California Notice of Hearing on Claim of Exemption - same as 982.5(8)

A taxpayer reaches insolvency when their liabilities exceed their total assets. Generally, you must include forgiven debt as income on your tax return. If you are insolvent and you have debt forgiven by a lender, you can exclude that debt from income on your tax return through the insolvency exclusion.

To claim insolvency, you'll need to fill out IRS Forms 1099-C and 982. These forms should be filed with your federal income tax return for any year in which a discharge of indebtedness was excluded from your income. Form 1099-C reports cancellation of debt (greater than $600) to the IRS.

Step 1: Obtain the form at the Department of treasury, Internal Revenue Service of the Federal Government. Step 3: First fill Part I- General Information. Step 4: Fill out Part II- Reduction of Task Attributes.

The easiest way to find/file form 982 in TurboTax Online is to go to: Sign into TurboTax Online and click "Take me to my return." (if not already open.) Once you are in your return on the left-hand side of the TurboTax Online screen click on TAX TOOLS and then TOOLS.

'' Tax attributes include the basis of certain assets and the losses and credits listed next.By reducing these tax attributes, tax on the canceled debt is in part postponed instead of being entirely forgiven. This prevents an excessive tax benefit from the debt cancellation.

Form 982 - Reduction of Tax Attributes When an individual has a debt that has been discharged, the amount that was discharged is generally treated as taxable income to the individual. Under certain circumstances, this amount can be excluded from income, and therefore not taxed.

Enter Form 1099-C. To enter your 1099-C: Create the Insolvency Worksheet. Check entries on the Canceled Debt Worksheet. Check Form 982.