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I received 1099C for 44,893 student loans

I received 1099C for 44,893.71...

I received 1099C for 44,893.71 for federal student loans that were cancelled because of permanent diability. How do I fill out the 982 form? I also received a letter from Nelnet that says I am on a three year post discharge monitoring, my discharge date was 9/13/2012

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Answered in 53 minutes by:
3/1/2013
Jesse Handel
Jesse Handel, Tax Preparer
Category: Tax
Satisfied Customers: 309
Experience: 10 years tax preparation. IRS Registered Tax Preparer.
Verified
Hello and thank you for coming to our website. We appreciate the opportunity to help you with your questions. Your situation isn't covered by Form 982. IRS Publication 4681 "Canceled Debts, Foreclosures, Repossessions, and Abandonments" covers your exact situation under "Exceptions" on page 4 of the 2012 version. You can read the publication at this web address Pub 4681. This publications explains that your forgiven debt isn't taxable income, but doesn't include any information for reporting the situation on your tax return. I would recommend that you don't include the canceled debt on your federal tax return, but that you include a written statement explaining the cancellation of debt was due to disability and a nontaxable event per Publication 4681 exception for student loans. Put your name and social security number on the upper right hand corner of the page and send it with your federal tax return. If you are filing by mail, just type the statement and add it to the return. If you are using tax software, they should have a provision for adding a statement to the IRS with your electronically filed tax return. If you go to a tax preparation office, their software will have to ability to include a statement with the e-filed federal return.

Since this situation is an identified situation in an IRS publication, the IRS should be able to recognize the situation as a nontaxable cancellation of debt without help, but adding a statement to that effect will call it to their attention and make sure that they don't miss the exception.

I hope this answers your question. Please let me know if you need further information or if I can provide any additional help with this question. There is a possibility that this cancellation of debt may slow down your refund (if you are going to receive one). Unfortunately, any time that there any kind of unusual situation, there is the possibility that your return will be looked at more closely than usual and that additional scrutiny can slow down the processing of any refund.
Jesse Handel
Jesse Handel, Tax Preparer
Category: Tax
Satisfied Customers: 309
Experience: 10 years tax preparation. IRS Registered Tax Preparer.
Verified
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Customer reply replied 4 years ago
Thanks for your help. The representative from Nelnet said I should fill out firm 982 that why I ask how to file this form. I will do as you suggested and add a statement to my return. Should I just explain that I received the 1099C and why I'm excluding it from my income?
Yes. If there is a code on the 1099-C, that may explain the situation to the IRS directly from their copy of the 1099-C. On the back of the 1099-C form, there is a list of codes and what they mean. In your statement, you also want to cite the student loan exclusion from Publication 4681. You probably want to include a copy of the statement in your Louisiana state taxes and state that it is a copy of the statement sent to the IRS, if you have to file in Louisiana.
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Jesse Handel
Jesse Handel
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Experience: 10 years tax preparation. IRS Registered Tax Preparer.

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