Home > Taxes > Form 982: The Way to Battle a 1099-C

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If you have received one or more of the estimated 5.5 million 1099-C forms being sent to taxpayers this year, then you may find yourself wrangling with Form 982. That’s the form that taxpayers who qualify to have the income listed on the 1099-C form excluded from their debt should fill out and include with their return.

The most common reasons taxpayers are able to exclude the income listed on a 1099-C from their gross income are:

  • The debt was discharged in bankruptcy.
  • They qualify for the tax break under the Mortgage Debt Forgiveness Tax Relief Act.
  • They meet the IRS definition for insolvency and that amount is larger than the amount listed on the 1099-C.

Already lost? Read up on the top 1099-C questions consumers are asking.

Of all of these three, bankruptcy is the most straightforward. If the debt was canceled as the result of a bankruptcy discharge, you simply check box 1a on Form 982 and fill in the amount discharged. You don’t have to pay taxes on debt canceled in bankruptcy. The exclusion for mortgage debt can get complicated if you used proceeds from your home loan for any reason other than to purchase or improve your primary residence and often requires the help of a tax pro.

It’s the third one — insolvency — though, that taxpayers seem to be having a particularly difficult time with, at least judging from the questions and comments we are receiving. Instructions for filling out Form 982 can be found in IRS Publication 4681, including the insolvency worksheet the IRS provides for calculating the extent to which you are insolvent.


But IRS Publication 4681 doesn’t cover every scenario. There are some big gaping holes — like a lack of instructions for taxpayers who receive 1099-Cs for very old debts. And some basic questions appear to remain unanswered — like how do married couples handle joint or separate debts or assets when filling out the insolvency worksheet.

So I turned to Edward Zollars, a CPA and partner with the tax practice of Thomas, Zollars and Lynch in Arizona for help answering two of the questions we’ve recently received.

Form 982 for Multiple 1099-Cs

Our reader asks:

“We’ve received several 1099-Cs for settled debt in 2012 and plan on filing Form 982 for insolvency. The question I have is: All of the settled debts happened on different dates throughout the year so how do we file only one Form 982? The instructions say that you must fill out your assets and liabilities immediately before the debt was settled, but how is this done with different settlement dates? All of the tax programs I’ve looked at only support a single Form 982.”

This question is particularly relevant for consumers who may have settled several debts, either with the help of a debt settlement firm or on their own. Zollars provides this guidance:

“I suspect that most consumer (and even likely most professional) tax programs won’t support multiple Forms 982. In reality I suspect you can combine all reporting into a single Form 982, though the worksheet from Publication 4681 will need to be filled out separately for each discharge. If the discharged debts are large enough that the question of the limits for reducing basis of assets (basis less debts outstanding immediately after discharge) come into play, the reductions might get more than a bit messy, but I think it’s doable with some worksheets to back up the Form 982 calculations.

If the tax software has tried to integrate the worksheet in Publication 4681 things might get messy — haven’t looked to see what’s out there on that issue in the software. But I think if they simply do the worksheet by hand for each date (it’s a simple listing of assets and liabilities at the then-current values) they’ll figure out how much of each discharge they can exclude — the total amount excluded is what goes on the Form 982.

Unfortunately, this sort of case is not something that most consumer software has been optimized to handle and I suspect that they never worried about multiple discharges in the same year even if they did integrate the worksheet.”

Do I Include My Spouse’s Assets or Debts When Calculating Insolvency?

The second issue is one that has come up in several different questions over the past week. The overall issue is how married couples’ individual debts/assets are handled when filling out the insolvency worksheet. Our reader asks:

“I received a 1099-C for one of my student loans. It was forgiven in 2012 because I am permanently disabled. The other huge loan is still being reviewed. My question is: I qualify for insolvency if I include everything I own. The problem is that I am married and I need to know if they are going to consider my wife’s income and her assets. Our home is in her name, as is the car and everything else we ever got. The only things I really own are the clothes on my back. My wife bought our home on her credit and job since I did not qualify for a loan. I have not worked since I went back to school in 2000 and I had to leave school in 2008 because of my disability. My loans are in excess of $200,000. Please help! Thank you.”

We’ve heard from many consumers whose student loans were discharged due to total and permanent disability. They were shocked when they then received a 1099-C for that amount and were faced with a potentially monstrous tax bill as a result. But it’s not just those with canceled student loans who may be have trouble figuring out how to complete the insolvency worksheet. Anyone who is married and received a 1099-c for any type of debt may find it difficult to navigate this issue. Zollars responds to our reader’s question:

“That one seems a bit less clear, but I’ll give you my take. In Publication 4681, Example 3 on page 6 makes it clear that if the taxpayers file separate returns you compute each spouse’s insolvency separately. The Publication does not offer an example of the insolvency calculation where a joint return is filed and one spouse is insolvent but the other isn’t, but it would appear the same tests would apply. That is, you would compute each spouse’s solvency or lack thereof and compare that to their share of any debt discharge.

That said, insolvency is trickier than you might suspect. First, you must always be aware of the potential issues in community property states. If the asset is community then you end up with a joint ownership. Similarly, you also have to look at the debts. The biggest problem, though, is that you cannot exclude assets that are exempt from creditor’s claims from your insolvency calculation. So if, for instance, the taxpayer has a pension or retirement account, that has to be considered.

Finally, his spouse’s income isn’t relevant — solvency is a pure asset/liability test at an instant in time and we don’t care about someone’s income.”

The bottom line is that for many taxpayers, 1099-Cs will trigger another bill — for help from a tax professional. For complicated situations or those involving large amounts of cancelled debt, it’s especially crucial to get expert assistance. Don’t assume that anyone who prepares a tax return knows how to deal with the complicated issues these forms raise. After all, this is just one part of 73,608 pages of tax code for 2012.

