I have a question about insolvency. Do I have to file a tax return if I am insolvent?
Thank you for your insolvency question. If you are required to file a tax return based on the amount of income you made, and you had canceled debt that you would like to exclude due to insolvency then you will need to file a tax return.
To show that you are excluding canceled debt from income under the insolvency exclusion, you would attach Form 982 to your federal income tax return and check the box on line 1b. On line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation.