’t seem to get the answer to. I am married and fileing “jointly”. My wife had 35,000 in student loan debt cancelled due to disability. When filling out the insolvancy worksheet, and I am not sure if I only include debt with her name attached to it. For example, I have my own student loans and my wife is not a co-signer. Would I include that amount as liability immediatly preceding the discharge of debt? If not, would I include MY pension as one of her assets. Thanks for any help you can provide!

  • Jeff Deale

    Hello Gary,

    Hoping you can help… We just received a 1099-C for cancellation of my wife’s student loan debt ($42,000) due to total and permanent disability (she was nearly finished with grad school, but suffered a stroke). We are married with 2 children and always file our taxes jointly, but I am trying to figure out the insolvency worksheet from pub 4681 to fill out form 982.

    My main question is- do we only include her liabilities & assets- or can we count both of ours together since we file our taxes jointly? I am a student as well, so I have about $55,000 in student loan debt myself. If we can count them both then our liabilities heavily outweigh our assets and we would be insolvent for the entire amount. But if the insolvency only applies to my wife’s individual liabilities/assets, then I am wondering if her assets include money that I got for student loans and money I made this past summer as well (all of our money is together in a joint checking account, so I don’t know if I have to list all of that on her assets). At the date of the debt cancellation I had just finished a summer internship and had made a decent amount of money (we were saving as much as we could so I didn’t have to work the next semester and I could take more classes) (roughly $8000), also right before that date as well, my fall semester student loan refund dispersed to our joint checking account ($6500). I guess what I am asking is, is there a way to separate out my student loan money and/or any of the money I made over that summer? She is totally disabled, unable to work, and only receives $1200/month in disability income. We rent, and own almost nothing of any real value, but if we have to count all the money in the bank (most of which was “mine”) + FMV of her very few possessions, it wipes out a lot of the liabilities, and we end up paying quite a bit of tax on it. (Honestly, I still can’t believe the IRS can consider student loan forgiveness due to permanent disability income- or if they can, it should be prorated over many years (the normal payback period)- not lump summed in one tax year as if we received a check for $42000 this year! I’m still pretty disgusted with this issue!)

    Sorry for the long post- any help with this would be greatly appreciated!

  • Katherine

    My best friend and I , each recieved a 1099 c for the same amount of debt for a short sale we did 2013. My best friend was the primary resident and i was just a co-borrower. I had my own primary house that i also short sale in 2013 which i recieved a 1099 c for it. I am confused on how to fill out the 982 form. because i dont know if I have to put the 1099 c of the house I had with my friend? it is the same amount ?
    I need help with this.

  • Cathy

    Hi Gary,
    I received a 1099c for cancellation of my 2nd mortgage on my house in 2011. Only my name was on it and my ex’s wasted. He refused to pay half of the gain so I claimed it all. I didn’t realize I could have the mortgage company’s didnt the 1099 until I started doing some research due to another 1099 he received (mortgage settlement case). I have asked the bank to correct and send him a 1099 as well. From reading the above post I am under the impression that there is really nothing I can do even if the bank sends him a 1099 because he will likely not amend his return. Do I have any leg to stand on if he does receive a 1099 to modify my return? The cancellation resulted in approximate 50k in income and a major payout to the IRS.


    • There could be legal recourse Marie, but I’m not an attorney. Without a joint return I doubt you could insulate yourself if he doesn’t step up. Sorry. It seems unfair to me too. However, please be sure you’ve excluded every dollar possible on Form 982. As a CPA I don’t like the major payout. It sounds to me like I could exclude the whole $50,000 making the point of his responsibility moot. Hope that helped.

      • Cathy

        Thank you it does. I believe I would not be considered insolvent due to the value of my assets at the time. I did do some further investigation after your comment and I am curious I’d the fact that the second mortgage was a purchase money mortgage would mean that it too qualifies under the mortgage forgiveness act. I do not see any specific IRS guidance on this but several web postings. Perhaps it would be possible to amend my return.

  • Pat

    I have a discharged student loan of $50,000. My assets prior to discharge were $10,000. My liabilities were $6,000 + $50,000(if one includes the discharge loan amt.) Am I insolvent, or do I owe taxes on the $4,000?
    Thanks for your help.

  • Kelli

    I had a school loan debt cancelled and I received a 1099. I filled out the insolvency worksheet and it has been determined I am insolvent. My question is I am now married and my husband and I will be filing our taxes together. We have no current debt together therefor he should not have to fill out to see if he he insolvent but our tax preparer is telling us they “think” he has to fill out an insolvency worksheet also and that we need to file an injured spouse form. This makes no sense to me. Wouldnt it all be on me to prove Im the insolvent one and once thats determined out preparer would fill out form 982 on our taxes on my behalf? I just dont think they know what they are talking about. PLease help

  • Thomas

    I received what I anticipate to be the first of many 1099-Cs for my deceased spouse for her discharged student loans. I filed her final return jointly with mine last year, there is no estate/assets and the last four of her SSN are on the form with her name and mine underneath.

    My first inclination was to ignore it, but after coming across this and other searches I am not sure that is appropriate. I’ve read the IRS Pub and am attempting to contact them to find out the proper action to take.

    Any guidance is greatly appreciated…


  • Chris

    Hi Gary,

    A friend and I short sold an investment property last year at a $70k loss which of course is now income. My friend received a 1099-C, however I have not and when I contacted the loan company they informed me they are only sending a 1099 to my friend and not to me. What should I do? Does my friend have to claim the entire amount as income or do we each enter $35k as income when filing our tax returns?



    • Hi Chris: if $35k is the full amount, and you signed on the loan, you’d split that, sounds like 50/50. Include detailed explanation with your returns to avoid future IRS Notices. If you weren’t a signer then your friend claims the entire 35K. Hope that helps.

  • Heidi

    My ex-husband recently received a 1099C for credit cards that accumulated while we were still married. I filed Chapter 7 bankruptcy (including these cards) and my divorce went through in 2012. He received the 1099C within the last couple of weeks. According to the person who does his taxes I am also responsible for this 1099C (we live in a community property state). Is that true even though I did not receive a notice and I filed bankruptcy on them?

  • chel

    On the insolvency worksheet would my student loan become a liability (debt) immediately before the date listed on the 1099c? I was forgiven on a student loan because of my disability. I can’t find the answer anywhere. Would the interest on the loan that is included in the main amount be included as a debt too?

  • Trish

    Greeting Greg, I really need your assistance in completing the 982 form and what to put on lines 2 in part 1 and what to check under part 2. Should it be # 5 or 10a with 0. Lastly do I subract and end up with a negative number or subtract to get a positive number for insolvency. If you look at the worksheet form it says subract line 37 from 15 and if zero or less you are not solvent. Will I have 43,000 in assets and 300,000 in liabilitys. I did a short sale and was forgiven for 70,000. The house sold far less that what the loan was orginally for and of course i didnt get the down payment i put in the house. I dont know how to do the figues for 10a and I dont know if I what to put if I check line 5 in section two. I am struggling here and already have enough debt. I cant afford to pay back any money. Please assist. I know I can do insolvency, but should I also check 1e for qualified principal residence? This was my only home and I didnt take out another loan to enhance this home. Bank of america did not put the fair market value on the home but it sold for 100k and I boiught it for 200k. Thank you in advance for your assistance.

  • Gina

    Hi, Gary,

    I have a question regarding what is considered liabilities and assets when doing insolvency.
    We have two homes and one we are short selling. The house we are not short selling we are still paying a mortgage and have very little equity. This may seems like a stupid question, but is the amount still owed considered a liability and is the equity considered an asset?



  • Fred

    I have a 1099c from a 2nd mortgage that was written off. Some of the 2nd was for home improvement and some was to pay other debt. I did not keep records of the amounts. What proof is required to to claim home exclusion on form 982?

    • We sometimes provide supporting documentation with the return Fred. I don’t know how often the IRS audits cancelled debt tax returns. It’s never happened to me. You can probably reconstruct home improvement costs in case the IRS inquires about them. There’s good examples of this issue in IRS Publication 4681.

  • Hi Gary,
    I went to my tax preparer who is using turbo tax . I got a 1099c which he filled up and he also filled up form 982 checking primary residence as reason for exclusion.( we had a hafa short sale in feb 2013).when he was done, it appears that I owe irs money but when he did not include the 1099c amount, I had my usual amount of refund I have been getting for years . As you wrote here, the amount I owe is 20% of the amount in the 1099c, how can the figure in form 982 flow in form 1040 using turbo tax?Pls. Advise. Thanks

  • Rene

    Hello Gary,
    I received a 1099-c form due to cancelled credit card debt of $3700, I am trying to determine if I qualify for insolvency. Should I be including my student loans that were in a grace period? When I add up my total debt – my total assets I get about $9,000. The tax site I use (FreeTaxUSA) says to include this amount of the difference, but when I enter in that amount under Debt Cancelled while insolvent, it gives me an error message stating: The amount entered for your bankruptcy exclusion, insolvency exclusion, and the mortgage exclusion should be less than or equal to the amount entered for your canceled debt. I am just trying to confirm if I should use the amount that is on the 1099c, or how to correctly figure out if i was insolvent.

    Thank you!

  • Heidi

    I received a 1099-C for $1,600. I have student loans owed at $49,000. Would this be considered a liability and therefore insolvent (I have no other liabilities or equity)? If so, do I need to fill out both the Form 1099-c and then the Form 982 as well (I am using Tax Slayer)? I just need to know if I need to fill out both.


  • Scott

    Hello Gary:

    I had a house in Massachusetts. It was our primary residence for 5+ years. We could not sell it when we moved to California, and had to convert to rental, which it was from 2008-2013. When the value of the property collapsed, we attempted load mods and were denied. Finally got approval to do a short sale. Received a 1099 C for the total forgiven debt of ~ $50K. This includes the real estate commissions, etc for the sale. We have ~ $110K in passive activity losses over the time we had it rented, plus the expenses to sell (commissions, etc.). Not sure if/how the Form 982 comes into this. Also sold another rental at the end of 2013, with a profit. It also had ~ $100K+ in PAL. With this and recapture, not sure what the end result will be.

    Any advice on the use of the Form 982 in this case would be appreciated. Planning to have a CPA do my taxes this year (normally TT). Any advice for what I should be looking for in a CPA in terms of experience with this type of issue?



  • Wendy Williams

    Hi Gary,

    My debt settlement company reached a settlement with one of my credit card companies in Dec. 2013 and I began paying installments over about 2.5 years.
    Do you know if the 1099C is filed upon the agreement to settle or when the whole debt is concluded? Also is there a deadline each tax preparation season for the party to file the 1099C?
    Thanks very much.

    • Hi Wendy. Form 1099-C gets issued (usually) when the settlement is complete. Many Form 1099-C(s) arrive late. Sometimes years late. The deadline is based on multiple IRS reporting requirements which a logical person wouldn’t suspect.

  • Nicole Barker

    Hi Gary,
    I filed form 982 discharge of indebtedness to the point of insolvency. I sent the paperwork in December. I have not received anything from them since I filed this form. I filed my taxes at the beginning of this month and I was expecting a refund. When I went to their website it said my refund had been reduced to pay a tax I owed to the IRS. Can they do this after I filed the form and I have not even gotten a final bill? The only thing I got was a letter of proposed changes with which I filed form 982. Please help!

    • Sorry Nicole, they can hold up a refund. If you get a formal IRS Notice, like CP2000, review it carefully. Lots of folks don’t prepare Form 982 properly. So maybe you can amend your 2013 tax return to recoup your refund. Hope so.

  • mark

    Would I qualify for a 982? I received 1099c on my old rental home for 100,800. I also had 17000 in credit cards debts when the 1099 was issued. My current home is worth 255k and we owe 244k on it. Assets: car, 5000, Ira 2000, bank balance 3000, plus other household stuff, maybe 5000 to 10000 worth. I think that I do qualify if I am understanding everything correctly.

  • kelli

    Hi Gary:
    I had a school loan cancelled in the amount of $28,000. I have filled out the insolvency work sheet and I am insolvent. I will be filing a joint return this year with my husband who has no ties to this cancelled debt. Our tax preparer does not know how to handle this situation so our taxes have yet to be filed. I am wondering, does my husband also have to fill out for insolvency? That would not make since to me since it was not his debt and his information may not qualify me as insolvent I am thinking. I guess my question is how do we file a joint tax return with my insolvency? Do we only have to prove me insolvent and send in form 985 with our return or does he also need to file insolvency or can I just file insolvency and then we file an injured spouse form. We really need help with this since noone in our area knows how to handle it so therefor noone will do our taxes for fear of filing wrong…Please help

  • I filed my Form 982 in December 2012 from my amended return for 2010. IRS is saying I had to file the form 982 within six months of filing??? Seems so wrong. IRS is disallowing (after 15 months of call and letters) because of this six month rule. Why give three years to file an amendment…really creepy. Any advice?

    • Hi Rich, I think the 6 month rule only applies to two specific elections on Form 982. Maybe you didn’t complete Form 982 properly?

      File Form 982 with your federal income tax return for a year a discharge of indebtedness is excluded from your income under section 108(a).
      The election to reduce the basis of depreciable property under section 108(b)(5) and the election made on line 1d of Part I regarding the discharge of qualified real property business indebtedness must be made on a timely filed return (including extensions) and can be revoked only with the consent of the IRS.
      If you timely filed your tax return without making either of these elections, you can still make either election by filing an amended return within 6 months of the due date of the return (excluding extensions). Write “Filed pursuant to section 301.9100-2” on the amended return and file it at the same place you filed the original return.
      Specific Instructions
      Part I

  • Mary Knell

    I am crying my eyes out Gary. I just received a 1099C for an old credit card debt that is over 9 yrs old. Having filed already this year I realize I must file 1040X and 1040 amended return plus form 982. Is there a statute of limitations exemption I can use on this? The creditor has not so much as sent a past due letter or bill in over 6 years. I haven’t slept in days because of this Gary….please your help??

    Love you

    • I’m not aware of a timeline limitations Mary. I’d prepare that amended tax return using Form 1040-X and Form 982. If it doesn’t show any additional tax due maybe it’s just better to file it. The IRS publishes their Form 1099-C tax reporting rules. If the lender violated those rules maybe you’d have a good case.


    I received a 1099-C on a motorhome I purchased in 2006. I leased it to someone until 2012. In 2012 we could not afford it anymore and the bank repossessed it from the people that were leasing it. I have not had it in my possession for years.

    My question is when I am filing out the insolvency worksheet do I need to list it as an asset? And the instructions say to list “Assets Owned” As of the date of the 1099-C the bank had it in their possession for months and then sold it. I still owed approx. $140,000 on it.

    If I need to list it what value to put on it? Hopefully I don’t have to list it…

    Thanks in advance.

  • Josh

    Hi Gary,
    My wife and I are all on 3 chase loans for her college schooling totaling $45,000 of chase debt. Chase sent us 1099c forms for all 3 loans with the total amount of debt for each loan in the 1099c forms. I contacted chase and they said that all 3 loans are “Charged Off” and that our debt is not forgiven (we still need to pay the whole amount back). H&R Block as of right now is saying is I’m responsible for the taxes for that $45,000, but they aren’t sure yet, but they want me to see if I can be insolvent. From my research I thought a 1099c was a “Forgiveness of debt” form. I don’t think it’s right that I have to pay taxes on that $45,000 and also pay it back at the same time. I would think it’s one or the other, not both. Something doesn’t seem right to me. Am I wrong at my thinking? I live in PA. Thanks.

    • Sometimes a Form 1099-C doesn’t keep the bank from trying to collect. I’m not expert on the IRS tax rules for issuing Form 1099-C Josh. But in my experience the bank won’t retract a Form 1099-C. If you can exclude it with Form 982 with no consequences I would do so. If not I have challenged issuance of Form 1099-C with the IRS. Seems to work but each case is unique.

  • Katie

    My sister was the primary borrower on a student loan for her son who passed away. The lender discharged/forgave the loan and issued a 1099c in my sister’s name. Some folks are telling my sister that she should not have received a 1099c in this scenario. Can you shed some light on whether a 1099c should be issued in the case of student death?

    Your input is much appreciated. Thank You

    • Hi Katie: seems to me the 1099-C would present on the final tax return or the Estate return (Form 1041) with probably no tax consequences. I doubt the bank will retract it. You could challenge it with the IRS. I don’t have an opinion on right or wrong, sorry.

  • Michelle

    I had my taxes done on Monday by a local Tax company. I gave him a copy of my 1099-c, but I don’t see where he put it on my 1040. When I presented the 1099-c to him, he said he’s only done a few of them (red flag). I’m scared he didn’t really do anything with it. He only gave me a copy of the 1040, but not any copies of supporting documents, and there isn’t any additional income on line 21. My 1099-c was for $15,000, I have other bills totaling $3,000. I don’t own a home, I rent, I have some household items, I own a car worth around $5,000. I’m thinking he should have listed income on line 21 and filled out the form 982. I’m worried I’m going to get audited, or a bill in a few months from the IRS…

    • Ouch Michelle. There should be a Form 982. Only a Form 982 could result in $0 on Line 21. There could be additional provisions of Form 982 besides insolvency depending on the nature of the cancelled debt. If your tax preparer doesn’t understand the tax reporting rules of Form 1099-C and Form 982, I’m happy to prepare the tax return. Otherwise the IRS will surely zing you for the $15000 which could mean $3,000 +/- of tax unless you amend.

  • Hi Gary. Great information above. Unfortunately, I didn’t find a question quite like the one I have. My home was foreclosed on by the principle lender in September 2012. I had a second mortgage (about $140,000) that was forgiven, but that lender waited until early 2013. Not all of, but a large portion of, the second was used to purchase my ex-wife’s share of the house. Due to the time lag between the foreclosure and cancelation of the 2nd I’m unsure of the best route to take. Can I, in my situation, exlude a portion of the amopunt shown on the 1099-C that I recieved as taxable using the Qualified Principal Residence Indebtedness route? Or, do I have to try to go the Insolvency route? And, if I can use QPRI for a portion can I use Insolvency for the rest? Thanks in advance for any help that you’re able to provide.

  • Michelle

    Thank you Gary. I went back to him yesterday and found out he didn’t put it on there at all. He added the amount on line 21,and typed “Cancellation” on that line. On the 982 he checked box 1b and put the $15,000 on line 2. This is all he filled out on this form. I guess the next step will be to fill out the form showing why I’m insolvent? Does the IRS contact me for this? I’m sure I’m going to need additional tax help. I also see where he filed my son’s taxes incorrectly. I claimed him, and he also claimed himself…ugh.

  • Sherri

    I am currently going through a divorce (4 years now) in which all the credit card debt was in my name. I have been on a debt management program for the last 2 years, but am at the point I cannot continue payments. I am unemployment and undergoing cancer treatments. I’m at the point that I do not know what to do. I entered the DMP in hopes of keeping my credit on track, but that has now become impossible. I live in PA and would like to know how I go about declaring insolvency and what I can expect to happen after I do so. I am expecting a decent settlement, however that was entered into court on December 16, 2013 and now my attorney is filing contempt charges on my ex because he did not follow through with payment that was to be made by February 16th. I’m in a terrible situation and do not know what to do, can you help me? Thank you.

  • Adam

    I got divorced and in the divorce my wife got her car which I was a co-signer. After the divorce she stop making payments on the car and it was repo’d and put on both our credit reports the next year which was 2013 I negotiated a settlement to get the car off my credit and this year we both received a 1099-C for the balanced they wrote off during the settlement. I would think she would have to pay taxes on this since it was her debt I paid off, not mine. I only paid it to get it off my credit because I knew she would let it ride out 7 years until it was no longer on her credit. What can I do or an I screwed.

    • Well Adam, sorry, it looks like you’re on the hook for the entire amount of cancelled debt in Box 2 of Form 1099-C, Cancellation of Debt, if your ex wife doesn’t pay her share. I know the principle is hard to swallow but if you can use Form 982, Reduction of Tax Attributes to generate no consequences on your tax return, maybe it’s best to do that. If not maybe I can work some of the cancelled debt and insolvency issues for you.

  • Lupita

    Hi: I’m going to short sale my property in this 2014. If the government does not extend the Mortgage Forgiveness Debt Relief Act can I still file the 982 form using the insolvency part? Because I’m insolvent that’s why I have to short sale my property.

    • Sure Lupita, you could use the insolvency aspect Form 982, Reduction of Tax Attributes to battle a 2014 Form 1099-C, Cancellation of Debt. I’m assuming the forgiven mortgage debt was for your primary residence.

  • Hi Gary, I have a question my husband had a mobile home that was reposed back in 1995 and today I received a letter from the IRS stating we failed to report 2668.00 on our tax return in 2012 from a 1099-c this happened 19 years ago and has been off my husbands credit for sometime now. We never received a 1099-c from the company in 2012. And I wasn’t married to my husband at that time. He is disabled and on disability and I work and pay taxes and he draws disability. Can they make they make us pay this since it is so old and we filed jointly . But it’s really my tax money as he draws disability. Please help. Thanks!’ Any advice on how I should handle this?

    • Hi Robin, depending on the time line you can prepare an amended 2012 tax return to include Form 982 if Form 982 excludes the cancelled debt from cancelled income. If not just pay what the IRS wants. Remember to ask for penalty abatement.

  • Well Chris, the IRS will rely on the Form 1099-C, Cancellation of Debt, and expect it on the 2013 return. The good news is that you should be able to write the entire amount of discharged debt in Box 2, perhaps with no future tax consequences either. So, sometimes it’s just easier to include the 1099-C than spend hours trying to contest it.

  • Jimmy

    Hi Gary,

    In 2011 FIA wrote-off almost $9,000 in debt that I owed. I never received a 1099-C. In 2013 I filed Chapter 7 bankruptcy, which was discharged in 2013, and I included this FIA debt. In 2013 I received a notice from the IRS that I owed 2011 taxes for the 1099-C that FIA issued. Can I use the 2013 bankruptcy to complete the 2011 Form 982?

    • How I work that Jimmy is first I see if claiming the Form 1099-C, Cancellation of Debt, cause problems on the 2013 return. If not we ride with that. We have challenged timing of Form 1099-Cs and won.

  • Ryan G

    Hi Gary, I have a question regarding form 982. Can loans/credit cards that are in default/collections still be used as my liabilities? I don’t receive statements from these accounts anymore, just collection letters and I can see them on my credit report.

  • Deanna W

    I hope you can clarify something for me. I am divorced (2 years) and my ex-husband received nearly $40K in 1099-C for 2013, NONE of which have me listed or my SS#. It was debt assigned to him in the divorce. I am paying on two of his credit cards that was assigned to me in the divorce (because I kept the property, it has excellent equity). He wants me to stop paying on those two credit cards so he can include them in his insolvency he is starting with a tax attorney. EVERYTHING in my gut tells me NOT to do it. I don’t know if my SS# is attached to them or not, and the cc company will not speak with me. I have every intention of taking my lumps and paying the debt off as the divorce judgement states, but why does he want those two cc accounts to go into default?

  • Cherri

    A few years ago we went through a very rough financial patch. We were not able to make payments on two credit cards and they would not settle with us. Well, now we have 1099-C now for 2013.

    Do you know if we will have to report this as income for 2013 since it was from 2010? I’ve read several articles on the topic and still cannot come up with any definite answers.

    If we try to claim insolvency, does vested state controlled retirement accounts which cannot be touched until retirement age count toward assets?

    Thank you

    • Hi Cherri. You would claim those Form 1099-Cs on the 2013 return. I’ve challenged the date on a few Form 1099-Cs when it was in my Client’s best interest to do so. You can also try to get the bank to correct Form 1099-C if using 2010 results in less tax. Pension plans are tricky. Defined benefit plans don’t go on the IRS Insolvency Worksheet.

  • Mike

    Gary – I am in the process of closing on a short sale. I’ve just been informed I’ll be receiving a 1099 for almost $200k. I make a decent income, however between other debt and rent I’m barely scraping by paycheck to paycheck. If the mortgage relief act does not get extended this year, would I be able to use line 1e on form 982 to exclude the debt?

  • Jon

    Gary…can I use the assessed value of a home from the annual tax statement as the FMV when filling out an insolvency worksheet?

  • Havilah

    Firstly, THANK YOU!
    I’m working (sort of) with a tax attorney who has generously offered to represent me should the IRS find any issue with my filing for insolvency (I was very clearly insolvent at the time of my cancelled debt, so I’m not SUUUUPER concerned), but I need to do the filing myself first.

    Using your sage advice I’ve completed my Assets v. Liability worksheet and the 982 form with ease.

    My question is this (and I’m very sorry if this has already been answered in the comments section) —

    Do I still list the 1099-C’s on my tax return? Like, is that still listed as income and then the IRS deducts it? Or do I just not list it at all?? I’m not sure how to handle the 1099-C’s if I’m filing for insolvency.

  • Jackie

    I received a 1099-A from my mortgagor. Do I file a 982 form?

  • Lee

    I live in Arkansas. It is an equitable division state, not a community property state. My wife is disabled and her old student loans (which she had before we were married) were discharged. We received a 1099-C for $53,000+. I am hesitant to just claim and pay the taxes as she is unemployed, has no property in her name with the exception of clothes and jewelry of course. We don’t even have a bank account in both our names, as she was denied by my bank. Anyhow, I usually claim Filing Jointly. Should I file separately? If so, when she claims insolvency, will any of my limited property need to be included? As an aside, I make over $100,000 per year and taking her off my income tax return causes a $7000 tax hit anyhow. That is better than the $18,000, but still a chunk of my emergency fund.

  • Nick Gioello

    In January of 2013 my home was foreclosed. Because of Arizona laws, this loan was non-recourse. However, the lender sent a 1099-c with box 5 checked as debtor was personally liable. Reading IRS statutes, it does not matter if you can show that the amount of discharge (about $41,000) was offset by home improvements, which is the case. So I claim Qualified Principal Residence Indebtedness for that amount. Okay, fine. Later, in June 2013 I am granted Chapter 7 no-asset bankruptcy, which wipes out credit card and medical debts and a home equity line. This is a separate event from the foreclosure. I receive no 1099-c’s for these debts. Based on your responses to others, I will guess that you would advise I need to file a 982 even though I did not receive a 1099-c because the IRS may have. My question is how do you file both events on one form 982? Or do you file two 982’s?

  • Kristy

    Hi Gary,
    Using a 982 for my 1099C school loan forgiveness. I’ve been given conflicting advice from 2 different tax pro’s regarding whether the amount forgiven, in my case $13,183, is included in liabilities when determining insolvency. Because declaring insolvency is all about recording assets & liabilities immediately BEFORE debt forgiveness, wouldn’t it be considered a liability AKA it’s a debt, in your name, that you owe & are not yet “forgiven” from. If I should include it as a liability, I assume I stick the amount under Student Loans? Thanks in advance for your wise words!

  • Ben

    Hi! Thanks for all the informantion.

    I am reading up on this because I have snagged an issue with my 2013 return. I went through a shortsale in 2013 and have received a pass on my federal taxes because of the debt forgiveness act. I am assuming I didnt need to use the insolvency exclusion because of that… but I am still owing big time on my NC state return… Does the insolvency exclusion extend down to a state level or are the state taxes complete different?

    Looking on the NC Dep of Rev website I cant find anything like a form 982…

    am I barking up the wrong tree???

    • NC doesn’t recognize the mortgage forgiveness act in 2013 Ben. You might try using a different provision of Form 982. Sometimes that results in less total tax (federal and NC combined). Tough tax break.

  • Angie Madruga

    Gary Help! I waited til the last moment to do my taxes!I am trying to complete insolvency worksheet. It has interest in pensions as an asset. I have a Calpers pension that i am vested in, but not retiring for many years. Do I have to include this on the worksheet as an asset? If I do.. how do I figure out the amount of asset ?

  • Gibbs


    I am considering settling on a student loan. My husband and I married in 2012 and I came into the marriage with no assets….I owe money on my car and have student loans outside of the one being settled.If we file jointly and complete form 982 to claim insolvent….would my husbands liability’s/assets be taken into consideration against the amount to be forgiven or would they just look at my own?

  • atcandela

    Hello Gary,

    Glad I came across your article and advice.

    Recently, I received a IRS notice regarding my 2012 tax year of form 982.
    Apparently I filled it out incorrectly and didn’t add the 1099-C taxable income on the 1040 form.
    I added the cancelled debt amount $9,963 on form 982, but didn’t show anything for insolvency of which I was at the time of the cancelled

    The amount of the cancelled debt was $9,963 and the IRS says I owe $1,328.
    Based on the taxable income (line 43) as -$739 = $9,224 ,
    self employment tax =$970, tax (line 44) $949, total tax (line 61) $1,919, earned income credit -$379 = $1,328

    My question(s) is what’s the accurate time frame for “immediately before the debt was cancelled”?
    Is it a month, few months, etc.

    Also what is the best way to calculate the FMV of clothes, books, computers, camera equipment, etc for 2 years ago?
    I’m guessing the IRS wants the FMV to be BEFORE the debt was cancelled. Clothes and shoes are impossible to value especially if you buy
    used or outlet clothing items.

    Right now, I’m looking at assets between $3K-$5K before debt cancellation. Is there anyway to figure out how much tax I would owe by this?
    I fear I’m not going to show enough for full insolvency and will have to owe.
    The only liability I had was the credit card debt.

    Much appreciate your thoughts.
    Thank you in advance!

  • Will

    We have an interesting and uniquely complex situation. We had 80/20 financing on our house. No HELOCS, or anything like that, all purchase money. Our foreclosure date was November 8, 2012. The primary lender immediately sent us the appropriate tax documents but the sold out junior lien did not. I contacted them, had to inform them that the loan was also non-recourse to which they said “oh, you’re right, we’ll have to send you the 1099-c for next year as it’s too late now.” Federally, we’re fine, but CA did not extend the relief and that’s where we’re facing an issue. If everything had been sent correctly, we’d be fine.

    We have filed a filing extension but have no idea how to approach the situation. It was the lender’s fault for not sending the 1099-c for the correct year. In terms of insolvency, if we go back to the “event” (foreclosure), of course we were insolvent for the amount as it included the “80” part of the loan as well. In essence, these two should be considered as one in terms of the timeline, correct?

    For the 982, can we list our assets as they were right before the foreclosure because that’s when the 1099-c should have been issued and that’s right before the debt should have been cancelled. It’s negligence on their part so what could we do without stirring up too much of a problem. Amending previous year’s return seems like an arduous process and one that could only be done if the bank sent a corrected 1099-c, right? We also file separately but the 1099-c was only addressed to one of us BUT we were both on the loan documents. Can I fill out a 982 instead of the person it was addressed to because it would be easier to prove insolvency?

    Appreciate your thoughts on this. Thank you very much.

  • Stephanie

    Hi Gary,

    I have an interesting scenario. We have a rental that foreclosed in 2014. My husband was the only one on the loan but we were both on title. The fair market value of the property was $25k and the loan balance is $375k (don’t ask!). My husband and I are both insolvent (together and/or individually), so I am looking at filing as married filing separately since the debt is just my husband’s. We can exclude the cancellation of debt in full on Form 982 on my husband;s return. My question is on the basis reduction. The only assets we have are another rental property held in an LLC (LLC is owned 50/50 by my husband and myself) and then our personal residence. Where do I make the basis reduction first? I assume that it somehow needs to be done with the rental held in our LLC but I wasn’t sure how that works? Do we just reduce the basis by his 50% of the interest in the property in the LLC? The LLC only owns the rental and nothing else. I was hoping we can just reduce the basis in the personal residence instead as we can then eventually take the capital gain exclusion when we sell (probably not though!). Thanks!

  • Heaven

    I just now realized i may have a problem due to a student loan that was released due to being disabled on ssdi. I’m in a panic . Your info has taught me i have to prove insolvency by having higher debts than assets before the discharge. The question is the biggest debt i hadnwasnthe student loan that was discharged, does that count towards my debts!!? Thanks

  • alex

    Hi Gary a question, I received a 1099c form for the 2012 year I am trying to file my taxes, it was a rental property and I am filing the excluded amount because of insolvency, my question is the amount of insolvency just need to be subtracted from amount of debt or do I have to file other schedules along with form 982? thank you

  • Anna

    Correction: I meant to say : Other than my two 1099-C’s code G, & 982, W2, is there any other form I need to attach to my amended taxes as far as the COD is concerned? Also could I contact the IRS to see if I have other 1099-C floating out there?

    • Hi Anna. I always recommend pulling an IRS wage and income transcript to check for missing Form 1099-C(s). Other Forms? Depends on what Form 982 exclusion you’re using.

      • Anna

        Hello again. So when I sent in my 1040X paperwork to the Federal IRS ,I had to file my amendment after reading your valuable website that expanded I qualified for insolvency- no other website really explains it -got my return from the STATE! but of course I had to send in a 1040X as well to the Fed even though I didn’t owe or was due a refund from them before or after the amendment. NOW the Fed is asking me to “Please provide a statement showing your itemized breakdown of your total insolvency so that we may complete the processing of your return” The letter does not explain further, nor does it have a letter code that I can look up. (Again – I am not due a return)

        I sent my 1040X electronically. The 928 was sent I believe, so the only form I can think of that they are asking for is the “insolvency worksheet” which clearly states “Keep for your own records”. Why does the sheet say “KEEP” when the IRS is going to ask for it anyway, or am I the only one they are asking of this? My 1099-G is for a simple credit card write-off of $2K. No mortgage or student loan. I am insolvent in upwards of $31K directly before the Insolvency. Is this weird or anything to worry about here and what statement are they really asking for?

        [ Sure, I will contact the IRS too and I have tried to contact them for 3 days straight waiting on hold for over an hour each time with NO luck. ]

  • William G

    Hi Gary,

    Firstly, your website is giving me some hope. Thank you. Right now, I just need a general questions answered please.

    I am on SSDI, and know that I qualify for a total and permanent disability (TPD) discharge of my student loans because my scheduled disability review by Social Security exceeds the required 5-7 year period. My date of entitlement per Social Security was early in 2010, and my next medical review isn’t until 2018.

    Question-if my discharge is approved (which I know it will be), I am subject to a three year post-discharge monitoring period. At what point does Nelnet report to the IRS my $16,500 in cancelled student loans. I guess I’m wondering when the tax implications will hit me: as soon as it is determined I qualify, or after the three year monitoring period is done. If it were after the three year period, then I could just put a little aside every month, and be ready to pay whatever I owe after my insolvency is calculated.

    Thank you for your answer,


    • Hi William. I don’t know the rules. But the Clients I have in your position seem to receive the Form 1099-C immediately after the discharge, at the beginning of the 3 year monitoring period. Remember you may not owe anything on the student loan debt cancellation. Hope that helps.

  • William G

    Thanks, Gary. When I add up my assets-Blue Book on my car, cash balance in my bank, baseball card collection, I come to about $12,000. My student loan debt, which is $16.5k, leaves me insolvent only $4.5k. How could I not owe anything on the cancellation? I get $1,280 from SSDI, and another $733 from the Hartford, which is disability insurance I was receiving through my brokerage firm when I was still employed. After 3.5 years on disability, they separated my employment, as they couldn’t keep me on their corporate benefits package indefinitely. So, I only get about $24,000 a year in income. I usually get a tax refund of about $1,400. If I add this $16.5k in income, that’s going to really mess me up. I don’t see any other way to decrease the amount of income this is going to add, and I need to save the cash in my bank account in case I need another surgery on my back or leg.

  • ann

    I am doing a short sale on a investment property and closing next week. I am prepaered to get a 1099 for $100,000.
    2 questions
    1- I sold a 2nd home 12/29/2013 and received $75,000 in proceeds on this ale that I deposited in an acct in Jan 2014. I lost $100,000 on this transaction even though I walked away with $75,000. My accountant did write this off in my 2013 returns.
    Should I include this $75,000 in my assets?
    2- Do you recommend giving most of this money back to my parents ASAP as they loaned me money a few years back. I dont have to pay them back but could to get the money out of my name now so I dont have to count it. What do you recommend?

    • Hi Ann. The $75,000 is an asset if you have it on the date of the Form 1099-C, Cancellation of Debt. Sounds like you can do some proactive tax positioning. Family loans are part of that. Sometime we extrapolate the expected tax return for investment property short sales and foreclosures.

  • Ashley

    What if you have no tax attributes to reduce? Can you not exclude the COD income?

    • Hi Ashley. Sometimes there are no tax attributes to adjust. That doesn’t disallow you from excluding cancelled debt on Form 1099-C, Cancellation of Debt. We generally explain why there’s no tax attributes. Hope that helps.

  • Gary, VERY informative and helpful article re COD. In my Googling around for pertinent info, I wish I’d landed here first!

    Quick question if I may: I see your article mentioned the possibility of a 1099-C rolling in some years subsequent to the triggering event, and that’s the scenario I’m wondering about.

    The situation is that of business (development) real estate being foreclosed on by the senior lender during 2013. Developer properly reports the foreclosure on 2013 return as a sale / exchange (gain / loss = asset’s FMV less his tax basis therein), and COD income (equal to excess of debt’s balance over asset’s FMV). But developer doesn’t recall having received 1099-C in early 2014 for this event.

    The question concerns his response should the lender send a 1099-C for this item in, say, 2015 or 2016. A letter to IRS explaining that he’s already reported this item and the associated COD on the 2013 return (along with copy or return)?

    Many thanks, Gary, from a fellow NC-er!

  • Marjorie L

    A question. this is a personal tax question. person had a ton of credit cards 13 of them that he was in debt for (total 26,800) and he had only a vehicle which had a loan on it. (he owed as much as it was worth approx) He couldn’t keep up so he went with an agency debt freedom relief (in 2011) who helped him get these paid and forgiven at different points. Most were done after the inheritance. So he got approx 8 1099C which amounts to over 11,000 in debt relief or taxable debt. we also recieved a form on insolvency. Trying to figure out if he qualifies. He inherited a bunch of money in June after his uncle passed away in may and most of the cards are reflecting the payoff as of these dates.ht 06/10 and 06/11, 07/05, 07/17, 2013. I guess i just want to know if you think he qualifies for insolvency. at the time of his debt the only asset is the vehicle which had a loan. He paid rent and all his income from his job went to these cards, rent and household bills utilities They all incurred due to a 5 year surgery and not working. Doctor messed him up which put him housebound on machines. long story short. Was a horrible time. All good now as of today. YAY. just want to know if he qualified somehow or not.

  • Kim L

    Hi, we just received news our loan was approved for a modification. They lowered our principle by 133,00.00. Will I have to pay taxes on that in 2014. I see the bills that protected use from being taxed expired in 2013.


    • Hi Kim. You’ll receive a Form 1099-C, Cancellation of Debt, sometime, probably for the 2014 tax year. yes, the qualified mortgage debt provision of Form 982, Reduction of Tax Attributes, is gone for 2014. But the Senate Finance Committee has a Bill to extend the provision. Even if the provision returns to Form 982 some States won’t honor it. So at he moment you’re looking at Insolvency to avoid the taxes generated by 1099-C. There are some tax positioning strategies available. Hope that helps.

  • Teresa Charbonnet

    Thank you for this very informative post. I have been on social security disability since 2006 and will soon turn 63. I attempted to attend school to change careers for several years. Unfortunately, I exhausted the undergraduate student loan cap before getting a degree. I recently filed for discharge of my student loan debt. I learned that the amount of discharge if granted ($57,500) would be considered taxable. I recently learned about filing for insolvency with the IRS. The article I read stated this must be done before the discharge is granted. Is this true? My only “income” is Social Security Disability. Reading your article, it seems I must file for insolvency when I file my tax return. This is confusing to me. I am not required to file a tax return. Can one file for insolvency with the IRS without filing a tax return? More importantly, since I’m hoping for the discharge to be granted shortly, should I immediately file the insolvency form with the IRS BEFORE the student loans are discharged?

    Thank you!

    • Well Teresa, generally we’re able to eliminate the tax consequences of student loan cancelled debt. IRS insolvency doesn’t use income in the calculation. You’ll wait until 2015 to file any tax return. Hope that helps.

  • Holly M

    I received a notice from the IRS about Form 982 from tax year 2012. I called and was told they need me to send in a Insolvency Worksheet. Any advice on obtaining information from 2 years ago? I seem to be hitting a wall as most creditors don’t go back that far online. Also is it true that filing a Form 982 increases your chance of an audit? Thank you so much in advance, I am feeling a bit overwhelmed.

    • Hi Holly. You might try a copy of your credit report to use as documentation. I’d assume if the IRS is interested in your tax, enough to ask about it, you stand a greater risk of audit. Hope that helps.

  • Mark


    Great Blog! My accountant failed to let me know about the elimination of the qualified mortgage debt provision of Form 982, Reduction of Tax Attributes. I have a property that has been foreclosed on and sold in 2014 and hence I will receive a 1099. I was insolvent at the time of the sale but don’t know if that does anything for me. I should have moved forward with my Chapter 7 to eliminate the debt before it sold but I didn’t. I still have 3 more properties that will possibly sell and I know I need to move forward with Chapter 7.

    Is there any possibility of eliminating the forgiveness of loan amount? My accountant isn’t as up to date as you are. I am sweating this and would appreciate your ear. Thanks!

  • Lisa Jimerson

    For 2013 taxes. My husband received a 1099-C for a pick-up that he voluntarily let go back to a small car place in town. They did in-house financing on this. We only had it a month when his dad died suddenly at work. My husband had to help his mom with the funeral costs so when we had to figure out what we could or couldn’t afford at that point it was obvious the truck had to go. But since it is a “tote the note” place they just re-finance to the next guy that comes along and so on and so on so they are getting their money way past what it is worth. WIth that said, in box 2 of the 1099-C they put the entire amount of the truck and not a remainder amount after selling it again. Can they do that? Also, we just married 8 months ago so a lot of his insolvency is his own and not mine (although I have plenty). So do we only put his info on the form 982 and how do we do this if we are filing joint and do we put any of my info on the form? Anything we have together is after the date of COD. Also, he has zero assets accept a car that is worth about $800 that doesn’t run. The amount of the COD is $11,881. Do you think he could be considered insolvent and his debt be forgiven? Thank you!

    • I don’t know the laws about car repos and they’re different in each State. But you should try Insolvency on Form 982, Reduction of Tax Attributes, before paying tax of Box 2 of Form 1099-C, Cancellation of Debt.

  • Dave

    Looking at your site has been helpful. I’m not finding a 982 for 2012 on the IRS.gov website. which one do I use and where do I get it?


  • tom

    I underwent a foreclosure in 2010, and the actual trustee sale was in decmeber of 2010. I just recieved the 1099-C this year (2013). I totally understand the forgiveness act and also the nonrecourse nature of my loan (in Ariozna…… so I know I will not need to count any of the forgiven debt as income on my 2013 return, however, my tax software prompts me to report sale of home in 2013, but the home was “sold” (i.e. the triggering event) wayback in 2010.

    So i just ignore the prompt to report sale of home?? That is a moot point at this juncture as it is the 2013 tax filing I am working on.

    I just need to deal with the 1099-C and form 928, correct?

    Thanks so much, no one seems to know that answer.

    • Hi. I don’t know an exact answer. However I always report the sale. Why? We’ve had Clients over the years who didn’t report only to get an IRS Notice CP2000. It’s just easier to report it. Hope that helps.

  • Paul

    My family came into some difficult times last year, so I was unable to continue paying my second mortgage. My home was recently assessed for tax purposes at $304k, although I think that is even high. I tried a refi last year and was told it was somewhere in the ball park of 275-300k but the appraiser didn’t complete it because it wasn’t anywhere near what I needed to get the loan. My first mortgage balance is approx 215k. The second is 152k. Early on I heard from the second on aregular basis, but haven’t heard anything since last fall. I recently contacted them to ask what was going on and was going to bring up the topic of some type of settlement, when I was told that they had charged off the loan and had sent me a 1099c. I told them that I had never received a 1099c so they said they would send one out. Yesterday, I received what looks like an internal printout from the bank that contains the information for the 1099c. Box 2 lists the full amount of the 152K and change. THE FMA is way off at 375k.
    Basically, I don’t know what to do at this point. I know that I need to file an amended tax return, but don’t know if I should allow the current FMV that is listed on the 1099c to go uncontested. Secondly, does this mean that the mortgage company has forgiven the loan? I have not received any other correspondence from them regarind a settlement or that the loan has been settled. I am just worried that I am going to file an amended return, even though I should be covered under the mortgage forgiveness act (the date of identifiable event is Dec 23, 2013 – so I should be ok under the act), I don’t want to see the mortgage company come after me down the road as I pay down the first or the market improves.