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  • Lori

    My husband an I received a 1099 c on our home that went into foreclosure an resold by lender will We qualify for insolvent we now rent an own basically nothing

  • Tony Mitchell

    Okay – we received a 1099-C from the primary mortgage holder on our house. We lost the house in a tax foreclosure. At the time indicated on the 1099-C we would have been considered insolvent. I understand that under this circumstances I would check box 1b on the 992 and list the total amount of discharged indebtedness on line 2.

    Now, what sort of statement do I provide for Part II and what information do I put on lines 4 – 13? What information do I put where on my 1040 (which, by the way, I have already filed; we received the 1099-C one month after filing our taxes).


    • http://www.credit.com/ Credit.com Credit Experts

      Hi, Tony. It sounds like you may want to consult a tax professional who specializes in 1099-Cs.

  • Kari Stoklosa

    I really need some help. I am definitely insolvent. I’m aware of publication 4681 and Form 982 I have had a couple settlements on credit card debt from last year resulting in a 1099-C form for the forgiven portion. I filled out the liability and asset worksheet. The only problem is I have no idea how to fill out Part ll of form 982 #10a & #10B also if I have a discharge of debt through settlement do I also have to fill out #5? I have checked B in part one and know that’s correct. Sadly that’s as far as I have gotten. I really need help! Thank you so much in advance.

    • http://blog.credit.com/author/christine-digangi/ Christine DiGangi

      It’s probably best for you to consult a tax professional.

  • Lakita Keese

    I filed my 2015 taxes and they were taken due to Cancelled of debt. My refund was taken, once I process my 982 form and it’s approved will the IRS send me my refund?

  • Jodie

    Hi. My question also relates to form 982. Primary home discharged in bankruptcy in 2013. Signed a deed in lieu in 2015. Received for 1099-c with $56k of canceled debt and FMV of $30k. I believe this will not show on the 1040 however, I believe I must file form 982. Do I check box 1a and write the amount discharged in bankruptcy on line 2, or the amount canceled from 1099-c on line 2? Also, am I required to fill out part ii on 982? I own no other homes.

    • Jeanine Skowronski

      You may want to consult a tax accountant about your best recourse.

      Thank you,



    Hello. I also received a 1099 c for home equity line of credit. I was the Co singer for the loan. The house was for closed on. We used the loan to do home improvements. Who files the 1099c the 1st or second owner.? Your response would be appreciated!!

    • Jeanine Skowronski

      You may want to consult your tax accountant to find out the best way to file.

      Thank you,



        Nobody seems to know….

  • Chaka

    I received a 1099-C for a debt that is not mine and never has been. I immediately contacted the credit agency that sent the document and I was told they purchased the debt from a credit card company in 2005. I explained that I never had a credit card with that institution.The long and short is this debt, even though it’s been cancelled is not mine and I’m being told there is nothing they could do about it. How do I get this corrected?

  • William Scott

    Hello and thank you for all this great tax information! I was wondering if there were any updates on how to determine insolvency when married and filing a joint return. My case is almost identical to the second example provided in the article above. I received a 1099C for tax year 2015 for discharged credit card debt that I had accumulated several years ago (before marrying). Other than a vehicle, I basically had no assets except for the shirt off my back! I moved into my wife’s home and we do not live in a community property state (Pennsylvania). Do I include my wife’s assets in the insolvency calculation? It seems nearly impossible to find information about this issue online, and I am skeptical about finding a local tax professional who would actually have knowledge about this particular issue.

    • Jeanine Skowronski

      The situation sounds complex so your best bet might be to consult with a tax attorney or accountant about your options.

      Thank you,


  • Jeanine Skowronski

    You may want to consult your tax accountant or a tax attorney about your best recourse.

    Thank you,


  • Jason Leonidas

    I found something for those who got credit card debts forgiven, and do not have a title 11 case and also did not file for bankruptcy.

    If your liabilities (all your debts) are greater than your ASSESTS, you are INSOLVENT.

    If insolvent, complete IRS form 982 this way:

    – Check Part 1 box b

    – Put the amount of settled or forgiven debt from the 1099-C on Part 1, line 2

    That’s it, you don’t need to fill anything else out on form 982

    You will need to fill out the Assets vs. Liabilities worksheet though, include this

    with your form 982 and tax return and and mail them back to IRS.

  • Concerned

    I have an equity line of credit that was written off and I subsequently received a 1099-C from the bank. Will I still have to settle this if I sell my home?

    • http://www.Credit.com/ Gerri Detweiler

      Do you mean can you still be held responsible for the deficiency? It’s possible yes. The IRS says that the issuance of a 1099-C does not mean the underlying debt has been cancelled. My guess is the lender still has a lien against the property and will look to be paid when the house is sold. Consult a real estate attorney for more information.

  • Lauren

    When filing a form 982 for cancellation of credit card debt, is a current student loan considered a liability if the student is still in school and therefore not required to make payments yet due to deferment?

    • http://www.Credit.com/ Gerri Detweiler

      The student debt is considered a liability regardless of whether you are still in school.

  • http://www.Credit.com/ Gerri Detweiler

    Sorry I misunderstood. I believe that is talking about the elections referred to in the prior paragraph. None of the tax professionals I have interviewed about this issue have mentioned only being able to amend the return for six months to claim the insolvency exclusion but I am not a tax professional so I can’t say definitively.

  • http://www.Credit.com/ Gerri Detweiler

    You’re looking at the instructions for Form 1099-C right? Those are the instructions for the companies that must file those forms not for taxpayers who receive them. The IRS website says this about amended returns: Generally, you must file Form 1040X within three years from the date you filed your original tax return or within two years of the date you paid the tax, whichever is later.

  • http://www.Credit.com/ Gerri Detweiler

    Is this for Part II of the insolvency worksheet? You’re going to have to make some assumptions but if you can support them then you should be OK. (For example you might pull similar property values from Zillow. Also keep in mind your used household goods probably wouldn’t fetch that much at a garage sale unless you have valuable items.) The IRS talks about FMV in conjunction with donated property in Publication 561.

