Insolvency Calculator for IRS Form 982 Available, Updated for 2016!

In January 30, 2017

If you settled a debt in 2016 (or prior years) and had more than $600 forgiven by a creditor, you will be receiving a 1099-C for “Cancellation of Debt Income.” That “income” has to be treated as ordinary income like your paycheck, unless you have an exemption for “insolvency.” In other words, if your net worth was negative at the time the debt was forgiven, then you can offset the 1099-C income up to the amount by which you were negative, or insolvent.

Calculating insolvency can be a tricky process, and the IRS form used to claim the exemption is the notorious Form 982 — affectionately called “the tax form from Hell” due to its complexity. Consumers often waste countless hours trying to decipher the meaning of phrases like, “interest in a pension,” “reduction of tax attributes,” or figuring out how to handle a series of 1099-Cs rather than a single 1099-C.

ZipDebt’s IRS Form 982 Insolvency Calculator solves all these problems and provides instructions in plain English on how to calculate and claim insolvency. In the User Manual, you’ll find answers to common questions about handling multiple 1099-Cs. The calculator is an Excel based spreadsheet, and the User Manual walks you through everything you need to understand. The cost is only $29, and this calculator will save you many wasted hours and frustration. The product has been updated for the 2016 tax year.


  1. I have a Whole Life Insurance policy that I cannot cash out unless my spouse or I are terminally ill. Do I need to include this on line 31 on the insolvency worksheet (“Cash Value of Life Insurance Policy”)? Also, line 6 asks for accrued mortgage interest, do we include the mortgage interest paid in 2015? I called the IRS with these questions and they no longer offer assistance for form 1099c.

    Thank you.

    • Amanda,

      An insurance policy has to be included to the extent that there is cash surrender value, which is a feature of most Whole Life policies. If there is no surrender value option, then I don’t see why you would need to include it — it’s not really an asset in that situation. Accrued mortgage interest is not what you paid in 2015 (or 2016 for that matter), but rather unpaid interest that you owed at that point. So if you had been behind a few mortgage payments, that accrued interest would count as a liability.

  2. My husband has a very small pension and we both have social security benefits. Does your calculator help me with the ” interest in retirement accounts”?

    • Lorie, the User Manual discusses the definitions and touches on the fact that inclusion of SS benefits is still somewhat murky in terms of tax code. However, you still have to supply the net present value figure for a future series of payments from a pension, as part of the overall calculation of insolvency. I generally recommend that people obtain these figures from a professional accountant, etc.

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