Form 982 is being questioned by IRS

[Pacun]

Client was forgiven about 30K by credit card companies. The IRS wants to have worksheets showing that client was insolvent on the year her debts were forgiven. Is there anything in ATX or any worksheet that I can send to the IRS? I think I will also include a letter explaining the situation. My clients makes about 15K each year and has only a car as asset.

 

Thanks in advance.

[Abby Normal]

Page 9 of pub 4681 has an insolvency worksheet.

[Jack from Ohio]

Be certain that the client knows that ALL assets must be shown on the worksheet.  The numbers must be what was in place on the day BEFORE the account was written off.  I had one rejected for $982 in debt write off.  $132 in tax.  In addition, the client must be able to document all his debts shown on the day before the account was written off.  I have heard of IRS asking for documentation.

Including a letter will not help.  Just send the accurately filled out insolvency worksheet and wait for the IRS to respond.

Edited June 6, 2015 by Jack from Ohio

[Pacun]

Thank you.