    Any advice/suggestions?

    • Hi Paul. It sounds like you can circumvent the tax consequences of the Form 1099-C, Cancellation of Debt. You’d need to do an amended return. We’re happy to help you with that. An internal bank memo isn’t a Form 1099-C. Until you have the actual 1099-C you can’t be sure of debt forgiveness. Hope that helped.

  • Syou

    Great article, thanks for taking the time. I can’t seem to find one answer I need anywhere. I’m hoping you can help. I am filing a 1040X to include a 1099c that I received late. Here’s a little history for the debt. It was incurred during a previous marriage and was declared my sole debt in the divorce decree. I have since remarried and filed jointly in 2013. When using the 4681 to determine the info for form 982, do I use the liabilities and assets for both joint filers, or just myself since it was a debt incurred before marriage? (We maintained separate bank accounts, vehicles, loans etc.)Thanks in advance for your time.

  • Christopher M

    I just cancelled a debt and Iam anticipating getting a 1099c. I have a couple of questions. Do I count SSI (disability, which iam going to stop in a month)into the into my assets/liability. My wife and I own a car do I list the full market value for the xar or half dince only own half.
    I would appreciate any help. Thanks.

  • Ken

    Hi Gary, great article. Do you know which date most creditors use in box 1 of the 1099-C, as the actual date of cancellation of debt if its a settlement? Is it usually the agreement letter date that confirms the terms of the settlement or the discharge date on which one completes the payment plan, for example ? I will be receiving as many as 8 1099-C’s in the next 12 months. This answer will help me prepare a summary 1-pager to be organized for a short consult.

    I will need an insolvency CPA for 2014 filing, (and likely 2015, I’m guessing), Even before filing the returns, I will probably need some advice on timing related to form 982, so I can properly choose whether to entirely pay off some remaining settlements this year or leave them to next year, if I have the option.

    • Hi Ken. The IRS lets those folks use multiple trigger events to file a Form 1099-C. So the banks chose, perhaps, what’s best for them. I’ve challenged that date with the IRS if it’s not in my Client’s favor. We do tax positioning and I’d love to be your insolvency CPA.

  • Lewis

    I haven’t filed a tax return for 16 years due to only income being nontaxable veteran’s compensation. Now I’m having a student loan discharged (only $800 balance left), apparently will receive a 1099c. Can I file the 982 alone, or do I have to fill out a tax return with zero for income and attach the 982?

    Also, they will refund payments I made on the loan, which may amount to $6k. Apart from the forgiven debt of $800, would any taxes be owed on the refunded payments? Thanks

  • robert

    I received a 1099-c in Aug 2014 for 2013. I understand that I will have to file an amended return for 2013. This 1099-c was for loan modification for a two family home that I own. I live on one floor and rent the other. The 1099-c amount is $60,000. I am not insolvent. Can I only exclude 1/2 of the $60,000 as this applies to my principal residence ? Do I have to recognize the other $30,000 as income ? Thanks.

    • Hi Robert. Your part of the home isn’t a problem for Form 982, Reduction of Tax Attributes. The rental portion of Form 1099-C, Cancelation of Debt, also has a shot at being excluded as well. Call me if you’d like. 90 399 2705

  • Steven Graham

    Gary, your information is priceless and I am very apprecative for your knowledge! My situation is with Bank of America. I have a house on the short sale list. My realtor and BOA have not come up with a closing date yet, but I’m sensing it’s pretty close. I’m trying to make decisions here based on the fact that I owe over $300k on the house and it was appraised by BOA for $142. I’m divorced and I’m the sole name on the debt. I’m in debt $366k and my assets including my 401K equals $50k at best. I know I’ll get the 1099C issued, but is there something I need to do now to establish insolvency (document wise)? I appreciate your help in advance. I’m really trying to avoid a Chapter 13 bankruptcy.

  • Gordon

    Hi Gary,
    I am a NY CPA.
    I have a client with a discharged home equity loan in 2012 from Bank of America, as part of the National Mortgage Settlement. This clients home was her second home, not her principal residence.
    Would you know if there is anything special related to this National Mortgage Settlement that would allow us to exclude the 1099-C income, or do we have to follow the regular exclusions available.
    In her case, she is insolvent, but not to the extent of the 1099-C reported, so if we use the insolvency exclusion, some of the cancellation will be taxable income.
    She was gifted this second home, so do we have to reduce the basis as part of the reduction of tax attributes on Form 982, because it is not her principal residence.
    Also, does the amount of the cancelled debt that will be included as taxable income increase her basis in the home in any way.
    Thank you for your help. Gordon Weiss

  • Steve

    Hi Gary,My wife and i filed chapter 7 in 2012 and had it discharged in Feb 2013 mortgage included now the bank wants to do a short sale will i be able to use the 982 form to discharge the taxes on the 120000 dollars we are underwater on

  • Darwin

    Hi BOA sent a letter forgiving our equity line of credit in 2012. It was a second mortgage. We received the 1099 and reported it as income. Result was a $17k tax bill. We’ve just learned that we may be able to have this cancelled as the home sold in foreclosure Feb 2014 and it was our primary residence when the mortgage was refinanced. Would we might be eligible for 982? Thanks

  • Recent Graduate

    Hello Mr. Bode,

    This article is awesome. I was wondering if you could provide some insight.

    I’ve just recently graduated college and started working. I got into a loan program that ‘forgives’ your loan amount if you meet certain criteria (certain GPA, graduate within 4-years, etc.). So the total loan amount over the course of my studies was ~$25K and I’ve met the criteria and the loan was forgiven so I am expecting a 1099-C. Normally if I went about my business and filed my taxes I would also include this forgiven debt as taxable income and pay that 20%-30% of the loan upfront like you’ve mentioned here. That seems like a major bummer so I searched around to see what I could do to get this loan actually forgiven completely and found your article and some others.

    Since my assets total about ~$15K (money in checking+savings, value of car, lump sum estimate of clothes and other belongings) I know I’m obviously insolvent but do I have to include the remainder from the level of insolvency in my taxes (So in this case the leftover $25K – $15K = $10K)? I’ve read that anything above $5K does not have to be included from the following website:


    Do I just complete Form 982 to utilize the insolvency exemption? I’ve covered all my expenses for more than half the year already so I’m not my parents’ dependent anymore.

    Thank you for your time

  • Helpful information. Fortunate me I discovered your site unintentionally, and I am stunned why this coincidence
    did not came about earlier! I bookmarked it.

  • Joe

    I have over $50k in student loans (with 11% interest i might add) from Katharine Gibbs, which is no longer is business. The credits were never transferable to any school, as they had promised they were. My question is, now that the “school” (if you want to call it that) is shut down, is there a way to have the loan (now held by Discover, originally held by Sallie Mae) forgiven? The monthly payment of $400 is killing me!!!

  • Mike

    Hi Gary –

    I received a 1099C for Tax Year 2013 on an auto loan where the vehicle was repossessed in 2008. The 1099C has a few issues. First, Box 5 is not Checked. All the research I’ve found has led me to believe this means the debt is a Non-Recourse loan, and therefore wouldn’t be counted as income. Secondly, Box 7 is empty for FMV. How would this be treated? Thank you in advance for any help.

  • DoingBetterNow

    Hi Gary,

    Went into default on a/b 40K of Credit Cards with about 5 different banks in 2009-2010, and about 20k in student loan debt. I was suffering from mental illness and couldn’t manage my affairs. Received some unemployment income in those years and maybe 15K of earned income, and didn’t file 08-13 returns. I’m mostly recovered and am looking to do a ch 7 case.

    As of now i have 3 judgements from the 3 biggest cards (2010, 2011, and 2014). I have not received any 1099-cs. I’ve just filed my 2013 with the whopping $1500 of income to help enable me to file my ch 7 (most recent tax year required). I am trying to do it alone cuz i can’t afford an attorney as i have no job, no assets and am on welfare.

    I’ve spoken to the irs and they want returns from 08 09 and 11, probably b/c i had no withholdings on my unemployment incomes in 08 09, but i suspect there might be a 1099-c in there in 2011 b/c they never want a return unless you owe them.

    If thats the case, what should i do about 2011? how can i prove to the irs i was insolvent in 2011. I have no records of anything, not even sure of who and when i worked due to chaos and hospitalizations etc…

    Clearly i should get this fixed before filing, but the person i spoke with threatened to file a substitute return if i dont file within 30 days. Waiting for the transcripts now.



  • Pilar Nino

    Hi Gary: I just want to say thank you for your help. Not every day you find people willing to help you for free. Your advice gave me piece of mind after receiving an IRS letter saying that I owed $106k. You are in my prayers now!! God bless you!!

  • Jai

    Hi Gary
    Needed some help. I received student loan discharge for 130,00.00 in 2013.
    then got 1099-c this july 2014 for 130,000.00
    What year(s) would i be filing it for and what information on form 982
    to show insolvent for?
    My only assets are my 12 year old truck which i own and worth 2300.00
    no property or others items listed on form
    I received ssi–
    thanks in advance

  • Jess

    Hi Gary,

    I completed a short sale in September for my primary mortgage and a home equity loan on my property in NC. I had to sell my condo because I moved to Texas for a new job. I was badly underwater on the NC condo. I’m worried that congress may not renew the legislation that protects people from being taxed on the forgiven debt. I have used Turbotax for the last 10 years. How much do you charge for tax preparation?

  • bobbi

    when filling out form 982….due to insolvency….if there is one cancellation of debt this year…and we still have other unpaid remaining debt that could be cancelled in the future…can the 982 and insolvency be used again in the future ? also the reduction of tax attributes ??? all we have is a vehicle and misc household goods…how are they affected

    • Yep Bobbi you can use it every year the cancelled debt regs allow it. I don’t think the insolvency exclusion for Form 982 is going away. As to the affect on your belongings, it depends on the lesser of three IRS calculations But I don’t see anything in your post that is bad news for the reduction of tax attributes section of Form 982.

  • Debra sharpley wright

    I recently filed for disability discharge of my student loans and my debt is 128,000. I got a letter saying they would be discharged. I got the form 982 and I don’t own anything no property and my car is only worth 3000.00 and I’m still making payments. I have credit card and small loan debts totaling 11000. I behind on payments. Will I be able to prove insolvency I get 1750 a month non Taxable income from my VA disability and my SSDI. Will I be able to get all of it canceled with this form 982 I live in Alabama.

  • Susan Turley

    Is a monetary inheritance received after bankruptcy dismissed considered an asset or income when figuring insolvency for the exclusion qualification on a 1099C?

  • le3

    Hi Gary.The state of MA does not recognize the mortgage relief act would I still be able to file form 982 claiming insolvency? My principle balance was140k and due to my husband and I both being laid off we were 49k delinquent (it took BOA 3 years to get the modification completed) ultimately the forgiven amt was 106k no other assets except two used cars that were owned outright worth roughly 8k combined. Can you tell me if we qualify for insolvency and if so the amount we would need to claim as income? Thanks!

    • I believe all states allow the insolvency exclusion on Form 982. So MA shouldn’t be an issue. I can’t do the calculation based on the info you’ve given, sorry. Happy to prepare the return for you.

  • Hemanth

    Hi Gary,

    I have settled 3 creditors in 2012 and have received only one 1099-C for that year. I have file for 2012 claiming insolvency and excluded the 1099-C amount from income. I have included all the debts settled/canceled while calculating the insolvency. Now, for 2014 I get a new 1099-C for Year 2012. Do I need to report this to IRS and do I need to include the debt in Income? I am assuming that I do not need to? If so, what documentation I should file along with tax returns for IRS?


  • Chris Madero

    Hi Gary,

    From one CPA to another, very well written blog. Wish I read it before filing my 2013 tax return. I had a rental property (originally principal residence converted to rental in 8/2009). Lost renter and had a deed in lieu of foreclosure go final in June 2013. Received 1099-C for 2nd on rental property. Included that 1099-C amount with the 1st note amount forgiven (ironically didn’t receive 1099-C on that one) and reported the total as the sales price on the home Form 4797. Ended up with a small gain on sale (after recapturing depreciation taken in ’09-’12). The FMV of the home was higher than the note we had forgiven including the 2nd so the bank was willing to take it back.

    After reading your blog, I think I may be in for an audit since I didn’t report the 1099-C on Line 21 or prepare Form 982. While I could probably figure this out, I’d rather rely on someone whose specialty is in dealing with these matters. What would you charge to review my 2013 return and prepare a Form 982 for me? Either that or provide some consulting on what steps I should take to rectify the matter. Thanks!

    • Hi Chris, I’m sure you could figure it out. Your return may not change. Cancelled debt shows up there only if it’s taxable. You might just have to file Form 982. They’ll probably send you a CP2000 Notice. No harm, no foul. On rental properties I can usually get rid of all the cancelled credit debt. Maybe just send me the return when the CP2000 arrives. If we do it now we’d have to amend the return. What software did you use? Here’s my personal e-mail gbode01@gmail.com. Maybe I can import your file and make it quick and cheap.

  • David

    I have a 2nd home, not my primary residence that was a short sale and the 2nd mortgage will not be paid off and I was told to expect a 1099-C for about 100,000.
    I will not qualify for insolvency, and I never rented the home.
    Since this was not my primary home, and even though I am NOT insolvent, am I still able to use the reduction of tax attribute method?
    thank you

  • Felipe

    Hello Gary,

    I’ve been wondering if I could use form 982 to cancel out credit card debt that I have settled on. When it comes to assets, I just own a vehicle. Home is under the wife name. Her credit was better than mine which allowed us to get a lower rate.

    My debts do exceed my assets and have contemplated filing bankruptcy but don’t want to go that route. The canceled debt is approximately 12k and would appreciate any simple advice if 982 could help me get a fresh start and out of this issue.

    The good part about this is I haven’t used a credit card ( except debit ) in about 2 years.

    Thanks for reading this.

    • Hi Felipe, I can’t answer that without running the numbers. Form 982, Reduction of Tax Attributes, might exclude the cancelled credit card debt. But it might not. One thing to factor in is how bankruptcy and cancelled debt affect your credit report.

  • Leann

    About 5 months ago we received a 1099c form claiming we owe 1300.00 for a car repossession 11 years ago in Texas. The finance company filed a loss for that repossession in 2012. I’ve filed dispute after dispute with the irs, but I get the same repeat letter from them in return saying it’s considered income for 2010. It’s as if no one reads the dispute. How it’s that legally possible to stick that loss on that year taxes when the repossession was in 2003? Texas allows 4 years to collect before it’s a charge off. What can we file to get the irs to put this income adjustment BACK in the year it belongs, 2003-2007 at the latest. It seems that it’s unreasonable for a company to just decide 9 years after their loss to submit a 1099c for which ever year suite them. Is there not a statue of limitations for filing that loss with the irs. I’m at a loss on how to get the irs to adjust our taxes in the correct year, not the one year we made the most (which is still not high income but double what we made way back then. I’ve searched the internet endlessly and can’t find a clear answer. It all seems fraudulent with the company submitting it into a year way beyond the actual event and the irs being ok with that. Bottom line, the finance company sustained a loss at the most, according to Texas statue of limitations for collecting, 2003-2007, not 2012. Help!

