1099-C Cancellation of Debt For Credit Cards - How To Get Out Of It As Taxable Income

Many people that get a cancellation of debt Form 1099-C from a credit card company can get out of it. Basically, if you are insolvent (meaning you got more debt than equity overall in everything), you can get out of it and it won't count as income.

The guide here applies to when you are not in bankruptcy.

The catch is many tax preparers do not do this on their own, they just add it as income unless you tell them. The easy way to do this is just to have a tax preparer do your taxes, let them know you are insolvent and that you need a Form 982 filed with your tax return.

You can also do it yourself. Just check out the form and Line 1B plus do the insolvency worksheet. Include Form 982 with your tax return. It's really that easy.

Download Form 982: https://www.irs.gov/pub/irs-pdf/f982.pdf

Worksheet to determine insolvency on page 6: https://www.irs.gov/pub/irs-pdf/p4681.pdf

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