form 982

[ardi600]

i have a 1099-c for around 9000. he definitely has more liability then assets to cover that 9000(insolvent). on form 982 i checked the box for insolvency and put the amount as well. i am really confused, which box needs to be check in part two. also, i am putting the 1099-c amout as other income. i would appreciate your inputs,

[Koss]

Cancellation of Debt

I don't see any "check boxes" in Part II of Form 982. There are some boxes you can check in Part I.

Which box gets checked, and which line gets filled in, depends on what kind of debt was cancelled...

And I don't think the amount should be reported as "other income," i.e., line 21 on Form 1040, unless your software automatically backs it out after you complete Form 982. The amount should not be included the taxpayer's AGI.

BMK

[ardi600]

thank koss, the 1099-c

is for cancellation of credit card debt. i have checked box 1b, and also put the amount on line 2. I believe you are right, it does not have to be added to 1040 line 21. on part two, i dont see any boxes that would apply to this situation. is that all i need to do for that 1099-c?

[Gary2]

9000 isn't much debt. Is he also upside down in a house, or does he have other debt as well?

Consider preparing the insolvency worksheet in Pub 4681 to be sure. You won't need to file it, but you should make sure it's right now, in case the IRS asks for it.

[ardi600]

thanks Gary, he has

about 40000 in student loans and his total assets plus cash in the bank is around 10000. does IRS require me to keep that worksheet in my files that show he is insolvent? and also, my understanding is none of the part II scenerios is related to credit card debt, and i should leave that part blank. correct?

[Gary2]

about 40000 in student loans and his total assets plus cash in the bank is around 10000. does IRS require me to keep that worksheet in my files that show he is insolvent? and also, my understanding is none of the part II scenerios is related to credit card debt, and i should leave that part blank. correct?

Ah, student loans could do it - though don't forget to include retirement accounts as assets. I don't think the IRS requires you to keep the worksheet unless it's relevant to EITC, but either you or the client ought to keep it handy in case they ask.

Assuming you mean part II of the 982, the fact that it's credit card debt isn't the relevant issue, as there could be business-related items on a credit card. But even if it's all personal debt, there are still items in part II that can apply, such as the basis of personal use property.