How to Exclude IRS Cancellation of Debt Income

Recently had a vehicle repossesion? Do you know anyone close to you who has foreclosed on a home? Had your credit card debt been written off? This article discusses the consequences for cancellation of debt income.

If youv'e received a tax form 10-99C Cancelattion of Debt in your mailbox. The last thing you should do is disreguard this form. The lender is obligated to send this form to you and the IRS. It reports the amount of cancelled debt. Its your duty to elaborate to the IRS as go ehy youf debt cancellation is not taxsble. Otherwise, it can and will be treated as taxable income. To ask the IRS to exclude the amount as income it is required that you complete tge form 982 Reduction of Tax Attributes due to Discharge of Indebtedness and attach form to your return.

The rules which govern Cancellation of Debt Income are complex and not simple. It is advised that you read up on the subject or seek help from tax advisor professional. If you'd like to dig deeper look over IRS publication 4681- Cancelled Debts, Forclosures, Repossesions, and Abandonments. The publication delves into the general rule required for cancelled debt to be income & exceptions to the rule. Within the publication are easy to read examples to better help in completing form 982.

Remember, if you don't complete and attatch form 982 to your return, the IRS will treat your cancellation of debt income as taxable, and you will owe taxes in that amount. Again, you must file form 982 with your return to claim the exclusion. Receiving an exclusion is not automatic.

If you need assistance call the IRS at 1800-829-1040. Visit one of the Taxpayer Assistance Center located throughout the nation. There is also a toll- free case intake line 1877-725-8271.

Thank you!