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An individual is insolvent if they are unable to pay their debts. This is, essentially, a question of fact, rather than law. Sections 267 and 268 of the Insolvency Act 1986 set out circumstances in which an individual is deemed unable to pay their debts if one of their creditors presents a bankruptcy petition.
How do I know if I am insolvent? By filing IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, or. Attaching a detailed letter to your tax return explaining the calculation of your total debts and assets.
Form 982 is used to determine, under certain circumstances described in section 108, the amount of discharged indebtedness that can be excluded from gross income.
Once you've determined that you're insolvent, you can claim insolvency by filling out IRS Forms 1099-C and 982. The creditor who canceled your debt should send you (and the IRS) Form 1099-C when a debt is forgiven.
Fill out the form which will give you the Amount of insolvency at the end on Line 7. In "Form Mode", scroll in the left column to Canceled Debt (Copy 1) and Click. It will open the form. On Line 54 "Amount of Insolvency" carried from Line 7 of Insolvency Worksheet.

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Your details will normally remain on the register until three months after you've been discharged from bankruptcy. Your bankruptcy will also appear on your credit file for six years.
In TurboTax desktop, here are the steps: Sign back into your account and select Pick up where you left off. Go to the search bar in the top right corner, type in "982" and Enter. Select "Jump to 982" Follow prompts. This allows you to enter your Form 1099-C information.
Once you've submitted your insolvency claim forms, the IRS will review your forms and calculations, then deny, question or accept your claim. If they deny your claim, you won't be able to exclude your canceled debt from taxes.
These registers can be searched by the public and exist so that anyone including employers, landlords, lenders and credit reference agencies can verify details of insolvency.
Once you are in your return on the left-hand side of the TurboTax Online screen click on TAX TOOLS and then TOOLS. In the Tools window, choose TOPIC SEARCH. Enter Form 982 without quotes. In the list select Form 982 and click GO.

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