  • Quiv

    When my Creditors send me 2014 1099-C’s for forgiveness of CC debt, I assume that some (from what I read) will use the default date of 12/31 for the date of identifiable event, even though I paid them off at different times of the year. For all the ones that do choose 12/31, does this mean that I can legitimately list all those full original amounts of debt on my liabilities insolvency worksheet calculations ? Or am I obligated to use the date of agreement letter or the payoff date, instead ? For example, if I settled a $10,000 debt for $5,000 back in June 2014, but they send me a 1099-C for $5000 listing 12/31 as the date, am I supposed to list that liability as $10,000 for purposes of a 12/31 worksheet calculation ? Also, do you have an easy secure upload function, when its time to send you all the 1099’s and return preparation documents ? Thanks! Great post and discusion here!

    • Hi. I work the dates both ways to see how it best works for the Client Quiv. Folk’s financial circumstances generally improve with time, so using the actual discharge debt sometimes works better. We use DropBox or Google Drive.

  • MC

    Hi, Gary.

    On 2013, I received a 1099-C for about $8,300 related with a reposed vehicle. Can you please tell me if this type of debt qualify for the insolvency exclusion. Please, note that the form 1099-C is showing me a liable on the field #5 and the field #6 is showing a “H” code.

  • MC

    Sorry, Gary, I must should have said that the 1099-C is related with repossessed vehicle. I filed a form 982 with my income tax return, but the IRS is asking me to paid back the total amount of the tax refund issued plus a penalty. I didn’t include the insolvency worksheet with the tax return, but my liabilities were over my assets for about $76,000.

    • Hi. Let me amend it. Generally we can get rid of all that cancelled debt from 1099-C excluded from taxable income using Form 982. No guarantees. Please don’t pay them until I check. Or let me amend if you have paid.

  • Jill

    I was recently approved for discharge of student loan due to disability for around $200,000. I own my home and have a car. I am receiving SSDI as income. Will I be able to file form 982? Also if so should I file with my tax return or before I file taxes? I am somewhat confused about assets and liabilities.

    • Well Jill I’d have to crunch the numbers. You’re confused because the IRS is confusing on the Form 982 instructions. But I expect you could use Form 982 to exclude some of the student loan cancelled debt. Why don’t you call me when the tax docs arrive. I’m pretty good at the 1099-C and Form 982 issues. You probably need a tax pro for 2014.

  • Steve Benetti

    I have two liens which were issued in 2012 and filed against me by Bank of America. The total of the two liens is $370,038.83. I accrued the debt when I defaulted on two separate real estate business loans where I was required to provide a personal guarantee. Following several years to negotiate a settlement and efforts on the their part to collect the debt BofA sold my debt to Spartacus. In August of 2014 I was contacted by a debt collection attorney on behalf of Sartacus to settle this debt. We have verbally agreed to $30,000 but I have yet to see anything in writing. He wants to settle prior to the end of the year but has sat on his response for the past 3-4 days. My greatest concern is the tax liability I will incur once I settle. I did not make an income in 2013-2014 but I own a home nearby. I live in my wifes home at this time. The liens are attached to my home. Not sure if I qualify for insolvency. Steps to take prior to accepting settlement to prevent a massive tax liability.


    • Sorry Steve not a lot of tax positioning left. If it’s done in 2014 try to look as bad as possible on the date of the acceptance. If you delay him until 2015 there may be more tax positioning possible. We consult on cancelled debt tax positioning. And I’d love to do your 2014 tax return. Vast majority of time we exclude all cancelled debt on Form 1099-C, Cancellation of Debt by using Form 982, Reduction of Tax Attributes. Hope that helps.

  • Lakita

    I received a notice yesterday regarding a cancelled debt from the IRS. I have filled out form 982 and the insolvency worksheet. But I’m confused on Parts II and III of the 982. My biggest concern is do I have to fill out the Reduction of Tax Attributes section. Don’t own a home, my car is worth about $500.00, what should I include and where does it go in Section II? My liabilities are more then my assets so I know I qualify. How do I proceed with this form. Also should I send documents to show the balance of my liabilities and assets (student Loans and 401K at my job)?

    • Hi Lakita, you can try reading IRS Publication 4681. Reduction of tax attributes uses three calculations. I think most cancelled debt CPAs tend to send more documentation with cancelled debt returns. I imagine what I’d want to see as an IRS agent to put your tax return on the “good” pile. Hope that helps.

  • Scott Rhoton

    I received a 1099-C recently for a car loan last active 3/07 and closed as profit-and-loss write off in 5/08. The 1099-C form wasn’t filed with the IRS until 3/13. Is there a timely filing issue with the 1099-C being filed too late (after the 3-year testing period ending 12/31 of that year)? Can I use this as a basis for not being liable?

  • Kimberly Spear

    Hi Gary. Quick question. I will be receiving a form 1099-C for $130,000 in student loan debt forgiveness due to perm. disability. I am married but have always filed separately. Do I have to include my husband’s assets/liabilities when calculating whether or not I am insolvent? Thank you for your assistance.

  • JPG


    Here is one I cant find an answer to anywhere.

    Wife purchased a 2 family pre marriage. We short saled it for a loss of $162k. Recveived the 1099-C today. We file jointly. I own other 2 families and we own our residence together. She is on title (only title through a real estate trust) of the other properties. I am only on the loans, purchased before we were married.

    We are going to take any equity we have and add that into our assets, just to be safe. Even with that, we do not have the $162K- in other words we are insolvent. Our assets do not out weigh our dent pre short sale.

    Question- Do we have to pay taxes on the assests we do have, or is it cut and dry, we are insolvent so the taxes on the $162K gets wiped away?

    In other words… If we have $100K in assests, will we be paying taxes on that $100K instead of the 162K?

    Great Blog- thank you!


  • Hi Gary, thanks for the website info. I had a little over $150,000 in student loans forgiven due to permanent disability. I don’t have any major assets (house, rental property, car), have some more debt (credit card) and live off of my disability payments. Can using Form 982 eliminate these loans as taxable income?

    I usually prepare my own taxes online. Can I submit Form 982 myself or do you recommend going to a CPA? Are there any specific questions I should ask when looking for a CPA?


    • Hi Rashan. Well we handle a fair number of student loan cancelled debt cases. But maybe you can do it yourself. Maybe read the Form 982 instructions. I’m happy to prepare the return. Sounds like there’s a optional for $25,000 +/- of tax at stake.

  • junior

    I have lived in my home sense2008 I will be loseing MMS house this year2015 in deed in the or forecloser will there still be hope for me not having to pay taxes on the diffrence of what the bank gets for the house

  • junior

    Would I qualify for insolvency

  • Hi Gary

    I went through debt settlements with four different financial institutions in 2014. I expect to be hit with a very large 1099C in the amount of 46,000. I am really counting on the insolvency provision to help me out of this mess but I had a few questions

    1. I have a very large mortgage and outstanding loan on my pricinpal residence. If I include this loan then I am clearly insolvent but without it I could be in trouble . Is the entire loan allowable ?
    2. Is Publication 4681 still the current one for tax year 2014 (file 2015) everything I found said 2013 and the IRS website is confusing. I want to make sure I am using the current guideline
    3. Same as above is form 982 current for year 2014 and this is what I should use. Is there another form I need that has a detailed Asset/Liability worksheet that I need to submit

    Thanks !!

  • I haven’t received them yet but considering the payments were made and letters of settlement received from the respective creditors in 2014 I assume they will count against 2014

  • Gary, thanks for responding to my question on 1/13 so quickly. I would like to use your services and will contact you once I receive my W-2 and 1099-C. One more question, my student loans were officially discharged on 12/13/2013, but it took a few months for the Department of Ed. & Sallie Mae to process the discharge, hence the reason they are applying it to the 2014 tax year (that’s what they told me anyway). Should I start collecting paperwork showing my liabilities right before 12/13/2013 (discharge date) or when the loans were finally discharged (sometime in 2014)? Thanks again.

  • Jennifer gray

    I just got a bill from the irs saying I owed for a car that was repossessed like 10 years ago. I never received a 1099-c but I need to fill out the 982. Apparently it was for my 2012 taxes. I am having trouble filling it out properly without the form. What should I do.

  • Stephanie

    Here is scenario. Husband receives a 1099-C for $400k for a ponzi scheme scam on a rental property (property was in litigation for years which recently ended and the principals skipped town so no money was obtained). Property was worth around $30k at time of foreclosure (purchase price was $400k). Wife was on title to the property but not on the loan. Husband is definitely insolvent by $541k at time of receipt of 1099-C. So, we file a joint return and exclude the canceled debt from income and also have a huge loss on the disposition of the rental. It is better to file jointly as the loss offsets wife’s income and wife makes way more money than the husband. My question is on the tax attribute reduction. Rental title was held in a jointly owned LLC (50/50 with wife). But mortgage was in husband’s name only (not in LLC). Only other asset of husband is personal home and some small stuff. So, I know we need to reduce tax attributes but how do you do this for a rental held in an LLC when debt is not held in LLC and held in husband’s personal name (and wife is non liable on debt but owns 50% of the LLC). I am happy to make an appt if that is easier.

  • Liz

    I got a 1099c last year for a bad credit card I defaulted on (ended up out of work with a broken ankle for 8 months and couldn’t pay). I did not file this last year because I received it after taxes were filed and did not know how to an amended return. I got a letter saying I owe irs 620. How do I find out if I have to pay this and if I am insolvent? I rent, only own my car which is now 14 years old and dead. My yearly income is only a little over 10,000. And if I set up payments (which I have no problem doing) will they take it off my income tax when I file? I really need to save refund for a new car.

  • Dan

    I had $25k student loans forgiven due to total disability.

    I am on $828 ssd per month and wife makes 40k per year as a special ed teacher of autistic students.

    we have 4 kids and have alot of debt and our only asset is a 2009 Chevy HHR. We rent our home.

    Please help. I will hire you to do our taxes.

    • Sure I’d be happy to do the taxes. Sorry about the disability. It sounds like we can get rid of all that student loan cancelled debt. No guarantees of course. I’d like at filing jointly and filing separately. Give me a call between 11-6 ET and we’ll move forward. No real worries here. 901 399 2705

  • Karl

    Hi I just received a 1099c for myself and one also for my wife for a total of $27,000 from B of A, this debt resulted from credit card fraud that I disputed from the start that occurred in Mexico, I never paid a penny and they refused to cancel it even though they were unable to provide me with any documentation that we were responsible. Now I get this , I’m not sure I can claim insolvency as I have decent equity. This was never mine to begin with and has haunted me, when I applied for refi’s . What can I do ?

  • shana72


    My daughter received a 1099 c for credit card debt. We completed the insolvency work sheet and she is indeed insolvent. Are there any online tax programs that support the 982 tax form? Thank you

  • Charlie

    I received a 1099-C dated 2013. how long can I wait to amend that return? I am in insolvent. I am expecting a refund on my 2014 return. will this hold up my refund. I am all so disabled, don’t know if that’s even a factor here

  • Kevin

    I can’t believe the amount of time and effort you’ve dedicated to this – thanks so much, its extremely helpful. In your experience, does filing a form 982 increase the odds of an audit – is it a trigger that the IRS watches for? Thanks again.

    • We’ve never had an audit for cancelled debt Kevin. Other Form 1099-C CPAs usually agree filing Form 982 doesn’t raise red flags in the year of filing. Some of that is explaining away red flags. But a good Form 1099-C CPA also looks at the future tax consequences.

  • steph

    I just received my 1099c for student loan forgiveness. I am terrified but just learned of the possible exemptions and am looking over the insolvency form. I am trying to determine if I am supposed to use my spouse’s information too as far as liability and assets because we file jointly even though this is only my debt. Thank You for any advice.

    • We always try filing jointly Steph but if that doesn’t work we sometimes file separate. Determining which is best is just part of my job as Form 1099-C CPA. Our software allows us to work the return both ways. Hope that helps.

  • Alice

    My husband passed away on 1-5-15. Today in the mail he received a 1099C in the amount of $38,000 for discharged debt. It lists a discharge date of 11-15-14. We live in Minnesota. We have always kept our finances separate. We own a home which he signed off to me in 2008 using a quit claim. I have made all the mortgage payments.
    I was never listed on his credit cards, nor benefited from any of the charges.
    The only assets he has are a 10 year old car and personal items – clothing etc. and 1,000 in his checking account.
    He was ill prior to his death and had out of pocket medical expenses of approximately $3,500 last year. Thank goodness I had health insurance. His only income was a monthly social security of 1,100 and a 214 pension check.
    I believe he would be considered insolvent. However, I am concerned that my assets may be taken into consideration. I would prefer filing jointly, as it appears I would have to pay an additional 10,000 over and above the withholdings taken from my paychecks if I file separately.
    Is it possible to filing jointly and have him considered insolvent, based on his assets only?

    • Yes Alice. I’m sorry for your loss. But it sounds like you won’t have to pay taxes on the Form 1099-C, Cancellation of Debt. However I don’t understand what type of debt was discharged. But I’ve been a Form 1099-CPA long enough to expect $0 additional tax.

      • alice

        It was credit card debt that was cancelled. Am I able to file jointly and not consider my assets to determine that my husband was insolvent at the time of the discharge?
        I am concerned that they will look at my assets and I would not be considered insolvent.
        I know that PLR 8920019 seems to indicate that I can file jointly and not use my assets.
        Have you handled similar cases?

        • Sure we handle that all the time We try to use joint assets just for audit protection but presenting just Hubby’s info works. Be careful of future tax consequences with Form 982. Hope that helps Alice

  • Ashley

    Will I still be able to take my student loan interest deduction when using Form 982?

  • Trich

    My student loan debt was forgiven in July of 2014 due to disability.
    I received all of my student loans in Vermont, before my husband and I got married.
    We moved to Colorado in 2011 and got married near the end of 2012. I got my 1099C for the amount of 58000 a week ago and I can’t find any advice anywhere.
    When we got married, we agreed to keep our finances separate, so my name isn’t on anything my husband owns, like the house and 2 cars. I am incapable of working, and my husband pretty much supports me at this point.
    How do we go about this? Should we file a join return? Should I file for insolvency BY MYSELF, or is my husband’s property “up for grabs” to pay off tax owed on cancelled debt? He is freaking out, as we usually get a return, and he feels it unfair that he not get a return because of debt I accrued before we married.
    Please Help!

    • Hi Trich. I’d work it both ways, filing joint and filing separately. I doubt you will pay any tax on the 58K if Form 982 was properly prepared. Let me know if you’d like us to handle your 2014 tax returns. No worries.

  • Barbara

    Good Afternoon,

    My husband and I filed a chapter 13 bankruptcy in Sept 2014 and we have been making our required monthly payment and will continue for a total of 5 years.