  • Sbh B

    Can I amend my personal taxes for 2013 and claim insolvent ( i was ). The form says you only have 6 months ? i would be checking #1a

    • http://www.Credit.com/ Gerri Detweiler

      What form says 6 months?

  • http://www.Credit.com/ Gerri Detweiler

    Yes, you should fill out the worksheet for each debt that was cancelled. You include the amount of debt before it was cancelled, but for not for subsequent ones. (For example, if you had a debt cancelled Feb 1st and another cancelled June 1st you would include the Feb 1st debt for the first calculation but not for the second.) Keep in mind I am not a tax professional, though, so please make sure you get advice if you need it. Many tax preparation software programs also support 1099-c calculations and there is an insolvency calculator available from ZipDebt.com.

  • Deb

    Where do I mail form 982?

    • http://www.Credit.com/ Gerri Detweiler

      You file it with your tax return.

  • Jane young

    I am 24 an single and my only income is SSI . I received a 1099-c for a credit card write off of $5059.08 and filled out the insolvency worksheet and came up insolvent in the amount $328.08. I filled out form 982 part I ,checking 1b and putting 328.08 on line 2. Then I went to line 21 of form 1040 and put $4731 there (5059.08 – 328.08), which after taking the standard deduction of $6200 results in a 0 for taxable income. I thought I filled this out correctly, then realized I hadn’t filled out part 2 of form 982. What do I fill in there?

  • http://www.Credit.com/ Gerri Detweiler

    Good to know! Thanks for sharing your story. (And you are right – the 1099-C MISC versus 1099-C issue can get confusing!)

  • Mary

    Do I have to pay taxes on a parent plus loan that was discharged due o permanet disability

  • Confused and looking for help

    I received a 1099-c for a mortgage debt canceled by bankruptcy in 2009.

    Based on your note article above, is the only thing I need to do is fill out the form 982 and include it w/my tax paperwork? The weird thing is the 1099c was coded as no longer collecting, instead of bankruptcy.

    Is that a problem? Should I take my bankruptcy papers with me to tax preparer for verification?


    • http://www.Credit.com/ Gerri Detweiler

      It sounds like the lender made a mistake. You may want to play it safe by asking them in writing via certified mail to correct it. But even if they don’t it sounds like you can claim the bankruptcy exclusion on IRS Form 982 and if they question it you will have your bankruptcy papers to back it up. Check with your tax preparer as I am not a tax professional.

    • Confused and looking for help

      Thank you … I will send my certified letter b/c I did call after receiving it to ask, they said they would not change it and their internal review determined this was the correct code.

  • Geezergardener

    I had student loan discharge due to disability and will file for insolvency. Do I fill out form 1040 with the discharge amount on line 22 and attach form 4681? Then there is form 982 that several web sites say must also be submitted but nothing applies to me since I own almost nothing and not sure what to do. Thanks….

    • http://www.Credit.com/ Gerri Detweiler

      Publication 4681 contains the instructions for Form 982. It sounds like you plan to claim the insolvency exclusion. If so, you fill out the insolvency worksheet in publication 4681 to find how much of your debt is eligible for the exclusion. Then you put that amount on Form 982 and file Form 982 with your return. Keep the worksheet in your records in case the IRS ever questions your return. Hope that makes sense!

  • http://www.Credit.com/ Gerri Detweiler

    If the amount of cancelled debt reported on the 1099-C will put him above the threshold required to file a return, then my understanding is that he should also file a return, include Form 982 and claim the exclusion. If he does not file and explain to the IRS why he is not paying taxes on that amount, the IRS computers will likely kick it back and say he owes taxes on it. (The dependent issue is a separate issue and I can’t comment as I am not a tax professional.)

    You can always confirm this with the IRS and/or a tax professional – again, I am not one.

  • http://www.Credit.com/ Gerri Detweiler

    Have you looked at the instructions for HAMP reductions in IRS Publication 4681? Depending on the type of reduction you received it may not be taxable. However, keep in mind that in your father’s case the IRS got the 1099-C form and expects it to be reported as income unless he can show why he’s not including it. So he would still need to file and include an explanation.

  • nowimfound

    I filed my tax return this year and it was accepted already, but then I received a late 1099-C for a student loan debt that was cancelled due to permanent disability. From what I can tell, I qualify for insolvency on form 982, having no real assets to my name. I have two questions: the first being, do I need to send an amended tax return with the 982 and 1099-C since it does not change my income and tax information with the insolvency exclusion? The second question is, since the worksheet says to include all debts prior to discharge, would I include the full student loan amount? Either way, I believe I still qualify.

    • http://www.Credit.com/ Gerri Detweiler

      We just wrote a story about your first question: Help! I Did My Taxes Wrong. As to your second question, yes, the insolvency calculation looks at your liabilities right before the debt was cancelled, so do include it.

  • http://www.Credit.com/ Gerri Detweiler

    Yes you can calculate insolvency for each individual debt and if you continue to qualify can continue to claim the exclusion.

  • http://www.Credit.com/ Gerri Detweiler

    Do you mean a 1099-C? If that’s the case, then it shouldn’t stop you from filing for bankruptcy. In fact, in some cases it is preferable to file first because debt discharged in bankruptcy is not subject to cancellation of indebtedness income taxes.

  • Tracy

    I see that retirement account and pensions are included in the asset portion of the Pub 4681. Do “retirement accounts” include social security income? I can’t find anything explaining if social security should be included, and if it is not included, why not?

    • http://www.Credit.com/ Gerri Detweiler

      Unearned income is not an asset to my knowledge. Assets are based on the value of things you own at the time you calculate insolvency.

