Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Other Income Workout

Cancellation of Debt—Nonbusiness Credit Card Debt

Skills Warm Up: Cancellation of Debt—Nonbusiness Credit Card Debt

Question 1 of 3

Greg was released from his obligation to pay $5,000 of personal credit card debt. The credit card company sent Form 1099-C showing cancelled debt of $5,000. Greg is fairly certain he has more debt than he has assets.

Can the VITA/TCE site provide tax return preparation assistance to Greg?

A Yes, since the entire $5,000 in canceled debt is reported on the tax return as other income.
B No, because it appears Greg is insolvent, which might mean some of the canceled credit card debt would be nontaxable and beyond the scope of the VITA/TCE programs.


Publication 4731
Publication 4012 Insolvency Determination Worksheet

Publication 4731

Publication 4012 Insolvency Determination Worksheet