    I was reading the IRS’s website about 1099c and wanted to make sure I was interpreting the info correctly.

    Under Exemptions starting on page 4 of their 2015 Instructions for Forms 1099A and 1099C it states:

    1) Certain Bankruptcies. You are not required to report a debt discharged in bankruptcy unless you know from information included in your books and records that the debt was incurred for business or investment purposes. If you are required to report a business or investment debt discharged in bankruptcy…

    None of our debt was business related. The debt was mostly credit card debt and a second mortgage with HSBC which was approved by the courts to be stripped.

    Our trustee hearing was approved with no problems and our attorney did not receive any objections regarding our debt.

    What do you think the chances of receiving a 1099C are and if we receive any will the 982 be sufficient to eliminate the problem?

    Also, do the creditors have a “deadline” that they must adhere to regarding the filing of the 1099C?

    Thanks for your help.


    • Hi Barbara. You’ll probably get a few Form 1099-C, Cancellation of Debt, forms. I can exclude them using Form 982.However the reduction of tax attributes is where my value comes in. I’d try to negate future tax consequences of cancelled debt. Call if you’d like (910) 399-2705

  • Toni

    Hello Gary,
    What a great site you have, THANK YOU for the information you have provided. My fiance and I purchased a home in 2007 and we are both on the loan. We recieved a 1099-C this week for our 2nd which was discharged back in May 2011. We settled with BoA in August 2014. The 1099-C was addressed to both of us, but the social on the 1099-C is my fiances’. We have filed seperately each year because we are not married, I only do the basic 1040 because I don’t have any write-offs. My fiance claims the house interest,etc. Do we both have to file the 982 or can just one of us do that? Can we include the 2nd mortgage balance in our liabilities section?

    Thank you for your advice!

    • Hi. Just one of you Toni. But if you pay half and your ex didn’t, you’re still on the hook for the entire amount. Hope that helped.

      • Toni

        Thank you for getting back to me, that does help. I had one other question in my email regarding the 2nd mortgage that was forgiven…can we use that amount as a liability on our insolvency worksheet when we are figuring out our assets and liabilities….

  • Doris

    I received a 1099-c dated 12/31/14 I’m not sure what I need to do with this. It is for student loans for $30000 can I claim insolvency this is very overwhelming

  • Rick Daniels

    I am 56 and disabled and my student loan has been discharged and a 401K loan I had was put in default. It looks like I am going to owe the IRS and my state alot of money.
    My tax preparer is not experienced and has told me I can exclude the student loan discharge and not mention it at all. That doesnt sound like good advice. I have got so much information just reading the posts here. I dont know what to do next. I have a 401k that I cannot touch due to my age is that considered an asset for purposes of determining my insolvency?

    • Hi Rick. Well there are student loan exclusion but as a Form 1099-C CPA I’ve never seen a Form 1099-C that qualified for an exemption. But check it out with the lender. My philosophy is that if we can exclude the cancelled debt this year without future tax consequences we do that even though the Client may be in the right. The emotional turmoil doesn’t make it worthwhile to fight under the above conditions. However we sometimes challenge the date on the Form 1099-C. And I’m pretty good about wringing everything out of insolvency.

  • Curtis

    Fabulous site and tremendous help!

    My wife just received a 1099-C for a COD for a student loan of $52,000; she has been determined permanently and totally disabled and on SSI disability. I’m working through the Insolvency Worksheet in Publication 4681, but I’m puzzled by something. The largest asset/liability is our home, which we’re upside-down on. I can determine the debt owed on the COD date (Jan. 23, 2014) but how can I determine FMV from a year ago? Thanks!

  • John

    Hi Gary,

    I had a few business credit cards for an S corp that I am the only officer. The company entered into a very large contract and was unable to collect a very large final payment and was put out of business. 3 of the business cards we had were negotiated down and a lesser amount was paid to settle the accounts. I just received the 1099 C’s made to me personally since all of the business credit cards were personally guaranteed. None of the debt on the cards was ever for personal use. It was always business card. It seems unreasonable that I am hit with a 1099 for business debt forgiveness, but I wouldn’t be surprised if that is the case.

    My questions are the following:

    The business is being dissolved this year and was insolvent at the time of the settlements. Since the 1099 has been made to me personally, do I have to carry it on my personal return or can it be carried on the business’s return (they have my SS # on them)? DO I have any shot in asking the the CC companies to re-issue the 1099 in the business name? If that is even permissible. We are looking at about 25-30k in debt forgiveness, so it’s a fairly decent amount of tax here. Finally, I personally am not insolvent so the 982 would not apply to me.

    Thanks for any help you can offer.

    Regards John

  • Jonathan

    Hello, I received a 1099c for a credit card. The card was only in my name. My wife and I file jointly and she has a 401k and IRA only in her name. From what I read on this site, it seems we can file jointly and claim insolvency using our combined (jointly held) assets and debts and not include her solely held assets. Is this correct?
    Thank you for your time.

  • Mark

    It’s so great to find someone who specializes in this. So thank you so much for proving a forum! The bank recently cancelled a debt that my father was a co-signer on. He did not benefit at all from loan. I, the primary borrower, was the one who benefited from the loan. He was simply the guarantor. However, we both received a 1099-C, each with our own name and SS# on it for the same loan. If the total tax amount owed is $12,000, are we both legally obligated to pay $12,000 each? That would seem like the IRS would be getting double what was actually owed. Is the creditor bank allowed to make 2 separate 1099-C for a single debt? And my second question…does the insolvency worksheet need to be included with the tax return and 982 form? Thanks very much!

    • Hi Mark, you’ve got a great Dad. It’s just 12K. But if your Dad declares 50% and you don’t pony up he’s still responsible for the other half. This is a situation where you may want to hire a 1099-C CPA like myself. (910) 399-2705.

  • Matt

    Hi Gary,

    Thanks so much for the advice. We have a 2nd mortgage in CA that was charged off and we got a 1099-C. Our 1st mortgage is current and we stopped paying our 2nd in 2011 because Chase would not work with us on a refi or a mod. The 2nd is $60k, the 1st is $289k. We have student loans and CC debt for another $40k. The house is valued at around $250k. Are we a candidate for insolvency?



  • Angela

    Thank you for such helpful information. I didn’t see my particular situation so I hope you can help. My husband received a 1099-C for student loans-$14000. We have been married almost 4 years and always file married/jointly. I left my teaching position after 16 years of service when I gave birth to twins 2 years ago so I have about 56,000 in teacher retirement. Husband has been with a management position 5 years so his 401k is about 15,000. When completing the insolvency, does he have to include my teacher retirement as an asset? We are in Texas. Also, do we claim the taxable amount of his 401k as asset? We will be insolvent, if we don’t have to claim my retirement.

  • Susan Sheffield

    This is really good information, but I see only the Federal tax issues associated with cancellation of debt. Since NC starts with Federal adjusted gross income, is it safe to assume that NC will accept the exclusion of cancellation of debt from taxable income at the state level due to insolvency as long as the IRS accepts it at the Federal level? A local NC DOR agent seems to think that the amount has to be added back to Federal Adjusted Gross Income to arrive at NC taxable income, making the cancelled debt noo-taxable at the Federal level and taxable at the NC state level, but I cannot find that in the instructions.

  • Kristina

    I settled a private student loan with Sallimae nov. 2014. They sent 1099-c with code F. Am I able to exclude the 1100 they canceled from my income?

  • Barry

    If I claim my Mother-in-law as a dependent on my taxes, and she would happen to pass away, would that make me liable for her unpaid bills?

  • Derrick Jordan


    Quick question. Back in 9/2014 I was able to modify the loan on my rental/investment property under the HAMP program. According to this program, as long as I pay as agreed they will forgive a total of approx., $83,000.00 over a three year period. Basically forgiving 1/3 of the $83,000.00 a year for a total of three years. Today I received a 1099-C, stating the cancellation of $83,000.00., how can this be correct, as the debt has not really been cancelled yet simply deferred. My first modified payment was 9/2014.
    Amount owed on property approx. 113,000.00
    Fair Market Value: $30,000.00.


    • I don’t know Derrick. Maybe the mortgage was that high. Maybe the bank is mistaken. Lots of fees? If you can find a mortgage balance statement I can challenge the amount on your tax return. Tax on that could be $20,000 +/- per year.

  • Cathi

    Hi Gary! We closed our small business franchise in October 2012 and filed chapter 7 bk, which was discharged in January 2013. We just received a 1099-C for the business credit card. Even though it was issued using the business TIN, can we report it on our personal taxes along with the 982? Or do we have to file a separate return for the business just to report that 1099?

    • Well Cathi, it sounds like a non Schedule C business,implying the property was held in a S Corporation or Partnership. If so, file Form 1120S or Form 1065. The Form 1120S instructions and Form 1065 instruction won’t be much help, sorry. Remember S Corporation cancelled debt and Partnership cancelled debt have different tax reporting regs and you may need help on that final business return.

  • Brent Tazelaar

    Thank you for answering these questions. *8 years ago my brother and I had a home foreclosed on. At the time Wells Fargo said they wrote it off and I owed a collection agency. Then a year ago I get a statement from them saying I still owe them the money. Now I got a 1099c with my brother excluded from it saying they cancelled the debt. Just went to get my taxes done at H AND R Block and the guy says you have to claim it and my 9000$ refund went to owing 4000$ Not sure how that happened. Either way I asked him if I could claim insolvency on this and he said he would have to research. I no longer trust this guy. It was primary residence at the time but of course since then I have moved on and now rent. Any Advice??

  • Teresa

    Hi Gary,

    My husband received a 1099-c for a rental property that went to foreclosure. It appears it didn’t bid high enough and the bank just took ownership. We received a notice back in April after the auction date stating they received a credit of 65k. Box 2 on the 1099-c has the full amount of the outstanding loan, (65K), and a market value noted as 40k. When determining the amount we are on the hook for it sounds like we need to claim the entire 65k as that is the amount noted, but shouldn’t it only be the difference between the loan and the amount they were credited (which would be 0) or the loan and the FMV, so 25K max? Wondering if the bank messed this up.


    • Hi Teresa you have things going on. The “sale” of the foreclosed property reported on Form 4797. Don’t let your tax software calculate that for you even though the Form 4797 instructions aren’t great. Make sure it was depreciated during all years of ownership. You might have to file Form 3115 if not. Look at the purchase HUD for buyer’s settlement costs. The next is cancelled debt. With it being a renal property you can use two provisions of Form 982. Be aware of future tax implications of Form 982. Finally include prior disallowed losses form Form 8582 (if any). Hope that helped.

    • OK Theresa you have two issues. One is the sale of foreclosed property. Report that on Form 4797. Don’t let your software calculate that even though the Form 4797 instructions aren’t that great. Check if depreciation was taken every year. if not maybe you can File Form 3115. The next issue is cancelled debt. Carefully consider the future tax consequences of using Form 982. Last look at Form 8582 for prior disallowed losses.

  • Vicki

    I received a 1099C for a student loan debt in the amount of 21,000. My husband and I both receive SS. The loan was discharge through Nelnet for disablity. Do I have to file a 1099. The IRS has desolved their law department because of budget cuts. Thand you in advance.

  • Jamie Paul


    I am a EA and this this first time I am preparing form 982. The 1099c my client received has the date of 12/31/14 in box 2. They quit paying on this debt (credit card debt) in September of 2009. Can we use the clients assets as of Sept 2009? or do we have to use their assets as of 12/31/14? Or can we challenge the date with supporting documentation?

    Thanks for your assistance

  • Roxanne

    I received a 1099-C form for an old credit card debt that was cancelled, roughly $10,000. As of the date listed on the form that the debt was cancelled (March of last year), I also still had debt from a couple of other credit cards, so I think I definitely meet the insolvency requirements, but I’m not quite sure exactly what the standing of my total debts were at that time, and I don’t know how to find out.

    I got a copy of my credit report from 2 of the 3 major agencies (I’m still waiting to receive the third one), but they only list my debt now, not what it was in March of last year. Any suggestions on how I could find this information, and would the source for the information be acceptable to the IRS as proof of my debt?
    Also, can I still claim a debt if it has fallen off of my credit report but I never paid it?

    Also, if I understand this correctly, what I need to do it A) figure the FMV of the things I own, and these are considered my monetary assets, B) figure the total of all of my OTHER debt (not including the amount on the 1099-C form). If A, my assets, are less than B, my debts, I subtract A from B (I will call this amount D), and if this amount (D) is equal to or more than the amount on my 1099-C form ($10,000), I will have to pay no taxes on the amount listed on the form. If it is less than $10,000, I subtract D from the $10,000 and I have to pay tax on that amount.

    I hope that is not too confusing! I would greatly appreciate any help on this. The thing I am having the most trouble with is finding out my total debts as of March of last year, so if you could point me in the right direction with that I would really appreciate it.

    • This is way too complex for a comment, sorry.

      • Roxanne

        Well I had considered contacting you for a consultation to see how much you would charge to do my tax forms for me, but to do that I would need an answer to the question Any suggestions on how I could find this information, and would the source for the information be acceptable to the IRS as proof of my debt? You would need that information for the forms, so if you can’t even tell me that I guess you aren’t the person for the job.

  • Felipe

    Received a 1099c for a second lien that dates back to 2008/2009. The first lien was cancelled and put on that years tax return. How can I file insolvency for this? Do you do returns for people in Florida?

  • Jimmy

    Gary, would like to start by thanking your for such an informative article. This is the most comprehensive & understandable article I have found regarding 1099-C & insolvency. My girlfriend didn’t have any income to report last year in 2014. She was not going to file an income tax but then received a 1099-C for some canceled credit card debt. The amount on the 1099-C is $6470. My question is, does she now have to file a return because of the 1099-C? The amount of $6470 is below the income limit that would require her to even file a return. I thought she wouldn’t have to but wasn’t 100% sure. Any advice would be much appreciated. Thank you, in advance.

  • Janet

    My brother passed away in Oct 2013. We just received a 1099c for a cancellation of Parents Plus loan that was is his name only for his sons education. The form 982 does not mention cancellation due to death. I am trying to file by brother & his wife’s form 1040 for 2013. Since the 982 does not mention cancellation due to death, does this mean it is fully taxable & there is not a way to show it is not taxable?
    Thank you in advance.

  • Brooks

    My husband had a short sale in Feb. of 2014. We got married in May of 2014. He received a 1099-C from the lender. Should I still file jointly or would it be more logical to file separately? Should we use Form 982?

  • Fatima

    Hi, do you know where I can get definitions for the items on the insolvency worksheet? For example, what does “accurued or past due real estate taxes” mean. The mortgage company collects money monthly in an escrow account to pay my property taxes. I don’t have past due property taxes but does accured mean I need to include the amount of my property taxes as a liability? Same question for “accured or past due mortgage interest”, accured or past due utilities. Also, for assests, does interest in retirement accounts include dividends and capital gains?