  • http://www.Credit.com/ Gerri Detweiler

    Please consult a tax professional with experience in these forms. You may be able to avoid some or all of the tax due as a result of the 1099-c but with rental properties it can get complicated and it not usually a DIY process unless you can understand the process described in IRS publication 4681. (Even some tax professionals don’t!) You may also find Mr. Pilla’s book I reference in this article helpful, though I am not sure it goes into the level of detail you need: The Little-Known Form for Avoiding a Big Tax Bill

  • Paulettep

    Hi. Bank of America took me to court for a debt in 2007 judge dismissed the case when the attorney representing Bank of America did not show up in 2008. I thought this nightmare was over until recently the IRS sent me a notice that I owed $ from 2012 that I failed to include a 1099 in my returns. WHAT 1099? I never got one, I haven’t moved and I always I mean always am super careful with my mail and whatever deals with the IRS. But seriously how can I go about this is there any hope for me? I’m desperate please help.

    • http://www.Credit.com/ Gerri Detweiler

      Don’t panic yet. Contact the IRS and tell them you never got the 1099-c and ask them how you can get a copy. (You may need to file a request for a Wage and Income Transcript). Then read this article about disputing 1099-Cs. There could be multiple reasons why that 1099-c is wrong. The Little-Known Form for Avoiding a Big Tax Bill

      I am not saying it will be a simple or easy process but you may be able to avoid these taxes if you fight back. (Mr. Pilla’s book that I referenced in the article may be helpful.)

      I’d also suggest you file a complaint with the Taxpayer Advocate and the Consumer Financial Protection Bureau.

  • Barukh

    I am a military veteran who lives in a state-run soldiers home. I have no assets other than a few shelves of books and a closet full of clothes. I receive SSDI monthly due to total permanent disability. My student loan debt was cancelled just last week – over 100 k. Will I be considered insolvent by IRS and if so what amount of tax should I expect from filling out form 982? Thanks.

    • http://www.Credit.com/ Gerri Detweiler

      Fill out the insolvency worksheet in IRS Publication 4681 to figure out if you qualify for the full exclusion. It sounds like you should qualify since you have no assets to speak of. So sorry to hear what you’ve been through.

  • http://www.Credit.com/ Gerri Detweiler

    I don’t know, unfortunately. You’ll have to fill out the insolvency worksheet. As to which assets/debts you include (yours, spouses, both), I haven’t received clear information on that. You may need to consult a tax professional.

  • http://www.Credit.com/ Gerri Detweiler

    I am sorry your question was overlooked before this, Kim. If you received it for the wrong year then the best thing is to try to get the lender to issue a corrected form. That’s not always easy though! I wrote about it here: The Little-Known Form for Avoiding a Big Tax Bill

  • Graham

    Hello Gerri. You have been quite the help. Thank you. My question is: Should I include the insolvency worksheet with my 982 form? I have two 1099-C credit card forms for that year but in different months for date debt cancelled. Do I just add the two debt figures together and calculate the Insolvency based on the earlier date of assets/liabilities immediately before the cancellation? Thank you again.

    • http://www.Credit.com/ Gerri Detweiler

      It’s a bit more complicated than that. According to Dan Pilla’s book on this topic, you must fill out the insolvency worksheet for the first debt right before it was cancelled, then fill it out for the second debt right before it was cancelled. My understanding is there is no need to include the worksheet with the form, but be sure to keep it in case questions arise.

      Glad I have been able to help! Do keep in mind, though, I am not a tax professional and so you may want to check with one if you aren’t sure you are handling this correctly.

  • Mike Bishop

    Hi. On the insolvency worksheet do I list only my liabilities or do I include my wife’s as well? We have always filed a joint return. All of our assets are jointly owned. Also, are my wife’s student loans countable as liabilities? Thank you in advance for any help you can provide.

    • http://www.Credit.com/ Gerri Detweiler

      Unfortunately Mike this is a question I have not been able to get a clear answer to. Working on it.

  • http://www.Credit.com/ Gerri Detweiler

    Annie – You may or may not need help depending on your situation and how simple or complicated it is. Start by reviewing IRS Publication 4681 to see if you qualify for an exclusion such as the insolvency exclusion. If you can figure it out on your own then file Form 982. If you can’t then you should talk with a tax professional who understands these forms.

  • mike0722

    a friend of mine, lynne had a stroke 2 1/2 yrs ago. she applied and got from the us dept of education and got a total and permanent disability discharge of her student loan. today she recieved in the mail 1099-c from us dept of education. 1 copy, it says “for your recods only” box 4- federal student loan box 5 box xhecked box 6- f . the amount is over $69k. does she have to include this as income and pay taxes on this amount? she is below poverty level.

    • http://www.Credit.com/ Gerri Detweiler

      Income is not the issue here. It’s her liabilities and assets that matter. She needs to complete the insolvency worksheet in IRS Publication 4681 to see if she qualifies for the insolvency exclusion – hopefully for the full amount of the debt. If so she files Form 982 to tell the IRS why she is not including this in her income. Remember she calculates insolvency right before the debt was discharged and includes the discharged debt in her liabilities. You’ll find more about this exclusion in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • Lindy3953

    I just received form 1099-C today. If I try for insolvency, can my wife’s assets be included as my assets? We were married in 2009. She already owned the home that I moved into after we were married. My name is not on any of the papers for the property. And the same goes for the 2 vehicles. Nothing is in my name. I basically have very little in terms of assets and the amount I was forgiven exceeds $100,000. Do you think I qualify for insolvency?

  • http://www.Credit.com/ Gerri Detweiler

    We discussed this in another article:
    Form 982: The Way to Battle a 1099-C

  • John

    On form 982, is Veterans disability compensation considered income. Normally, this nontaxable income is not relevant.

    • http://www.Credit.com/ Gerri Detweiler

      I am confused by your question. You don’t put your income on Form 982 nor is it used on the insolvency worksheet. ??

  • Mary

    Hi, I just recieved a letter that my deceased husband had a credit card debt $22,000 that was charged off & I will be getting a 1099C for this. I’m 82 do not own my home only have social security. Am I responsible to pay taxes on this? My husband has been deceased 3 years.
    Thank you

    • http://www.Credit.com/ Gerri Detweiler

      Mary – My condolences for your loss, and so sorry to hear you are dealing with this. Have they told you what tax year this will be filed for? Is it for tax year 2013? Who is issuing it?

