How to File for IRS Debt Relief
Debt relief offered by the United States Internal Revenue Service (IRS) allows loan cancellation for Americans unable to pay back a lender. Filing for IRS debt relief can provide individuals and families a way to overcome their personal financial difficulties.
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Instructions
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1
Determine whether you or your family qualify, and whether this debt relief is taxable. Certain types of filed debt relief, such as bankruptcies and repossession, do not tax the money provided by the IRS for debt relief purposes. Read the Internal Revenue Service's Publication 4681 to find out if you qualify (see Resources).
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2
Contact the private lender or financial institution (e.g. a bank), that services your loan. Contact information will be prominently displayed on all loan forms and correspondence from the institution. Request that they send you Form 1099-C. This form is used by the IRS to process debt cancellation and, like the regular IRS 1099 for regular income, is sent automatically each tax season for debt relief amounting to $600 or more.
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3
Download Form 982 from the IRS's website (see Resources). This form is used for the reduction of debt tax attributes when debt relief is administered. In most circumstances, only the first two lines of Form 982 need to be completed. If you are unsure, consult a professional tax expert or accountant to determine which sections of the form apply to your debt relief file. Make copies of your 982 form and keep one copy for your own records.
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File your taxes as you regularly do. In addition, also file the original IRS Form 982 (from Step 34 and a photocopy of your completed Form 1099-C (provided by your lender in Step 2). The IRS will process the paperwork and initiate any relevant correspondence upon reviewing your file.
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Tips & Warnings
Prepare the debt relief forms ahead of time to ensure that you are able to file them with your regular taxes.
Failure to file your taxes on time will result in a penalty from the IRS.
