Get the Insolvency Worksheet

Hi I'm Kate the tax lady and I prepared this video to talk about form 1099 Z now you might receive one of these forms if during the year you had some debt that was cancelled because your home that you were living in was foreclosed on or you fell chapter 11 bankruptcy and that was finalized here in the year or you had some credit card debt that was forgiven you made some sort of agreement and had some of that debt forgiven and so they might send you a form and they're also sending a copy of this to the IRS and that means that you need to do something you need to address it on your tax return and I see people getting letters from the IRS and the IRS is just going to assume that the entire amount is taxable to you so you do need to do something the first thing you need to do is go to the IRS website and look for form 982 this form needs to be attached to your tax return so on the form 982 we're only going to be filling in information at the very top section here numbers one and number two if you had chapter 11 bankruptcy and that's why you received the 1099 C then what you need to do is check box 1a if the 1099 see debt was because of the home that you were living in then you would need to check box 1e then what you need to do is under number 2 on Form 982 is write the amount that you see in box 2 of the 1099 see that you received for example here you take that number and you put it on line to a form 982 right here if you receive the 1099 C because of one of those two reasons either bankruptcy chapter 11 or foreclosure on your primary residence that's all you need to do just attach the form 982 to your tax return and you're done however if the reason for your 1099 C is because of other debt like credit card debt then you have more work to do you have to again go to the IRS website and look for publication four six eight one and then go to page nine and there you will find the insolvency worksheet that you need to complete you'll need to use this worksheet in order to calculate the extent of your indebtedness at the time that your debt was cancelled so the first thing you need to do is look at your 1099 C in box one for the date so in other words if the debt was cancelled on December 31st 2014 then you need to complete the insolvency worksheet with that date in mind so what was the amount that you had in your bank account on December 31st 2014 how much did you owe credit cards on that date and so on now make sure on this form that you also include the debt that was cancelled at the bottom of this worksheet is where you determine the extent of your insolvency and you do this by subtracting the total assets from the total deaths so debts - assets now if this number is 0 or less you are not insolvent and you actually do have to report the entire amount that was put in box 2 of your 1099 C as other income on your 1040 and you do that on line 21 - the space provided on line 21 to the left of it you need to write in 1099 - see this way the IRS knows what...