      • Mary

        Thank you…It states its for tax year 2013. The card was from Chase Bank. It was in both of our names. Majority of charges were from medical expenses. My husband had openheart surgery 3 hours away, then in 4 years had 4 strokes before finally passing.

        • http://www.Credit.com/ Gerri Detweiler

          Mary – please give me a little time to get back to you on this one.

          • Mary

            Thank you so much! May God richly bless you for all you do to help everyone. The IRS can be very intimidating. You have been a God send..Thank you!

  • http://www.credit.com/ Credit.com Credit Experts

    James – the government requires lenders and debt collectors to report discharge of indebtedness income if the debt cancelled is more than $600.

  • Gerri Detweiler

    I am not sure if you can Brian. I’d suggest you talk with a tax professional about that specific issue. Have you tried filling out the insolvency worksheet in IRS Publication 4681 to see if you qualify for the insolvency exclusion?

  • Susan

    I’m filing my 982 for insolvency. Do I need to send in a copy of the worksheet also?
    Thank you in advance!

    • Credit.com

      Susan – Looking at Form 982, there doesn’t appear to be any mention of including a copy of the worksheet however, we’re not tax advisers so please don’t take our word for it. We’d advise speaking with a tax professional or calling the IRS directly to speak with a representative to find out for sure. Here’s the information from the IRS website for form 982: “If you have a tax-related question, please go to Help With Tax Questions or call our toll-free number at 1-800-829-1040 (Individuals) or 1-800-829-4933 (Business).”

    • Gerri Detweiler

      Susan – the tax advisors I have spoken with said you don’t include the worksheet. But you should keep a copy for your records in case the IRS questions your return. I’d also keep the supporting documentation you used to fill it out (account statements, for example). And keep all of it for years – you can’t be too careful when it comes to tax matters!

  • Connie

    My husband was the sole mortgagee of our home purchased in 2005. We took out an equity line of credit from Bank of America in both our names in Feb. 2007 to rehab the house. After all the improvements were complete, my husband passed away a month later, in Nov. 2007. Despite my best efforts to keep up the home, it went into foreclosure and was sold at auction in 2011.

    This year, we both received (separately) a 1099-C from Bank of America. I have already filed my 2012 1040 with Form 982, Part I (e) for the discharge of qualified principal residence indebtedness. However, I live in Massachusetts, where the Act is not recognized and was told this $50K debt cancellation will be added to my AGI.

    I have virtually no liabilities. I have lost almost all of my assets since my husband’s death. Can I be exempt from the Bank of America debt due to insolvency? And if so, would I have to amend my 1040? (Does insolvency include 401(k)’s, IRA’s and pension plans?)

    I am filing for an extension today to try to get some solid answers. I really hope someone will be able to help me. Thank you very much.

    • Credit.com

      Connie – We’re so sorry to hear about your husband. It’s bad enough to lose a spouse and then your home too. We wish we could provide more help but to start, in order to find out whether or not you can claim the insolvency exclusion you need to first determine whether or not you qualify. You can do this by completing the insolvency worksheet here – http://www.irs.gov/publications/p4681/ You will see that it does include the value of retirement accounts when calculating insolvency.

      Unfortunately, the rest of your questions are a little more complicated and would be best answered by someone that understands the tax laws and the rules for the state of Massachusetts. Have you tried contacting a tax adviser or tax attorney? Another option would be to call the IRS directly, they should be address the basic questions on what can and cannot be included. For specific advice on which options would be best for your unique situation, a tax professional would be better able to advise you here. Please do keep us posted on how things turn out. By sharing your story, you may be able to help others who might find themselves in the same situation.

  • Benard Appiah

    Hope you can help answer my questions.,
    I received 1099-C mortgage indebtness relief and 2 separate 1099-C from credit card companies.
    For the mortgage which I purchased in 1998 was my priminary residence till 2006 and rented it from 2006 to mid 2010. I moved back to the house in mid 2010 and was foreclosed on in 2011. Do I qualify for Mortgage debt forgiveness Tax?
    Also, how do I file both the mortgage and credit card 1099-C’s. Do I use Form 982?

    Thanks for your time and hope to hear from you soon before April 15th.

    • Gerri Detweiler

      Benard – Sorry we couldn’t get back to you before the 15th. We were swamped with questions on this issue! Hopefully you were able to find the answer you were looking for. I’ll comment that generally the requirements for qualifying for the Mortgage Forgiveness Debt Relief Act are spelled out in IRS Publication 4681. As for your second question, the creditor files the 1099 and you must include that “income” in your gross income unless you qualify for an exclusion. If you believe you do, then you file Form 982 to show the IRS which exlcusion (s) you are claiming. I’ve explained that in more detail in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt.

  • Linda

    On form 982, they ask for your name and to the right of that they ask for your identifying number. Where do I get that number from?

    • Credit.com

      Linda – It sounds like the identifying number would be your social. We’re not tax advisers, however, so it may be in your best interest to consult with a tax professional for help on completing the form to be sure.

      • Susan

        The identifying number is your Social Security number. If you are filing jointly, then it would be the head of household’s Social Security number.

  • Jase

    I filed a chapter 13 in March of 2012. My rental home was surrendered, but not foreclosed on till this month, April 2013. I have claimed 47k in depreciation on it since I bought it in 2001.
    1-Do I have to add the 47k as income on 2013 taxes, or does the 13 protect me?
    2-If I must show the 47k as income, can I show it over 10 years, as that is roughly how long I claimed it?
    3-The 13 protects me against a def judgement and if a 1099 comes, that too, but not sure about the depriciation.
    Also, the original pp was 185K, but due to tenants destroying 3x, I owed 340k when I filed 13. It will probably sale for about 150k due to the recession.

    • Gerri Detweiler

      Jase – I am not a tax professional but based on my research my understanding is:

      1. Depends on timing – whether the identifiable event that triggered the 1099-C was the bankruptcy or the surrender that happened before. I am guessing that an argument could be made that it couldn’t be triggered until the foreclosure or bankruptcy.

