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

Other Income, Form 1040 Line 21 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?

Yes, since the entire $5,000 in canceled debt is considered income and reported on Form 1040, line 21.
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.