According to IRS instructions taxpayer must report amount in box 2 of form 1099-C if taxpayer is not insolvent.Is there any worksheet inside Proseries that will help me to figure out if my client is insolvent?How can I help him prove it to the IRS?Thank you,
The only input related to the 1099-C that we have in the program is Line 15a on the Other Income Statement (Form 1040, line 21). There are various references to the taxpayer being ?insolvent? in the Help Menu, but I was unable to find any input that would allow you to mark the taxpayer as ?insolvent? or ?not insolvent.?
I did some research on this topic for a client last tax season. Attach a balance sheet to form 982 (last year this form could not be e-filed - haven't checked this yr).
The definition of insolvent means that liabilities exceed assets. I do not believe that you have to prove the taxpayer is insolvent when he files the return, just be ready in case he gets questioned.
On the Cancelled Debt Worksheet, look at Section VIII, Exclusion for Insolvency. There is a QuickZoom button to the sheet to fill in and submit showing insolvency of your client.
