The IRS Form 982 is the reduction of Tax Attributes Due to the Discharge of Indebtedness. This form is used to determine under the circumstances described in section 108 the amount of discharged indebtedness that can be excluded from a person’s gross income.

What is excluded from gross income on Form 982?

Include on line 2 the amount of discharged qualified principal residence indebtedness that is excluded from gross income. Any amount in excess of the excluded amount may result in taxable income. See Pub. 4681 for more information.

Do you need to fill out Form 982 if you are insolvent?

Most people associate cancellation of debt with an insolvency scenario, but it is not always the case; if indeed insolvent, you simply need to provide some information to the IRS on the Form 982. But if your situation does not fall under the following categories then it will likely result in a higher tax bill.

Can you exclude discharged indebtedness on Form 982?

However, under certain circumstances described in section 108, you can exclude the amount of discharged indebtedness from your gross income. You must file Form 982 to report the exclusion and the reduction of certain tax attributes either dollar for dollar or 33 1 / 3 cents per dollar (as explained later).

Can you use Form 982 to cancel debt?

Unnecessary given that the potential income and tax bill resulting from this cancelled debt will be eliminated using Form 982. Taxpayers with cancelled debt scenarios should be wary of self-preparing their tax returns.

How to reduce basis of depreciable property on Form 982?

Use Part II to report your reduction of tax attributes. The reduction must be made in the following order unless you check the box on line 1d for qualified real property business indebtedness or make the election on line 5 to reduce basis of depreciable property first.

However, under certain circumstances described in section 108, you can exclude the amount of discharged indebtedness from your gross income. You must file Form 982 to report the exclusion and the reduction of certain tax attributes either dollar for dollar or 331/3 . cents per dollar (as explained later).

When to file Form 982 for debt forgiveness?

If one of these exceptions applies, the taxpayer must file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Determine if the forgiveness of your debt is related to a qualifying event.


How to calculate insolvency on a form 982?

For details and a worksheet to help calculate insolvency, see Pub. 4681. Example. You were released from your obligation to pay your credit card debt in the amount of $5,000. The FMV of your total assets immediately before the discharge was $7,000 and your liabilities were $10,000.

When was the last update to form 982?

We last updated the Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) in December 2018, so this is the latest version of Form 982, fully updated for tax year 2018. You can download or print current or past-year PDFs of Form 982 directly from TaxFormFinder.

IRS Form 982 is Your Friend if You Got a 1099-C. This is a form that is reported to both the Internal Revenue Service (IRS) and the consumer. The instructions on the 1099-C form say: “You received this form because a Federal Government agency or an applicable financial entity (a lender) has discharged (canceled or forgiven) a debt you owed,…

Do you need an insolvency worksheet for the IRS?

Although it doesn’t specifically say to attach the insolvency worksheet, it’s not a bad idea to do so, as the IRS is known to request documentation in insolvency cases.

How to estimate asset values for insolvency and..?

IRS Publication 4681 (link opens PDF) includes an insolvency worksheet on page 8, which lists the assets you need to value. These include: Investments in collectibles (coins, stamps, etc.)

What do you need to know about IRS Form 4598?

There are exceptions and exclusions, such as bankruptcy and insolvency.” If you received a 1099-C many years after a debt became uncollectible, you need to know about little known IRS Form 4598. But that’s where may run of the rails with their message all income is taxable if it is forgiven.

How to calculate the amount of insolvency on Form 982?

On Line 54 “Amount of Insolvency” carried from Line 7 of Insolvency Worksheet. If your total liabilities exceeded the total FMV of your assets at the time of the cancellation, you may exclude the canceled debt to that extent. Complete the “Statement of Insolvency” to compute and document the amount of insolvency.

Can a cancelled debt be reported on Form 982?

Below are five scenarios where an exclusion from taxable income could be applicable by utilizing a properly reported Form 982: When initially explaining this topic, it almost feels silly to mention that the IRS will look to tax you on cancelled debt.