Hey all,

First posting. I recently went through a divorce and am trying to get back on some firmer financial footing. Left in a bad place and considered insolvent, to avoid bankruptcy, I cashed out my 401k and did debt settlement with my major credit cards.

Now, a year later, although somewhat on better footing, I've ended up owing the Federal Government nearly $9000 in taxes due to "capital gains" on the canceled debt of the credit cards in addition to the 401K being considered taxable income.

In addition to all that, due to the income of the 401k which all went towards debt reduction, and the canceled debt, I've now jumped a tax bracket and being taxed for making $115k last year instead of my normal $85k.....and I remain insolvent because now the financial headway I made, is being replaced by owing the Feds so much.

I realize these choices were a mistake, but hindsight is always 20/20, and if I hadn't done it, I and my two kids that I have custody of, probably wouldn't have made it this far.

A free tax information phone number I called suggested filing a Form 982 for the canceled debt. Anyone know anything regarding this? And any other ideas pop into anyone's heads as to how I might be able to offset some of this damage, legally, without tripping the audit alarms?

Thanks,

-- Swimming in mud

Form 982 seems to be an option in your case.

If you still need help, PM me with the details.