Tax software that supports form 982 for filing 1099c

You asked me to get this info to you so here it is STRAIGHT from the mouth of the IRS. I read the booklet three times and then talked twice to different reps a the IRS directly and received the same answer twice. So, for those of your filers who have settled here are the instructions for taxes For tax for 982--Reduction of Tax Attributes Sue to Discharge of Indetedness http://www.irs.gov/pub/irs-pdf/f982.pdf. If the 1099-c received was for credit card debt, then you need to check the box 1 b If you received one or multiple 1099-c forms then you add up the totals of all forms you received and place that total on line 2. Line 10a is for credit card debt settlement. You must put the same amount you placed on line 2 on line 10a. Then must match as you will earn yourself an instant audit, which none of us want. You need to fill out an insolvency worksheet.

http://taxtipsfrombill.com/Documents/Cancellation%20of%20Debt%20Insolvency%20Worksheet.pdf. If filiing by mail, this worksheet MUST be included with the 982 regardless of if you have to pay taxes on the settlement or not. NOW HERE IS THE TRICKY PART Step 1---If after finishing this worksheet you must subtract your assets from your liabilities. ( $40,000 assets - $100,000 liability= ) If your liabilities are great than your assets( -$60,000) you then put that total aside until step 3. Step 2---You should put the total of all your 1099-c's($7,000 wachovia + $1,000 chase= $8,000 total taxable 1099-c) on line 2. Step 3---Next you substract the line 2 1099-c total from your liabilities. (-$60,000-+ 8,000= $52,000 more liability to 1099-c taxable settlement) In other words, if you 1099-c total is greater than the total of liability over of your assets you must pay on that total overage. ( 1099-c total taxable income $8000. Assets $40,000, Liabilities $12,000= +$38,000--you must pay taxes on all of the taxable 1099 amount) If it is less than your liability total then you do not pay taxes on the 1099 settlement amount. 1099-c total $10,000, Liabilities $50,000-Assets $10,000= --$40,000 which is more than the 1099c of 10,000) If the 1099c is only partially the amount then you are responsible for the difference, In other words ( 20,000 1099c total, Liabilities $30,000-Assets $15,000=--$15,000 which is less than the 1099c so you must take the 1099 total of $20,000 and substract the $15,000 from it=giving you the total taxable income to report on line 21 of your tax form or $5,000 in this example.) $40,000 assets -$12,000 liabilities ________________ $38,000 ---you pay taxes on ALL your 1099c total so if it is $4,400, you put $4,400 on line 21. $10,000 Assets -$50,000 Liabilities ___________________ -$40,000 ---You pay taxes on any amount over $40,000 so if you 1099 is under $40,000 you do not pay taxes, if it is over, you pay on what is over that total So, if it is $32,000 on your 1099c--since it is less than $40,000 you do not report anything extra on line 21 -$15,000 Assets $30,000 Liabilities __________________ -$15,000--- Your 1099c is $20,000 $20,000 1099c $15,000 liability overage ________________________- $5,000 reported on line 21 as extra income. Step 4---Basically, if your total of 1099-c is larger than your liability total you must subtract the liability total from the 1099-c total and add that amount as income on line 21. If your liability after assets is larger than your 1099 total then nothing is added to line 21.

You can use Turbo tax to file electronically, but the forms are only available on the Home and Business edition. You must go the forms portion of the taxes and click add forms and add the 982. Fill it out there and then click and add for insolvency of debt. Fill it out with your asset to liability ratios and then you can electronically file.

You probably won't have to pay anything on the forgiven debt - here is some information. Read the Mortgage Forgiveness Debt Relief Act to check for the conditions - they are applicable to most foreclosures. Also if you live in a state where there is anti-deficiency protection, such as Arizona.

Homeowners who default on mortgage loans may also qualify for exclusion of their foreclosures under the http://www.irs.gov/individuals/article/0,,id=179414,00.html Mortgage Forgiveness Debt Relief Act, which took effect Dec. 20, 2007, to help homeowners caught in the mortgage crisis. This provision applies to debt forgiven in calendar years 2007 through 2012.

Homeowners who default on mortgage loans may also qualify for exclusion of their foreclosures under the http://www.irs.gov/individuals/article/0,,id=179414,00.html. Mortgage Forgiveness Debt Relief Act, which took effect Dec. 20, 2007, to help homeowners caught in the mortgage crisis. This provision applies to debt forgiven in calendar years 2007 through 2012.

I have both a credit card cancellation plus a rental home mortgage principal reduction/cancellation.  So I understand checking 1b and 1d and then putting the total of both on line 2.  For Part II, do I put the mortgage amount in 4 and the credit card amount in 10a so that total matches line 2?  Or do I just put the basis reduction for the rental property in line 4?  thanks.