Check the box on line 1b if debt relief occurred during your insolvency. You were insolvent to the extent that your liabilities exceeded the market value (FMV) of your assets immediately before debt relief. Details and a worksheet on how to calculate bankruptcy can be found in Pub. 4681. In the event of title 11 or insolvency, the reduction of the tax base is limited to the sum of the base of your assets immediately after debt relief against the sum of your liabilities immediately after debt relief. However, this limit does not apply to a reduction of the base indicated in line 5 in accordance with section 108(b)(5). `qualified farm debt` means the amount of debt directly linked to trade or the operation of agriculture; In addition, 50% or more of your total gross receipts for the 3 taxation years preceding the taxation year in which the debt relief takes place must come from the trade or agricultural operation. For more information, see sections 108(g) and 1017(b)(4). Some people may only need to fill out a few lines on Form 982. For example, if you fill out this form because of debt relief for a personal loan (such as a car loan or credit card debt) or a loan to buy your principal residence, follow the chart later to see which lines you need to fill out. See also Pub.
4681, Cancelled Debts, Foreclosures, Reversals and Discharges, for more information. Under section 108(a)(1) of the IRC, gross income does not include an amount that could be included in gross income as a result of the discharge of the taxpayer`s debts if one of the following circumstances applies, such as: bankruptcy or insolvency of the taxpayer. The purpose of this statement is to provide information and instructions to individuals who have received a 1099-C debt relief form. If you have reached a compromise or settlement with a creditor who agrees to release you from any other obligation to repay a debt, such as credit card debt, your liability may not end there. Your creditor can “cancel” all or part of the debt you owe and report it to the IRS with a 1099-C tax loss. Because you never paid off the debt in full, the IRS may treat a debt cancellation as income you received. For example, a $4,500 credit card bill where a compromise has been reached between you and the lender to pay off the $2,500 debt is theoretically a personal net gain of $2,000. The IRS may ask you to report this cancelled debt as income you received for the tax year, even if you didn`t actually receive the money. If you have any comments on the accuracy of these time estimates or suggestions for simplifying this form, we`d love to hear from you.
See the instructions for the tax return with which this form is filed. You are not required to provide the requested information on a form subject to the Red Tape Reduction Act unless the form contains a valid OMB tracking number. Books or records relating to a form or its instructions must be kept for as long as their contents may become essential to the administration of an internal revenue law. In general, tax returns and tax return information are confidential, as required by section 6103. The exclusion only applies to debts settled before 2026 or settled under an agreement entered into and documented in writing before January 1, 2026. The maximum amount you can treat as eligible principal resident debt is $750,000 ($375,000 if you are married separately) after 2020 and before 2026. You cannot exclude from gross income the forgiveness of eligible principal residence debt if the debt relief was provided for services provided to the lender or because of any other factor not directly related to a loss in value of your home or financial situation. A debt incurred or assumed after 1992 is not a qualified debt of the real estate business, unless it is (a) debt incurred to refinance eligible debt in the real estate business or assumed before 1993 (but only to the extent that the amount of such debt does not exceed the amount of debt to be refinanced) or (b) qualified acquisition debt.
The exclusion of insolvency does not apply to debt relief in a Title 11 case. It also does not apply to debt relief for the eligible principal residence (see line 1e below), unless you choose to apply the bankruptcy exclusion instead of the debt exclusion of the eligible principal residence. Form 982 is a 3-part form with many checkboxes. It is easy to fill out compared to other IRS forms. PDFelement makes the filling process much easier. To fill out the form correctly, follow the step-by-step instructions below. If the discharge is in a case subsequent to Division 11, you cannot tick box 1e. You must check box 1a and complete the form described below under A non-commercial debt. If you are insolvent (and not in a Title 11 case), you can choose to comply with the bankruptcy rules by ticking box 1b instead of box 1e and completing the form described below in A Non-Corporate Liabilities. The time required to complete and submit this form depends on individual circumstances.
The estimated costs for physical and commercial taxpayers who file this form are approved under OMB control numbers 1545-0074 and 1545-0123 and are included in the estimates provided in the instructions for their tax return. The estimated effort for all other taxpayers submitting this form is presented as follows: accounting, 5 hours, 58 minutes; Learning the law or form, 2 hours, 34 minutes; Creation and submission of the form to the IRS, 2 hours, 48 min. Step 3: First, complete Part I – General Information. However, make sure you read the instructions properly before proceeding. From 1a to 1e are check boxes, select the corresponding check boxes for the excluded amount for the following reasons, which are highlighted before the check boxes. Check the box on line 1e and indicate on line 2 the amount of debt relief of the eligible principal residence that is excluded from gross income. Read to understand before checking the boxes. On line 2, enter the total amount of debt-free debt excluded from gross income in the area provided. Finally, in Part I, answer yes or no by ticking the boxes of the question asked in point 3. Make sure you understand the question before answering. You can use Wondershare PDFelement – PDF Editor to fill out this form successfully.
This program can not only be easily filled out your form, but can also be used to edit, edit texts, digital signatures, and other PDF-related tasks. It`s quick and easy. Step 1: Obtain the form from the Department of Finance, Internal Revenue Service of the federal government. Best of all, you can download it online and fill it out electronically. Line 2 shows the amount of debt relief from the eligible principal residence, which is excluded from gross income. Any amount in excess of the excluded amount may give rise to taxable income. See Pub. 4681 for more information. If you sold your home, you may also need to account for a gain from its sale. For more information, see Pub. 523, Selling Your Home.
“Eligible Acquisition Debt” means (a) debt incurred or assumed to acquire, construct, reconstruct or physically improve real property secured by such debt; and (b) liabilities arising from the refinancing of eligible acquisition debt, to the extent that the amount of such debt does not exceed the amount of debt to be refinanced. The user`s main entry is to open Form 982 in the PDF element and use the program to fill it out. It is actually a powerful software that can perform tasks like ticking boxes, selecting with radio buttons, etc. and which are supported by both Windows and Mac operating systems. The IRS recognizes five situations where a cancelled debt does not need to be reported as income. You may elect under section 1017(b)(3)(E) to treat all real property held primarily for sale to customers in the ordinary course of business as if it were depreciable property. This election does not apply to the relief of eligible real estate transactions. To make the choice, check the “Yes” box. You are considered insolvent if your total liabilities (debts) exceed your total assets. By completing the bankruptcy worksheet at the end of this document, you can determine if you were insolvent when the debt was repaid.
For example, if your total liability is $8,000 and your total assets are $6,000 at that time, you will be insolvent in the amount of $2,000.