  • Mrs. T

    Hello. My husband & I got a 2nd mortgage for $36,000 around about 2007 that we used to consolidate credit card debt (bad idea). We filed chapter 7 discharged in 2009 with no reaffirmations. We continued to pay 1st & 2nd mortgages to keep our home, but 2nd mortgage was modified in Feb 2014. We each rec’d a 1099-C for 17,600. We’re in Georgia. How should we file this? Are we eligible to file form 982 and is therenanything else we should know? Thanks for your advice.

  • Christy

    You are awesome. Your website is much more helpful than the IRS website!! My mother is totally and permanently disabled and student loan for 17.5k was cancelled and she received a 1099-C. She has nothing but an older car so insolvency shouldn’t be a problem. My question is she only receives her social security and isn’t required to file a tax return. Do we just send in the Form 982 by itself? Everything I have read said to send in Form 982 with your tax return, but she doesn’t file a tax return…thank you in advance for any help you can offer!!

  • Aurelie

    I got a 1099-C form for 2014, and I was insolvent right before the date on the form, but if I claim insolvency, do I risk re-aging my debt?
    After the date shown on my 1099-C my debts either have reached or are about to reach the statute of limitations, and I don’t want to re-age these debts by claiming them on my taxes. Thank you in advance for any help with this!

  • Jim

    Gary, my wife and I went thru a debt program in which 4 loans (1 unsecured, 3 cc) where resolved. We received 1099’s for them. My question is the unsecured was a loan we both took out so we both received a seperate 1099, but the 3 cc’s were in my name only (from before we were married so I only got 1099’s on them). So I’ve prepared 4 seperate insolvency worksheets 1 joint for our unsecured loan, and 3 using just my info. On my info I used half of all assets and debts. Is this the correct way? And can we still file jointly?

  • Cynthia

    Recd. form 1099-C in line 2 is $658.79 in line 3 is $506.01 How do I enter this on my tax return? Is the interest subtracted from the amount of debt discharged?

  • Bob Armbruster

    How can I find out if the IRS got a 1099C or not ??? HSBC is telling me they didn’t issue one for a debt forgiven in 2014. I called and 2 reps (recorded) said that one was not issued for 2014 (which I’m assuming means it could be for 2015) and that they were reviewing the property lien for release. I trust these guys about as far as I can throw them. Any way to confirm or deny what the IRS has????

  • Donna

    how do you claim solvency for credit card debt?

  • Gina

    Hello: I posted a bit ago and did not see a response. There is another Gina, though, with a kind of similar issue, so perhaps we seemed to be one and the same. I wanted to try again, just in case, as I am stumped and I don’t know where to begin. I was sued by a credit card company for $13K. The judge found for the plaintiff (technically) but dismissed the $12K of the debt I argued, and obviously proved, that I did NOT owe. I felt very good about the “loss” as you will, paid the $1K and have a satisfaction of judgement form filed with the court. I have now received a 1099 from the credit card company for that $12K that the court determined that I did not owe. Logically this doesn’t make sense and I can’t make sense of the tax rules – what is my best “next” step? It seems they are claiming as lost income (and trying to pin on me, then as my found income) a debt that they feel is valid but a court of law said, NO, it is not valid. Thank you!

  • Lynne Dempsey

    If I received a 1099-c for student loan (Chase bank) for 2013 and for 2014, do I file separate forms for each year, or one form for the total amount they say is due? It’s $17,000 total.

  • James Felts

    Hi Gary,
    If I report my cod on my return but didn’t get a 1099 c form, how do I explain what it was for if I get a 1099 c the following year?

  • Jason

    Wow, Thank you so much for all of the help you have given out. I think I know what I need to do. My taxes are pretty easy, Head of Household, student loan interest paid, one dependent, but I filed Chapter 7 December 2013 and my debts (personal cred cards to support family of 3 while in grad school) were discharged February 2014. I did not receive any 1099c forms. Do I simply leave Line 21 for ‘other income’ blank on my 1040 as the discharged debt is all exempt and just attach a completed Form 982 with the discharged amount? Or would I put the amount in the line for 1099c’s even when it is all exempt?

    Is it possible I only fill out 1a and 2 on the Form 982?
    Nothing business related or real property.

    Also does the forgiven debt if exempt on a Form 982 change your taxes due/refund? Is it just a matter of disclosure or will my taxation be different for 2015? I guess after reading all over the irs website and the Publication 4681 I still don’t know how this affects my taxes or what tax attributes even are. Do I have a tax basis if I don’t have property?

    Thanks again for all the help you have provided.

  • Michelle

    Do you recommend submitting supporting evidence when filing form 982 for insolvency? If so what types of records would you suggest submitting?

  • Sonya

    Hi Gary,

    I settled on 9 credit card accts in 2014. Of the nine, I expected 7 1099c but I’ve only gotten 6 so far. I am hoping that insolvency will help as the total amount of the 1099c’s is about 23,000. I am located in Georgia, do you actually do the returns or the 982 form? Or is this just an informational site? I have looked over the form and know that I will need the help of a tax professionally.

  • Steve

    Hi Gary,

    I posted this a couple of weeks ago; it showed awaiting moderation a day or two and then disappeared. I thought I’d try again, so here goes…

    My dad passed away in 2011 and there were a few CC debts that were unable to be settled. The largest has filed a 2014 1099-C for $4,500. There were a few other smaller ones but I have not seen anything from them. It seems to me that since the estate has had no income since the year of his passing and this, the only reported income for 2014, being less than the standard deduction of $6,200 for 2014 should result in $0 AGI and no tax liability. Am I right in my conclusion? Should I file a return for this or not bother? There have been no returns filed since the year of his passing.

    It’s really weird that the idea of 1099-C’d debt could still be pursued by the lender… Once they report it as taxable income to the borrower they are required to claim it as a loss. I guess if they did finally collect on a debt of this type they would have to then have to turn around and claim it as income, would they not?

    Out of curiosity, what method would a debtor use to then claim as a loss the value of a debt that they paid tax on a 1099-C and then subsequently settled with the lender? Simply subtract it from the gross income? Not that it applies in this situation… just wondering. Seems to me that if that happened the borrower would be entitled to take back the value settled as a loss to reduce taxable income since the 1099-C increased taxable income.

    I appreciate you sharing your expertise in this subject!

    • It’s too complex for a comment Steve sorry.

      • Steve

        OK, how about the just the meat of the question then…

        A 2014 1099-C for $4,500 is the only income reported for 2014 on my dad’s SSN (the estate of actually I suppose). Since this is less than the standard deduction of $6,200 for 2014 am I correct in my conclusion that this would result in $0 AGI and no tax liability? It seems to me that this would not require any claim of insolvency or even the filing of a return.

  • Tannah Ogle

    Hi Gary,
    My husband and I both received a 1099-C from Toyota on a lease truck from 2009, I lost my job in April that year and we were unable to keep the lease truck. We had credit card debt and a house to pay for so, we chose at that time not to keep the leased truck. Toyota came and repossessed the truck in or around August of that year. In January of 2015 we received the 1099-c C.O.D, the debt was for $7826.00 that’s over 15k that I have to file as income we didn’t receive. How do I get this removed or canceled? Thanks for your help!

    • Sorry for your stress Tannah. First it’s not two 1099-Cs. so only the $7800+/-. But it does mean if Hubby reports taxes on his half and you don’t, he’s still on the hook for the remainder of the 1099-C. I’d be happy to prepare the return. (910) 399-2705.

  • Jim Mobley

    Hello Gary,
    I sent you a private message earlier today. I ran across something about insolvency on using form 982 on mortgage loan cancels or forgiveness. Can the IRS come back years later and collect tax on the home sale?

    In other words 2 loans for $300,000 a piece, 1 is forgiven and you receive a 1099-C fill out insolvency for 982 and its approved. Later on you sell house for $650,000 a $50,000 profit or is it calculated differently?

    Is the value of your house reduced in the eyes of the IRS at the time of the 982 to $300,000 due to the forgiveness of tax, and your profit is calculated to be now $350,000?

    I keep reading that the debt is not really forgiven, it can come back and haunt you on something like this.
    Also Individuals have an allowance for $250,000 capital gains profit and Couples have $500,000 would assume this comes into play also.
    Thank You

  • Colin

    Hi Gary,
    Great article! My wife and I typically file using the 1040EZ each year. This is our first experience with the 1099-C and a 982. She received two 1099-Cs for credit card/student loan totaling $9300. We own no real estate or property other than my IRA and our vehicles. Our debt to wealth ratio is roughly 4.5:1. Would the Form-982 be logical for us to file this year?

    If not, I think an Injured Spouse form may be a good idea as well.
    What is your advice? Thanks!

    • Form 982 is critical for all cancelled debt and I wouldn’t pay any taxes on Box 2 of Form 1099-C without exploiting Form 982. The injured spouse If you’re filing jointly we sometimes use that as a safety net. Hope that helped.

  • renee

    \hey gary I got a 1099c with a g in the box on the form and I got it after filing my taxes last month for 2104 and hr block told me that I owe back 2038.00 of the 2073.00 that I just got as a refund well any way I was told by someother than hr block I file an insolvency with in debt with my 2 houses im buying and my credit card debt and two vehichle debts to get money back instead of owing is this something I can do with out being audited later I had no idea I was gonna get a 1099c from 5 yrs ago its from a company out of dallas fort worth area AmeriCredit is the name of my repossion company on a truck

  • bart pinto

    Hello Gary,
    I had started by parents taxes with turbo tax, and boom hit with a 1099 c for 56,381. when i did the assets $116.00 and liabilities i got 280,000 i did it as simple math…. is this somthing you can do for me? please let me know the cost….

    thanks bart


  • Neil

    Gary – Thank goodness I found this page (although I have been searching for something like this for some time and not sure how i missed it). I have been fighting a 1099C I was hit with from the IRS from BOA (though it was past through 7-8 other banks and collection agencies first) from 2012. I believe my identity was stolen and used for several credit cards and have been using the debt verification process to fight all of them since 2008. Now that everything has dropped off my credit report the only 1099c I received was this one. Of course BOA mailed it to the wrong address (even though we had been communicating all through 2012). I presented all of my correspondence regarding this debt to theI RS after getting the CP2000 notice with the thought that if since identity theft was involved they would certainly have to drop it. However I then got a notice of deficiency letter stating I have until March 16th to file a petition with the US Tax Court. I have been dealing with BOA’s legal department in an attempt to get them to amend the 1099C but they won’t budge – consider the account is closed and obviously don’t care. I then realized I can use the insolvency exemption but now have only 4 days before the March 16th deadline. I am rushing to gather all of the necessary paperwork but know that the insolvency exemption will work for me. Should I just send in the 982 now without having all of the numbers needed on the worksheet (need to find out wife’s Life Insurance cash value is as well as Retirement Savings and a few other items) with the idea of sending a worksheet to them ASAP? Should I file a petition? Can you contact me as I would like to know if you could help me with this? Thanks for all you do.

  • Gary Alikonis

    A Question I have Gary,

    Me and my wife were both Cosigners on a loan we settled, The Bank actually gave us both a 1099-C for the same debt, If we are filing jointly, are we getting “double dipped” or do we only have to include one of the 2 1099-c’s That are for the same forgiven debt of the same amount?

    • Just one Gary, but you’re responsible for the entire debt. So if file separately, for example, and you claimed your half but your wife didn’t, you’d still be on the hook for the other unpaid half.

  • Wanda Wilkes

    Hi Gary: Trying to help daughter’s fiancé on a CP2000 dated 3-2-15 for 2013 taxes for 1099-C on cancelled debt for repossessed car. Original debt was with Americredit – car was repossessed 6-28-08 with debt of $20,318. GM took over Americredit in 2010. GM filed 1099-C 4-27-13 for $9,890 cancelled debt. Want to use Form 982 but cannot figure out how to do Worksheet for Foreclosures and Repossessions – do I put $20,318 in #1 from debt in 2008 or just do worksheet based on the $9,890 1099-C? Cannot figure out what would go in #7 or #8. He served in Army, mostly Iraq, 12 years and separated 11-2012. Only assets he had in 2013 were few pieces of furniture & washer & dryer that were lost by time he got out of Army. By end of 2013 due to hard time finding full time job child support arrearages were at least $12,000 and this $9,890 debt. Can you please help me with this? I called yesterday but never heard back from you. Please? Response due to IRS by April 1, 2015. Thank you very much for your time and help.

  • chris R

    Hello Gary, I received a 1099 c from a foreclosure on a rental property. I also received a report of sale for that same property from the courts reflecting a sale of 96k. Am I still liable to pay taxes on the 113k, or the difference from the sale, which is approx 11k. Also im curios as to why the bank sent the 1099 c for the whole amount of 113k almost 2 years later, when they should of recognized / factored in the report of sale for 96k and issuing a 1099 c for 11k, if thats the case. Any advice, thanks..im all ears

  • Jody

    Hi Gary,
    Great information.

    Do you know if Congress extended the Mortgage Debt Relief Act into 2015? I see that it typically only is for a primary residence, however, I have seen several posts above about debt being relieved on secondary homes/rental properties.

    How do we go about potentially short selling a rental property since we currently have over a $50k loss? We are current on the mortgage, however under water (losing about $600/month or $7,000 per year), the loan was in 2007, and the current loan to value is 1.34.

    Any insight you have on the Relief Act and how to potentially do a short sale on our rental would be appreciated. Thanks.

    • Mortgage Debt relief on Form 1009-C and Form 982 only apply if you lived in the house 2 of the last 5 years. But, generally, there are two provisions of Form 982 that usually keep the Form 1099-C from being taxable. Hope that helped.

  • Christopher

    Hello Gary,
    I had to short sale my primary residence September 2014 and received a 1099c for $60k, should I still file insolvency even if my cancelled debt is covered under the mortgage debt forgiveness act?
    I also received a 1098 for mortgage interest paid on the short sale, can I claim that also?

  • Deidre Alexander

    Hi Gary,
    Thank you for such an informative website. My student loans ($84,380) were forgiven due to my disability. My only income is from rental property. Not sure how to complete form 982. Would you be able to complete my taxes?

    Thank you very much!

    • Hi Deidre. I know you’re in a tough spot with all than student loan cancelled debt, We have a good track record on cancelled debt in general by the rental properties mean I can’t be sure in your case. If you send me the 2013 tax return I can get a better feel if I can help you. Try no not worry. 910 399 2705.

  • Rick Daniels

    Is it too late to get a initial consult? I have emailed and called

  • Robert

    Hi Gary,

    This page has been very informative. My question is: I received a 1099c from an old CC settlement with an event date of November 4, 2014. We agreed to a settlement amount in 2010 when I would be considered insolvent, but now 4 years later I am in a much better position financially. In addition, I received life insurance proceeds from a death about a week before the “event date” which took me out of being insolvent. The Credit card company says they will not send an updated return with the 2010 date because it is their policy to send it out when the statute of limitations for collections expire. In the 1099 they chose “G – decision or policy to discontinue collection” as the reason and not “C – Statute of limitations or expiration of deficiency period”. I am not sure if it matters, but any advice would help on whether I should fill out form 982, request a correction, etc. Thanks.

