Hey, what's up everybody? I wanted to make this quick video about 1099 cancellation of debt forms that some of you may be receiving. This is a really important topic right now because a lot of people may have had cancellation of debt, either from student loans or credit card companies. There seems to be some confusion about this issue. Some people think that if a company writes off the debt, then they shouldn't come after them for it. However, when a company writes off a debt or charges it off, it's just a legal technicality that all companies have to do for loans. They have investors to report to and they need to document what happened with these loans. Usually, there is a six-month period before they officially write off the debt when they redo their reporting. During this time, they can sell the debt to a debt collection company, who can still try to collect the debt. The only time they can't collect it is if they actually write it off as a cancellation of debt. They would then report this to the federal government using a form 1099-C, stating that they have forgiven the debt. However, here's the interesting part. If you happen to receive one of these 1099-C forms in the mail, the IRS will consider that as income for you. Let's say, for example, you had a $10,000 credit card balance and the credit card company decided to cancel that debt. They would send you the 1099-C form, as well as sending it to the federal government. When you file your taxes, the government will wait and see if you include a copy of the form or if you state that you had a cancellation of debt and add that amount to your income. If you fail to do...
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Cancellation of debt 982 Form: What You Should Know
Guide to Debt Cancellation and Your Taxes — Turbo T ax. Sep 21, 2024 — When using an exception, you may need to file Form 982 to reduce your tax basis, or cost, in property that you own, including any Note: Your canceled debt is now treated as a Note: If you are a joint filer, you are encouraged to apply Form 982 to all debts you owe, and file only one Form 982 for your tax return due date. Note: If you are a single filer, you are asked to apply Form 982 to all debts you have and for which you have a reasonable basis. If you need to file a Form 982 for multiple debts, go to IRS.gov and fill out each Form 982 in turn to calculate and report your debt cancellation. The following are the ways the IRS allows taxpayers to request that the canceled debt be included in their income : The canceled debt is an obligation arising under an agreement to which you are the obliged or a related entity (such as a related person). The canceled debt is an obligation arising under a trust or a power of attorney of an individual, such as a lawyer, doctor, trustee, or estate executor. This type of obligation generally cannot be canceled unless the canceled debt is a “qualified charitable contribution.” A qualified charitable contribution to a qualified educational institution is a contribution made to the institution, rather than a distribution from the estate of the donor, which is not subject to estate or gift tax. The canceled debt is a qualified charitable contribution made by a person who dies prior to the year of inclusion, and whose estate is not includible in gross income. A qualified charitable contribution may be used to make qualified charitable contributions of income not otherwise includible. Therefore, you can only use the canceled debt to make qualified charitable contributions if the canceled debt is part of the qualified charitable contribution. For more information, see Rev. Pro. 2016-22, 2017-7 I.R.B. 863, available at IRS.gov/irb/2016-16_IRB/ar14.html or in the instructions for Form 982, Reduction of Tax Attributes— Tax Act. Under an exception, the canceled debt can include the canceled indebtedness in the gross income of the deceased individual only if the estate does not have the 10,000 limitation. The canceled debt is an obligation that arises upon the death of an individual.
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Video instructions and help with filling out and completing Cancellation of debt form 982
