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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I received a cancellation of debt in 2011 for my student loans,

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I received a cancellation of debt in 2011 for my student loans, due to total and permanent disability. I was also receiving SSDI at that time from Social Security. Do I need to pay taxes on the 1099c cancellation of debt, even if I was insolvent at the time?

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Megan C :

If you are insolvent, meaning your assets are less than your liabilities you can exclude the cancellation of debt from your income.

Megan C :

You will need to fill out form 982 claiming the insolvency exemption

Customer:

I am doing okay, except that my underwriter wants verification of whether I need to pay taxes on my cancellation of debt from 2011. Can you help me with this?

Megan C :

Yes, if your assets are less than your liabilities then you will not pay tax on the cancellation of debt

Megan C :

What type of verification do they need?

Customer:

Can I pay you to help me with this? My underwriter (I'm trying to buy a house) wants verification from a CPA that I do not have to pay the taxes on my cancellation of debt. I need your help.

Megan C :

I'm sorry, we can only provide you with general information. I cannot practice as an accountant, prepare returns, etc on the site.

Customer:

My assets in 2011 were nil, I had much more debt than anything. SSDI was (and is) my only form of income (which, I know, I do not have to file taxes on).

Megan C :

I understand.

Customer:

Can you give me some advise on what to do?

Megan C :

Your underwriter should realize that if you have no assets then you are insolvent

Megan C :

If you need a letter from a CPA you will have to go to a local professional.

Customer:

Smart :) but he wants verification that I do not have to pay taxes on the 2011 cancellation of debt. Where do I start looking for this verification?

Megan C :

If you need a letter from a CPA you would need to find a CPA in your area and take your information to them

Customer:

Okay, thanks for your help. Is there an online source to get professional tax help?

Megan C :

I do not know of any online CPA firms. If you call around, you might find one that will do this all by phone or email

Customer:

Thank you, XXXXX XXXXX do that.

Megan C :

You're welcome. I'm sorry I cannot provide that assistance. Is there anything else I can help you with today?

Customer:

No, I'm on a mission. Thanks for your time.

Megan C :

You're welcome. If you would, please take a moment to rate my response as "excellent" so that I may receive credit for assisting you today

Megan C and other Finance Specialists are ready to help you
Thanks, Elizabeth for your positive rating. Please come back and visit me any time you need a question answered. It's a pleasure working with you today.

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