  • Lonnie Drew

    Hi Gary,

    Is it possible to file a return although no 1099-C has been received?

    I normally file my own returns via Turbo-Tax but believe I need help on this one.

    Can I consult with you and possibly have you prepare my return?

    • Hi Lonnie. Yes the IRS expects you to file cancelled debt even though no 1099-C has been received. But they’re pretty good about penalties and seem to understand if Folks don’t always receive one and don’t know about cancelled debt income.Call me at will, (910) 399-2705.

  • Karen

    Hi Gary, I was issued a 1099c, forgiven student loan (parent plus) after becoming permanently disabled. My questions are 1) We always filed jointly in the past, I plan to run the numbers both ways (jointly and separately), but in figuring assets/liabilities for insolvency would I use half the value/debt of our home when running numbers separately – both names are on the mortgage. Also, would the value be the tax assessed value, or appraised value? Also, the interest in box 2 can be deducted from the taxable income, but not deducted when figuring liability on form 982, correct? Thank you for the great site!

  • Karen

    Hi again, I am sorry for multiple messages, but I thought the worksheet would explain in more detail than it does. As stated earlier, we have always filed jointly in the past, but seeing how the 43,000 dollar 1099c is mine only (only my name on the parent plus loans), and my only income is from SSDI, I am thinking that perhaps filing married/separate would be beneficial, but may be considering a few options like joint insolvency instead of a separate insolvency for myself. If pursuing the separate filing, do I claim half of joint bank accounts, half of home value (assessed or market value??),half of jointly held debts, etc.etc?? This is Michigan, so I am speaking of things which are actually titled in both names. Also, a gray area about deducting the interest from the total on the 1099c. Seeing how student loan interest is not a qualified deduction when filing separately, is it then to be left in the total of forgiven debt…it says in pub.525 that interest in box 3 can be subtracted from box2, as long as it is interest normally qualified as a deduction. It qualifies, and we would normally claim all loan interest, and in this instance it is interest not deducted in the usual manner, so a bit foggy!! Thanks Again so very much!

  • Jen

    To just to follow up on my previous questions, I’m wondering what the IRS considers “immediately” before the debt forgiveness when the repayment is done in two installments and whether my co-signer has to address the 1099-C at all if I declare 100% of it? Or is my co-signer forced to declare half of it regardless of the circumstances?

    Thank you!

  • Lisa Pi

    My mother was awarded 100% disability for an automobile collision. She was then able to have my sister’s college student loan debt discharged/cancelled. We got the 1099-C, however the tax preparer didn’t know about insolvency. The discharge was April 2013. Can you tell me what the deadline for filing Form 982 is for this type of issue? Can you also tell me if my parent’s 2013 tax return needs to be amended so that they can include it with the Form 982 (if not too late) – or – if they need to submit the Form 982 with the 2014 tax return?

    Thanks a bunch!

  • yvonne pitsch

    I am helping an elderly lady who received a 1099C for $8000 for a credit card cancellation debt. She is insolvent. She does not own a home and owns a old car worth about $1500 but has more than that in other debts so she is insolvent. She does work a small part time job but does not have any large checking balance (less than $100 usually). I see that I can use form 982 Part 1, Line 1B and line 2 for the cancellation debt balance $8000. Do I need to use line 10A and if so what amount do I use?

  • Brian

    Hi Gary – Thank you for all the advice. I have an additional issue that I’m hoping you might have some insight on.

    I received a 1099-C for standard credit card debt with event code G (box 6). Box 5 is not checked, but as I understand it credit card debt is recourse debt and I am personally liable for it, and thus, box 5 should’ve been checked.

    I spent several hours on the phone with the creditor trying to confirm whether or not they filled out the 1099-C properly, and the two most definitive answers I got from them were, “it was filled out correctly,” and “we are not obligated to fill out box 5.”

    Ultimately, my tax burden will be the same at $0 either way due to my lack of any other income and amount of insolvency, but I’m trying to figure out the best way to proceed in filing – 1) consistent with what the 1099-C says (no box 5 check) and thus $0 taxable income or 2) override the 1099-C and report a box 5 check and then exclude the taxable income with Form 982 insolvency.

    Any thoughts?

  • Mike

    Hi Gary,
    If I moved out of the home April 2009, my ex-domestic partner files for Chapter 11 Oct 2009, I did a quit claim 2012 and then the bankruptcy is discharged Oct 2015 then the lien holder Citimorgtage issues the same 2014 1099-C for both parties for the $87k, it looks like the chapter 11 will protect him with the IRS 982 form however the IRS might look at me to pay taxes on the $87k even if I moved away and the money was used for his credit card debt and his home repairs?

  • Randy


    I received a 1099-C for a credit card debt settlement that was negotiated by a debt relief company. Can I deduct the 20% in fees I had to pay to the Debt Settlement company?

  • Randy

    When calculating whether or not you can claim insolvency, do you include the FMV of your home in assets even if you have an outstanding mortgage? Is there a formula for figuring out FMV of household items. I have no idea how much my old bedroom furniture is worth.

  • Dave DuVall

    Hello Gary,

    I closed an S corporation last year and had credit card debt that was used for business purchases. I was not able to pay off the credit cards and CC company sent me some 1099c’s….the credit cards were issued under my name and SS#. Can I somehow show a loss somewhere on my 1040 to offset the 1099c since the CC’s were used for the S corp?

    • Well doing that would be of great benefit for you. You’d have to prove it to the IRS with things like corporate minutes, credit card statements and explanations. Income is easily assignable to an S Corp. But S Corporation cancelled debt has favorable IRS tax treatment. It could work. Extend you tax returns and contact me after 4/20/15.

  • Kathy

    Hi Gary,
    Great info! Quick question. If you are filling out the Publication 4681 Insolvency Worksheet, would a property tax assessed value be a good indication of current market value of the home (asset), or should we get an appraisal? I actually think the home in this case is probably worth less than the assessed value. Thank you!

  • Max

    Hi Gary,

    My mother got a Cancellation of Debt letter for about $2,750.00. She has retired a few years back and now receives her SS benefits and also Medicaid. If the above amount is included in her income tax then the state will take away her Medicaid. I would like to complete f982 and check 1a (Discharge of indebtedness to the extent insolvent) My question is, how would I prove/show to IRS that my mom’s FMV of all her assets is way below the cancellation debt amount. She has no assets (i.e. bonds, stocks, savings, IRAs, properties, automobiles, or any precious metals, etc.) In other words, this Cancellation of Debt amount far surpasses her assets such as old TV, furniture or used clothing.

    Thank you in advance.

  • Susan

    Hello…Would you be able to answer two questions?
    1.) If I receive a 1099-C (Date of identifiable event 12/31/14 w/code H), and I am in the process of filing bankruptcy now in 2015, is there a way to include the 1099-C amount in bankruptcy or must I include it in my 2014 taxes and then also remove it from my bankruptcy debts for 2015? (I would need to file form 982 as I was insolvent).
    2.) I made so little income in 2014, that the added income from 1099-C would NOT affect my taxes due. However, since I qualified for some federal aid in 2014, I am worried that the increase in income(if I DID NOT file form 982)would be a problem?

    Thank you, I know this is a lot of info. If you can not answer, I understand. Sadly, I am not able to afford to pay for assistance at this time

  • Andy

    Form 982 questions:
    1. Can an unpaid personal loan be counted as liability?
    2. If my worksheet shows insolvency and I own a home, can I simply show the amount excluded on Line 5 and adjust my home’s basis by that amount?

  • Lindy

    My ex husband and I claimed insolvency for 2012 Divorce final January 5th 2012. The accountant filed me as single for 2012. We had a cancellation of debt on 2 properties (Property A 84,000 to clear 167,000 of a second mortgage Ex claimed as his personal residence , Property B 12,000 to clear lender loss from a short sale)for a total of 96,000 on the 982 form line 10a reported on my personal taxes. Property C Rental Ex, Property D my person residence. I live in Florida, per the divorce decree I wasn’t responsible for or entitled for/to any loss or gain on properties A B OR C, he was not responsible for the same on Property D. Properties A B and C were quick claimed to him and D to me per the divorce decree. The accountant said we weren’t going to follow the divorce decree. Properties B C and D were listed on my personal taxes for 2012.

    Ex is now selling property A and will be keeping the profit of 200,000.

    Is the 84,000 on my taxes attached to the sale of property A since the property was still titled in both our names when the taxes were done or when I sell property D in the future would it be attached to it?

    I am still on the mortgage of property A and he is still on the mortgage on Property D.

    We bought property A for 235,000 being sold for 340,000 and we bought property D for 175,000.

    So how does line 10a of 982 going to work? Thank You

  • Lindy

    Hi Gary,
    With all that is going on my ex told me yesterday that he is not going to live up to paying back my mom a loan of 20,000 upon sale of the house which was also in the divorce decree, He is whittling away at it the only thing left is the Alimony. I took the info to the manager of H and R block where the insolvency complete for review. Apparently there were irregularities in the return that was filed on my personal taxes which benefited my Ex and definitely a conflict of interest by the agent. I was not given a copy of the insolvency documents of the return and even a capital gains for something that the form was not in my personal tax return for 2012. Because of the way my return I paid an additional 3,000 that I wasn’t suppose to pay.

    Can I have the 2012 tax insolvency amended? Therefore removing the liability for the 96,000 which my ex was suppose to be responsible for per the divorce decree?

  • Damon

    I am not sure this went through the first time, so I must thank you tons for providing this information! I have the exact issue as another individual above concerning total disability and a discharge of my student loan by the Department of Education. I am eternally grateful! You saved me from overwhelming worry, complete panic and $16,000 on a debt discharged by the Department of Education.

    With great appreciation!


  • Hi Gary,

    I have been on permanent disability since 2010. Last year, I requested my student loan be discharged. It was. I was sent a 1099-C for that amount, which comes over $30,000. I can’t afford to pay this loan, as I only collect a little over $1000 a month disability. I do have other debt of $1500. As for my assets, I only own a $500 computer and a $300 computer, but that is it. How can I get out of paying tax on this debt? Thanks.


    • I’d read IRS Pub 4681 Harry. In my experience few folks in your position end up paying any tax on the 1099-C. Hope those stats include you. However I’m happy to prepare the return for you.

  • LeDora Calvert

    Gary, I have a friend that sold their home Sept.15, 2011 through a short sale. He and his wife got a divorce about the same time. He has been contacted by the IRS that he owes taxes on the portion that was forgiven by the mortgage company. Can he still have that waived if he files form 982 for his 2014 return. I’m a real estate Broker but I didn’t handle his sale. I just found out that he has to pay taxes on about $65,000. I believe his ex-wife should also be liable if it’s too late to file for the waiver.

  • Terry


    I short sold a that wasn’t my primary residence and received 1099-c’s from the original lender as well as the second lienholder for a heloc. Heloc lender issued a correct 1099-c but the original lender issued a 1099-c that was for twice the forgiven amount. I’ve contacted them via email and phone calls indicating that the 1099-c they issued was incorrect they refuse to provide any documentation or return my calls. I’m just wondering what are my legal options in terms of suing them to correct? Also is there another option I can write off the loss? I don’t qualify for insolvency or the primary residence rule but heard that one can write off the loss using form 4979 business property sale?

    • You’re asking legal questions. But I’ve only ever seen one client get the bank to correct a 1099-C. It took two years. My philosophy is that if we can rid of it with no tax consequences then that’s what I’d recommend. Otherwise there are years of legal battles.

  • Elizabeth

    Hi Gary. I received a 1099c for $26,000 this year for the foreclosure of my primary residence in 2008. I have already filed my taxes for this year. Do I need to amend and include Form 982? I have few assets and live with a friend. Can you help?

  • Martin

    Hi Gary,
    Thank you for all your time. This is valuable information for most people. I have a question what under what IRS code does student loan debt cancellation fall?

    Thank you,

  • Martin

    When you file form 982 with your tax return do you still include the cancelled debt on line 21 OR do you leave out income reported on 1099-C from including it on your 1040 once you file for 982 with your tax return. please help.

    • Line 21 is what cancelled debt from IRS Form 1099-C, Cancellation of Debt, you couldn’t exclude using Form 982, Reduction of Tax Attributes. The instruction for Form 982 should be clearer on that point. Hope that helped.

  • Allen

    Hello Gary, great website. I am currently negotiating credit card debt with a bank. Total debt is $17,000 and settlement amount is $5,000. I understand that the bank will send me a form 1099-C for $12,000. My wife and I are both on Social Security and receive $37,000 annually. No other income. I ran the numbers and apparently, with standard deductions, we would owe no income tax for this year.

    Seems too good to be true. Is it?

    Many thanks

    • Well Allen, if claiming the $12,00 on Form 1099-C, Cancellation of Debt, yields $0 tax due, that’s great. But If you made estimated tax payments, had taxes with held on SS etc. I’d use Form 982 and try for a refund.

  • Mike F

    Hi Gary, I hope you can help me get some light shed on this really dark and confusing tunnel. Thank you so much for offering your expertise. I also received a notice from IRS saying I owe $1244 for a $4441 forgiven balance. I never received the actual 1099C so at first I was completely sure it was a mistake, but after one phone call to capital one I learned that this was an account that was forgiven by HSBC bank 2003. The lady at capitol one gave me some history on this account, but couldn’t give me much since it was acquired over 12 years ago. She was however, able to tell me that the last payment they have showing was back in 2003. How is it possible to be liable to pay taxes on such an old account that was forgiven more than 12 years ago? Is there a time frame in which the creditor has to file the 1099C? Lastly do you think I would benefit from filling form 982?? Please help. Thank you

    • Hi Mike. You have a common situation. The IRS Form 1099-C instruction provide bankers great flexibility about when they can issue one. So you’re stuck using the insolvency exclusion on Form 982.

  • Will

    Hi Gary,

    I’m curious as to why IRS does not [allow the taxpayer to] amortize COD “income”. If a debt agreement specified repayment over a period of time, ordinarily multiple years, and very likely extending beyond the date of debt forgiveness, do you know what rationale the IRS uses to front-load it?

    Also, do you know if anyone has attempted to challenge this, and what was the result?

    Thank you for any help you can provide –

  • Chara

    Hello, if I had a partnership, that is now dissolved, and we had foreign investor debt that was forgiven, I can’t figure out how or where to report this Cancellation of Debt income on my 1040, because I am also insolvent (to a greater amount than the COD income). The COD income appears on my K1 line 11E, but the insolvency needs to be at the personal (partner) level. Can I put the insolvency as a line item under Unreimbursed Partner Expenses (UPE)? Or do I need to figure out how to put the COD income on page 1 of my 1040, and then include form 982? Thank you! I have spent hours and hours researching this issue and your blog is the most helpful thing I have found!

  • Howard

    I filed chapter 7 bankruptcy nearly 2 years ago, i just now received a notice cp2000 from the IRS that i owed $2000 my attorney said i should have my accountant fill out Form 982. please i do not know where to start

  • Chantal Wandick