      2. Not that I am are of. 1099-C income must be addressed the year for which the 1099-c was issued.

      3. Because this is a rental property you’ll definitely have to deal with Part II of Form 982 which gets complicated. I wrote more about that here: The Tax Form From Hell: The 1099-C Saga Continues

  • Tsong M.

    I rec’d a 1099C for $135,000 debt forgiveness for a equity line of credit on my primary home. Because it is an equity line of credit, it does to meet the guidelines of the Mortgage forgiveness program. I filled out the insolvency worksheet and I am insolvent. My question is, how do I fill this form out. I’ve been looking and reading through form 982 but am confused. I checked the box in Part 1, line 1B and put $135,000 on line 2. Do I check anything on line 3? And what about part 2? I put $135,000 on line 10A and what about section 3? Don’t know if I’m filling it out right. Do I just leave the rest blank? Pls help.

    • Credit.com

      Hi Tsong – Unfortunately, IRS Form 982 is not an easy form to get through. It’s extremely complex and can even confuse some tax professionals if they’re not familiar with it. To read more about this topic, Gerri goes into more depth in this article: 1The Tax Form From Hell: The 1099-C Saga Continues – http://blog.credit.com/2013/03/1099-c-tax-form-982/

      If you’re having trouble filling out the form and you’re not sure, it would be in your best interest to seek the advice of a tax professional who’s familiar with the form so that they can advise you and help you fill it out correctly (to be safe.)

  • http://www.metaforge.net Chip

    Another thing I’ve found which might help those who have had a rental property foreclosed or disposed of in a short sale… let’s do an example:

    You bought a rental house for $300k. You put $30k down. Over time you’ve paid down the mortgage $10k. So you still owe $300k – $30k – $10k = $260k.

    Now the tough times come, the bank forecloses, and sells it for $200k. They will send you a 1099C for $60k that they have forgiven.

    So, you have income of $60k from the 1099C. However, on form 4797, you have a loss of $300k – $200k = $100k that also goes directly to your 1040 as an ordinary loss.

    So in the end, you have a $60k – $100k = 40k loss, which is exactly right – that’s the $30k you put in as a downpayment + the $10k of principal that you had paid off.

    That case is pretty straightforward, and you shouldn’t even need to file a 982 form.

    It gets more complicated if you had taken depreciation over the years on the rental, or if you ever refinanced and took out extra money, because depreciation will lower the cost bases (you’ll have to subtract it from the $300k that you paid for the property in this example). Likewise, if you refinanced and took out extra money, then it is likely that the amount forgiven could be more than your cost (because the cost is the original $300k, not the $300k plus the extra money you took out), in which case then you either will have ordinary income from the debt forgiveness that is not offset by a loss. In that case, then the insolvency claim can help, because then at least you can offset the 1099C income against capital losses or some other tax attribute, which is less damaging that having the forgiven amount hit your bottom line as ordinary income.

    At least that’s my understanding. I am not a CPA or tax professional, but I’ve been reading up on this a lot the past few days and working my own forms – so do your own due dilligence.

  • http://www.metaforge.net Chip

    I received a 1099c for debt forgiven in a foreclosure. It was not my primary residence. I was insolvent with the insolvency amount being more than enough to cover the entire forgiven debt, so I will file that way. I understand that process in part 1 fine. My problem, however, is what to do in Part II? Do I have to do anything there? I don’t get what the whole “reduction of tax attributes” means. Any advice? Thanks!

    • Gerri Detweiler

      Chip – Part II can be very confusing. I wrote about that here: The Tax Form From Hell: The 1099-C Saga Continues

      • http://www.metaforge.net Chip

        Thanks. What I ended up doing was offsetting the cancelled debt with some capital losses that I had been carrying over from prior years. While I’m not happy that I had to do that, because I would have liked to continue writing off those losses, at least the nightmare is done. I think what people need to realize is this exception for insolvency doesn’t let you get out of the tax bill – it just lets you offset it with other losses you were going to claim, or makes you pay for it eventually when you sell assets (like your house) by reducing your cost basis. It’s a deferment, not a freebie – one way or another, you’re still going to pay for this cancelled debt “income”. 🙁

        • Gerri Detweiler

          Chip – Thanks for the update. These issues can get very complicated and I hate to say it but it almost makes bankruptcy look like a breeze compared to doing the right thing and paying as much as you can afford to settle the debt.


    I received a 1099C from my mortgage company on a modification that I did. I did a modification on my home in 2012 and the balance on the home was reduced to 90,000. I received a 1099c for the 40,000 that was written off. by the mortgage company. Do I qualify for the tax break under mortgage debt forgivenss. and when filling out the 982 form do I select the box b or box 2

    • http://www.metaforge.net Chip

      Deidrea, assuming this is your primary home, I would think you would select box e, discharge of qualified primary residence indebtedness, and then on line 10b reduce the cost basis of your home by that same $40k. It should be pretty straightforward. Just remember when you go to sell your home & figure the gain/loss, you need to reduce what you paid for the home by that same $40k when doing your calculations.

      Disclaimer: This is my understanding. I’m not a CPA or tax professional. Do your own due diligence.

    • Gerri Detweiler

      Deidrea –

      I’d suggest you review Publication 4681 to see if you qualify for the exclusion. If so, it should walk you through the form. If you don’t understand it, try calling the IRS first. Some of our readers have found them to be quite helpful.

  • R Oke

    My father passed away and left debt from personal credit cards. I have received 1099C for filing for his tax forms which I was planning on filing jointly with my mother. The debt was cancelled as this estate did not not have the funds to pay the personal debt. Do I need to file the 928 form along with documentation from the county seat that showed after making payments in order to accordance of State Law the balance of the estate was zero.

    • Gerri Detweiler

      My condolences for your loss. I am going to have to recommend you talk with the IRS or a tax professional. I haven’t researched how these impact final tax returns when someone has died.

