Form 982 Insolvency Not Reducing Schedule 1 Line 8c

Hi everyone,

I’m working on an Individual 1040 return where the taxpayer received a 1099-C for $10,193.50. The taxpayer was insolvent immediately before discharge.

Here’s what I’ve entered:

• 1099-C entered under Income → Cancellation of Debt

• Insolvency exclusion checked off on Form 982

• Total amount of discharged indebtedness excluded from gross income entered as $8,059

Form 982 is generating properly. However, Schedule 1 Line 8c is still including the full $10,193.50 as taxable income. There is no negative adjustment flowing through, and the 1040 is taxing the full amount.

I also tried entering a negative amount in Other Income (as suggested in a previous community post), but that generates a critical diagnostic error because NJ-1040 does not allow negative income entries.

Has anyone experienced this? Is there an additional step required to properly link the 1099-C to the Form 982 exclusion so the insolvency exclusion flows to Schedule 1 correctly?

Thank you in advance for any insight.