Before you start
US federal individual tax preparation records. Checked September 15, 2026: Publication 4681 is the 2025 edition and Form 982 instructions are revised December 2021. Verify developments and the actual tax year; no automatic exclusion or state-tax determination.
1. Fix the snapshot before gathering totals
Use the cancellation agreement and creditor confirmation to establish the relevant event. Several cancellations can require separate snapshots; do not carry one total across dates without checking intervening changes. Obtain statements close to the event and the transactions needed to bridge any gap. Label the document date separately from the value date. A year-end account statement may not show the value immediately before an earlier cancellation.
2. Keep the evidence behind each asset value
Record fair market value, ownership share, valuation method and uncertainties for each item. Retain dated market comparisons or appraisals where appropriate, account statements and explanations of condition. IRS Publication 4681 includes assets protected from creditors, such as retirement and pension interests, as well as collateral and ordinary possessions. Do not omit an interest because it is hard to withdraw or assume hypothetical withdrawal taxes should be subtracted.
3. Match liabilities without netting twice
Keep debts and asset values in separate lists. Record the amount owed at the same moment, whether you are personally liable and whether the debt is secured. Do not record only home equity and also deduct the entire mortgage. Nonrecourse debts have specific liability rules in Publication 4681; flag them for review instead of including every balance automatically. Identify joint ownership, contingent claims and disputed amounts as questions for the preparer.
4. Preserve basis records for the next step
Fair market value and adjusted tax basis are different records. Keep acquisition and improvement information, prior returns and relevant tax-attribute records for the professional. Form 982 can involve reduction of tax attributes as well as exclusion from income. A complete valuation folder alone does not establish the exclusion or finish the return. Use the existing Form 982 preparation resource to organize the broader review, including ordering rules and unresolved valuation questions.
Fictional example: check the documents
A fictional bank record shows $1,200 on June 30. The only changes before a July 15 cancellation are a $500 deposit and $900 payment, giving $800: $1,200 + $500 − $900 = $800. At that same snapshot, documented assets include a $4,800 car, $6,000 retirement interest and $400 possessions, totaling $12,000 with the cash.
Listed liabilities at the same moment are $15,000, a $3,000 excess over the asset total. This assumes those are all assets and applicable liabilities and their values are confirmed. The $3,000 is a snapshot comparison for review, not a tax bill or an automatic Form 982 exclusion; cancellation amount, other rules and tax attributes still matter.
Before you finish
- Event evidence and exact valuation moment
- Statements plus intervening transactions
- Ownership and fair-market-value support
- Retirement, pension and protected-asset records
- Same-date debt and separate basis records
My preparation notes
All notes are optional. Use labels such as Debt A and Document B. Keep identifying records, account numbers and tax IDs outside this page.
Entries are optional and stay in this page's memory. This worksheet does not send or save them. Use generic account labels and document labels. Do not enter account numbers, Social Security numbers, PINs, access codes, passwords, names or addresses, and do not upload documents. Downloading or printing creates a copy you control.
Have the preparer review completeness and valuation evidence before using the totals on a tax form.
Put up to four documents or actions in order
Record a short fact, such as requested a quote, sent a question, or received written terms. Dates and document labels are optional. Use generic labels; keep actual documents and identifying details outside this tool.
This is a factual log. Dated events sort from oldest to newest. Events on the same date keep their entry order because times are unknown. Undated events appear separately, in entry order. A document reference is your own label, not proof that a record was verified.
Enter actual dates as YYYY-MM-DD. If a date is unknown, leave it blank; do not invent one. Dates are calendar dates, with no time zone or time-of-day comparison. This record does not calculate a legal deadline or schedule reminders.
Questions you may have
Can I leave out a protected retirement account?
No automatic omission is justified. The IRS insolvency discussion includes retirement interests and exempt assets; obtain the relevant value and ask about difficult valuations.
Is the original purchase price the asset value?
Not necessarily. Insolvency uses fair market value at the relevant time. Keep purchase and basis records separately because later tax-attribute work may need them.