    • Gerri Detweiler

      Our condolences to you and your mother. I asked Edward Zollars CPA, about this type of situation generally (not specifically to your situation) and he said: “If the debt was cancelled for a deceased person, the income is technically income of the person’s estate since the debt passed to the estate on the decedent’s death. It would be reported on a Form 1041 for the estate. The estate would be able to avail itself of the various exclusions (such as for an insolvent estate) but otherwise would have taxable income.”

      I also suggest you read the answer to a similar question from Barbara in California in the comment section of this story: What To Do If You Get A 1099-C For An Old Debt where another tax professional offers some advice.

  • Cecile

    My husband is on SS and disability. I work for a retail company and receive a $4600 yr pension from a previous job. Last year we got a loan modification, my husband a college loan forgiveness because he is permanently disabled. I received $28,000 from stocks and out of an IRA I had rolled over but HAD to use the money to pay expenses. This is the first year we are not getting a refund but have had our taxes done and are presently looking at paying at least $8,000 back because of the numerous 1099s. We are sinking. Besides my normal everyday bills I have $90,000 in student loans because our twins graduated 2 years ago.

    Also, I have a bad report with the credit bureau because 2 different agencies tried to collect on a medical debt. I paid the one however and sent proof to the other one and they still put my info on the credit bureau as unpaid. To add to it, my copayment for the ER had gone up to $100 for that particular year and the other agency was trying to get the old copayment of $50 which was the wrong amount. Everything was the same–same acct. number and hospital name.

    • Gerri Detweiler

      Cecile – Did you talk to your tax advisor to find out whether you qualify for the insolvency exclusion? I would suggest you do so if you haven’t already.

  • http://www.credit.com montana

    Please help…I recently received two 1099c from Chase for approximately 7000.00 for charged off credit card debt. I used my line of credit to help my then 89 year old mother stay in her home. I was sole heir. My mother passed in 2010. I kept up payments as long as I could believing I would be able to pay off the cards when her estate was settled. I myself am disabled. When she passed unknown to me she reversed mortgaged her home and it was foreclosed. Thus no money in estate. I’m married with a home. This ends up being my sole debt due to my ignorance. Thought with my heart not my head. What are my alternatives. It’s not my husbands debt. He is on socila security and a dmall pension. Should we file separately?
    Thank you.

    • http://www.metaforge.net Chip

      Sorry for the loss of your mother. My understanding would be that this is $7k of your credit card debt, right? In your name? In which case, unfortunately, I don’t think it’s going to matter what you spent it on – it’s your credit card debt.

      I think you should do the insolvency worksheet, and assuming your insolvent for the 7k, file form 982, put 7k on line 2, put 7k on line 10a (assuming you don’t have any other losses to counter the 7k first), and attach a note saying what asset you are reducing the cost basis of by 7k, such as your house, car, jewelry, etc.

      If you weren’t insolvent, then just list the 7k as income and take the hit. Taxes on an extra 7k of income are probably not going to be that bad on your bottom line.

      Disclaimer: This is my understanding. I’m not a CPA or tax professional. Do your own due diligence.

  • Jess

    I hope you can help. 4 years ago bank if America lost a 3k deposit of cash and checks I made. They had evidence a deposit was made, but lost the items. They credited back my account the deposit amount. I closed the account (I’m not going to do business with a bank that loses my money!). We assumed whoever was emptying the deposit saw there was over $1000 in cash and pocketed it and destroyed the checks. If they had received an empty envelope a $0 would have posted to my account. But they knew they got the deposit just didn’t know where it went.

    I received a letter shortly after stating the situation was resolved and since my account was already credited it ends the dispute. Suddenly years later I get a 1099 for the amount saying I was a borrower and it was a debt they forgave! That’s not true and I already claimed that money on my taxes since it was rightfully mine to begin with.

    I’ve taken the info and letter into Bank of America to get the information fixed and a corrected 1099 but they just sent a letter with the same information and not corrected. How do I file my taxes when there is this false 1099 that the bank is holding over my head?? I’m a single mom so every penny is a big deal to me and I’m feeling very cheated and lied to.

    • Gerri Detweiler

      Ugh!! I don’t have a simple solution for you. What you may need to do is include an explanation with your return. They may kick it back and you may have to jump through some hoops but it appears to definitely be an error on their part. I think you’ll find this article by a tax professional helpful. Although it doesn’t describe your situation exactly, it is applicable. In addition, you may want to read this article: Tax Help: How to Dispute A 1099-C Form

  • Amy Eras

    We had our home discharged through bankruptcy in 2009 for $360,000. However, we continued to make payments and received a loan modification in 2012. We are having our principal reduced by $30,000 for the next 3 years. We orignally bought the house in 1998 for $159,000 and had refied it. Dd we qualify for the Mortgage debt relief reduction? And if so how do I fill out the form? It is extremely confusing. Thanks for any help you can offer.

    • Gerri Detweiler

      Hi Amy – Since this is your principal residence, you may qualify. However, you must meet certain qualifications which the IRS desribes here: The Mortgage Forgiveness Debt Relief Act and Debt Cancellation. However, at the moment this exclusion has only been extended through 2013. If it is not extended in following years, some of your forgiven principal may not qualify. (You may qualify for the insolvency exclusion at that time, though.) For more information, I recommend you read our series on this topic which you will find summarized here: What is a 1099-C? Your Top 11 Questions Answered

  • Suz

    i just recieved form 1099-C for a Credit Card Company that we went to court with over a debt that was not ours but someone elses or FRAUD from Country Wide Mrtg. corp , release of our personal information and several people were harmed from leak in that Co. and several cards were opened under Mtg. Holders information and Social number! We faught them and they took us to court which they could not PROVE it was ours! HERE IS THE BIG DEAL// they dismissed it were the paper could then AGAIN , BE SOLD! So here we go NO CONSUMER RIGHTS!!! Now that same CREDIT CARD COMPANY SENDS US A 1099-C with no box code checked just and X by PERSONALLY LIABLE FOR DEBT…….
    your articles state we have to claim with IRS….we are as it is under 36 income so this 3300 or so they say is ours does not put us over a IRS /EIC POVERTY LINE…so do we bother WITH FORM 982? AND why if not ours IS THIS LEGAL? HELP //JUST CLAIM IT AS INCOME? THEN can they come after us for other amounts NOW SAYING IT IS OUR DEBT ETC….ETC….INTEREST THEY WON”T TALK TO US AT ALL OVER PHONE!!!!

