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how to determine insolvency

IRS Releases New Insolvency Pub

The IRS has updated Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). I know, you’re thinking “So what?”

Well, the “So what?” is the updated worksheet for determining insolvency, found on page 6 of the Pub (and at the bottom of this post). The worksheet is a handy resource for taxpayers who have been trying to determine whether and to what extent their canceled debts are excluded from gross income.

You see, canceled debt (like credit card debt after it is forgiven) is reportable – and taxable – as income to the IRS unless you meet an exception. Insolvency is one of those exceptions. The definition of insolvency is debt that exceeds your assets. But many taxpayers find that difficult to quantify. So the IRS has a handy worksheet to help you figure it out. To view the insolvency worksheet as a pdf, click here.

By Kelly on April 29, 2009 · Posted in individual

We are trying to fill out the insolvency worksheet for our taxes. Do we use just the interest from retirement and 401k or the total amount. Please advise ASAP

We are trying to fill out the insolvency worksheet for our taxes. Do we use just the interest from retirement and 401k or the total amount. Please advise ASAP

Hi – My

husband and I just recently married in 2009. We purchase a home and we haven’t owned a home for three years. We thought we qualified for the new home owners credit of $8,000.00…. It turns out, my husbands ex-wife purchased a home in the last three years, and if he was still legally married to her (although separated) WE DON’T GET THE CREDIT.

I am trying to fill out the Insolvency worksheet and in the assets section; Residences etc… Do they want the FMV of the property in default? Also, i wouldn’t know what the FMV was as I never saw a figure until I received the 1099-A…….which I was approved on a Deed in Lieu……can you help me with these questions?

Trying to fill out the Insolvency Worksheet. What do I put in for “interest in a pension plan”. (I have NYS teachers pension of 50k/yr and SS of 18k/yr.) Thanks

Posted on April 9th, 2010

Jack, as I understand it, you would include the full value of a pension plan on the worksheet, but not your SS benefits. I believe this is true even if state law would otherwise protect your pension from creditors.

You do include SS as income on your tax form (though it may or may not be taxable, depending on your situation). It’s generally not considered an asset.

Source: www.taxgirl.com

Category: Credit

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