Criteria for VITA/TCE Program

You may assist taxpayers who meet the following requirements for excluding canceled principal residence debt from income:

• The home was never used in a business or as rental property
• The debt was not canceled because the taxpayer filed bankruptcy (Form 1099-C, box 6 is not checked)
• The taxpayer is not in bankruptcy when he/she comes to the site for assistance
• Form 1099-C, box 3 does not include an amount for interest
• The debt must be a mortgage used only to buy, build, or substantially improve the taxpayer's primary residence, i.e., this money was not used to pay off credit cards, medical/dental expenses, vacations, etc.
• The mortgage was secured by the taxpayer's primary residence
• The mortgage was not more than $2 million ($1 million if Married Filing Separately)

If the taxpayers do not meet these requirements, they may still qualify for the exclusion. However, the issues may be complex and beyond the scope of VITA/TCE. Such taxpayers should be referred to a professional tax preparer.

Use Publication 4731, Screening Sheet for Form 1099-C, Cancellation of Debt, to help you identify those taxpayers who can be assisted at a VITA/TCE site. A copy of the screening sheet can be found in the Volunteer Resource Guide (Tab D).

Click here to view Publication 4731, Screening Sheet for Form 1099-C, Cancellation of Debt, which provides step-by-step guidance for the volunteer tax-return preparer to determine if the cancellation of debt is within scope. Part I addresses home mortgage loans.