Cancellation of Debt Issues in Scope for VITA/TCE
Cancellation of indebtedness can involve auto loans, credit card debt, medical care, professional services, installment purchases of furniture or other personal property, mortgages, and home equity loans. A debt includes any indebtedness for which a taxpayer is liable or which attaches to the taxpayer's property. Generally, if a debt for which a taxpayer is personally liable is canceled or forgiven, other than as a gift or bequest, the taxpayer must include the canceled amount in income.
Only two types of cancellation of debt issues are in scope for VITA/TCE:
For all other cancellation of debt issues, refer the taxpayer to professional tax preparers.