    • Gerri Detweiler

      I will answer as best as I can, but please understand I am not a tax professional and I can’t offer specific advice.

      The very first thing I would do in this situation is to call the IRS and tell them you need help with an incorrect 1099-C. Tell them that this was a fraudulent debt – it was not yours – and that you even have court papers showing the case was dismissed. (I’d suggest you keep your explanation brief and to the point when you talk with them.) Ask them what you should do. Then come back here and let us know what they say.

      The fact that you include it in your income taxes does not affect whether they can try to collect the debt. So don’t worry about that issue.

      But based on what you are telling me I see no reason why you should have to include this in your income and reduce your refund. Don’t panic yet OK?

  • Pingback: Form 982: The Way to Battle a 1099-C - Debt and Credit Management.com()

  • angela

    Hi Gerri. I lost my job last year and my home was foreclosed (TX). This was my primary residence. I received my 1099-C. I did not file bankruptcy because the only debt I have are student loans and the house. Do I qualify for debt forgiveness under the Mortgage Forgiveness and Debt Relief Act of 2007?

    • Gerri Detweiler

      Angela – Publication 4681 should help you figure out whether you qualify for that exclusion. It depends on whether the home was your primary residence and whether the loan amount that was cancelled was originally used to purchase or improve the property (and not for other purposes such as cash out to consolidate debt). If you aren’t sure, I’d encourage you to talk with a tax professional since this likely involves quite a lot of forgiven debt.

      • George

        I deal with forms 1099C and 1099A a lot. For both personal residences and rental property, vacation homes and timeshares (not too much on time shares).
        Pub 4681 is almost totally useless (tens of thousands of words that are confusing); particularly the examples. It gives three examples for people who combined their first and second mortgages – useless. I have not come across anyone in real life who brought me a combined 1st and second. What about examples dealing with first and second mortgages separately? I wonder if the good people at the IRS are aware of real world situations!
        Examples of what to do with combinations of debt cancelled, whether or not the people Refi’d to just lower interest rates or took out equity and used it for the home or for personal reasons, basis (and adjusted basis), fair market value and short sale gross proceeds would be a big help to making Pub 4681 worth reading.

        • Gerri Detweiler

          George – I don’t disagree with you that there are a lot of situations it doesn’t cover. Quite honestly I don’t think anyone ever anticipated the sheer volume and types of problems this issue has raised. But you’re right – they need to expand that publication!

  • selahsue


    I have a quick question about Part II of the 982 Form. I will be checking #1a for personal (not business) bankruptcy, but do you know if I have to fill out anything on Part II? Most of the questions have to do with business. I have read & re-read IRS publ. 4681 & Form 982 plus directions & can’t seem to figure out if I fill out Part II, #5 or #10a or none of Part II.


    • Lulu

      I have the same question

  • jolainajo

    Hi Gerri. I got a 1099 c for a forgiven student loan and am on disability. I do not have anything except the clothes on my back. I own nothing. Do I put the clothes as assets when trying to fill out form for insolvent?

    • Gerri Detweiler

      Line 23 on the insolvency worksheet asks for the value of your clothes. But keep in mind the current value is whatever someone would pay for them. So unless you have some very valuable items in your closet, they probably won’t be worth much.

  • L. Allen

    I received a 1099-C for a lien stripped 2nd mortgage in a chapter 13 case that was completed and discharged. Bank of America, contacted me after the discharge and tried to get me to agree to modify my loan and if I did not then they would send me a 1099-C. I told them, their mortgage was found to be unsecured and was treated as such with payments sent to them as part of the chapter 13 plan and the mortgage was lien stripped. They said no it wasn’t and I sent a certified letter to them restating what I told the caller who was illegally harassing me. Now, a few months later, I have received a 1099-C from them stating I had a forgiven debt for 150,000. I should not have to go through paying someone to do my taxes so the 982 form is filled out right when I should not have received a 1099-C at all. Do I have any recourse. Bank of America is conducting illegal harassement and i consider the 1099-C they sent me part of this harassement. No matter who I contact there, or what I say, they do not care. They should be sued. Filling out a Form 982 doesn’t cover my situation since the lien strip considers the debt to be unsecured, so I would not know how to report it. Please help. I can’t file my taxes until I know what to do and can’t afford an accountant.

    • Gerri Detweiler

      L. Allen – If the loan balance was discharged in your bankruptcy, then this should be pretty straightforward. You simply check Box 1 a and then fill in the amount that was discharged. Not everyone needs an accountant for that. I wrote more about that in this article: Just Received a 1099-C? Don’t Freak Out! (It is not required for the creditor to send the 1099-C but my understanding is that it is optional.) As far as suing the lender, we’ve had quite a few readers express a similar sentiment!

      • L. Allen

        Thank you for responding to my question, but they also placed a “G” in the identifiable event code which means it was the decision of the bank to discontinue collection instead of A which they are required to put. In fact box 6 is optional for them to fill out unless it’s for bankruptcy which is box “A”. Also, doesn’t part two on the form 982 have to be filled out? That is what is confusing me.

        I called BOA after posting the last comment and I was told, it would be researched and that if they found I shouldn’t have received a 1099-C, they would send another that now says 0 box 2! If that happened, would I still need to file a form 982? By the way, the woman on the phone said that I still do in fact owe the money to them that they just aren’t allowed to come after me for it do to the bankruptcy filing.

        L. A.

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