Home > Personal Finance > 1099-A In the Mail? How to Avoid Taxes on Cancelled Debt

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If you have lost your home to foreclosure, or sold it for less than you owed in a “short sale,” or if you had a car repossessed or gave it back to the lender because you couldn’t make the payments, you may have received a 1099-A and/or 1099-C form from the lender. In a previous post, I discussed ways to avoid paying taxes on income reported on Form 1099-C, Cancellation of Indebtedness.

In this post, I will focus specifically on 1099-A forms. These are typically generated when you lose a home or and investment property, or have an automobile repossessed. Because the dollar amounts involved in these transactions can be large – involving tens or even hundreds of thousands of dollars – this is one area where you truly can’t afford to get it wrong.

“I do five consults a day on this,” says William J. Purdy, an attorney with a Master’s degree in taxation who practices in the Law Office of Simmons & Purdy. “The American middle class is in here talking about losing their homes. There’s no end to the people who are coming in.”

When you lose a home to foreclosure, you may receive one or both of these forms:

  • 1099-A Acquisition or Abandonment of Secured Property and/or
  • 1099-C Cancellation of Indebtedness Income

Some transactions – such as a foreclosure – can result in both forms being sent to the taxpayer. Both of these forms essentially provide similar information but in a different format, and which one you’ll get largely depends on the lender.

“There is no consistency whatsoever in what they are doing,” warns Purdy. “Some people get an A and some get a C.” He adds ruefully, “The same people who issue these are the same people who ruined the economy and engaged in reckless behavior. You can’t guarantee that they are done correctly.”

Reading Form 1099-A

This form is used when you give up paying for a loan secured by property. This form is typically associated with foreclosures, short sales, or repossessions (including automobile repossessions). Purdy walked me through a 1099-A form, and I’ll do my best to do the same here.

Box #2:

Balance of Principal Outstanding. This box should list only the principal balance remaining on the loan, and should not include interest or other fees.

Box #4:

The Fair Market Value (FMV) of the property. In the case of a foreclosure, this will be the sale price if the home was sold. If it was not sold, it will list the Fair Market Value at the time the lender took back the home.

The key: 1099-A In the Mail? (con’t.) »

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  • Ben

    Starting to file taxes and noticed we have a $19,500 increase income on miscellaneous income from 1099 A or C. The only thing I can think this would be are Student Loans my son had after he was declared disabled last May. But this is coming up on my wife’s and my tax turbo report, I have no record of either of these forms. Any ideas, increased my IRS payoff to $6000 when usually we always overpay in. HELP !!!!!!

  • Becky p

    I received the form this year,. and Im so confused,. Box 2 has an amount of 311K,. Box 4 has 0.00,. date of acquired is 9/8/2011,. I had filed bankruptcy and was not sure if that will qualify as an exclusion

  • Mayra

    A home my husband bought before we married is in the process of foreclosure. What are these forms for? Does that mean you have to pay that amount? I want to prepare for whats coming. Also we own a home we bought together. It’s current. Will this affect my family home we purchased together.?

    • Jeanine Skowronski

      Hi, Mayra,

      You may want to consult a consumer attorney to learn what your best legal recourse is here.

      Thank you,


  • sweet billie

    I received a 1099-c on the 2nd mortgage of my home five years ago. I just received a notice saying they are going to foreclose my house for missed payments. When we received this (5 years ago) our bankruptcy lawyer told us we would never have to repay this. Can the 20% mortgage foreclose a house over the 80% loan? We did file a 982 on our tax return

    • http://www.Credit.com/ Gerri Detweiler

      I am sorry but I don’t follow. Was your 2nd discharged in your bankruptcy? If so then this notice may be erroneous. Mistakes happen all the time in the mortgage lending industry so don’t assume they are correct. I’d recommend you contact your bankruptcy attorney asap. (And the 1099-C is a tax form–it doesn’t mean the debt is uncollectible.)

      • sweet billie

        Yes the 2nd was discharged in bankruptcy.

        • http://www.Credit.com/ Gerri Detweiler

          Then talk to your bankruptcy attorney asap.

  • Rocky

    We had a property that was value at 10,000 and we owed 47,000 we tried to get a deed in lieu but were denied by the mortgage company and they
    sold the mortgage to another company. We had a change of heart and made arrangement to keep the property. The loan is in a charge off state no interest
    and no penalty. However we receive a 1099-A from the IRS, which was submitted by our previous lender, and we still own the property. Since we still own the property we do not need a 1099-A. what form will we need to show the IRS that we own the property and don’t need a 1099-A.

    • http://www.Credit.com/ Gerri Detweiler

      Whether you own the property or not is not the issue. The issue is whether there was any cancelled or forgiven debt. (And it’s not clear from your question whether there was.) However, it’s my understanding you don’t necessarily have to do anything until you get a 1099-C. Check with a tax professional who understands this form. More in this article: What is a 1099-A?

  • Roland

    Received both 1099-A and 1099-C; C indicating that I am responsible for the debt. However a month later I received a new 1099-A *”corrected) with zeros in all the boxes. What does this mean. Does the newer, corrected 10099-A (0) supersede the previous 1099-A and C? Confusing as can be!

    • http://www.Credit.com/ Gerri Detweiler

      I have no idea! Never heard of that scenario. Though it is my understanding the 1099-A is just an informational form and it’s the 1099-C that triggers possible tax implications. Did the 1099-C look correct? If so I’d suggest proceeding. And call the creditor to see what the deal is with that second 1099-A! (Actually, call them anyway – very odd.)

  • Brian

    My house was foreclosed on April 2014. It’s been sold twice since then. We were hoping to get a 1099C for 2014 tax season. Someone in the foreclosure department with the mortgage company (actually a debt collection company) told us we should be getting one. They stated that they were required to send them out by March 15. Well, we still have not received one and no one with the company really knows anything. We keep getting the run around. I’m not surprised by any means. We want this to be resolved now because of the tax exemption being extended to cover 2014. We are worried the (bank) will drag their feet and send out a 1099C sometime down the road with a different year on it in a non-exempt year. What should we do?

    • http://www.Credit.com/ Gerri Detweiler

      You may be able to claim the exclusion anyway and then if they send you a 1099-C later you could let the IRS you know it was already taken care of. The challenging part, though, could be figuring out what amount to report. I’d suggest you talk with a tax professional who really knows these forms for advice if you want to proceed.

  • http://www.Credit.com/ Gerri Detweiler

    Regina – We don’t know. It depends on whether you qualify for an exception or exclusion. Also a 1099-A doesn’t necessarily trigger a taxable event the way a 1099-C does. You’ll want to read this –
    What is a 1099-C? Your Top 11 Questions Answered and this – What is a 1099-A?

  • http://www.Credit.com/ Gerri Detweiler

    I am sorry but I don’t understand your question. What do you mean you got blindsided? Did you get a 1099-C? Doesn’t it list the Fair Market Value in Box 7? Have you tried using the insolvency worksheet in IRS Publication 4681 to see if you qualify?

  • http://www.Credit.com/ Gerri Detweiler

    Yes, first you should request your wage and income transcript from the IRS to make sure they didn’t file a 1099-C already and you didn’t get a copy. Request it for every year from 2010 – 2013. You will find instructions on the IRS website.

    If they have not filed one, it doesn’t mean they won’t in the future. So you should be proactive. Read IRS publication 4681 to see if you qualify for one of the main exclusions such as the Mortgage Forgiveness Debt Relief Act or insolvency exclusion. (The latter is a little tricky since it depends on when they say the identifiable event took place.) If you do, you may want to go ahead and report it now. If the bank sends the form in the future you can always explain to the IRS that you already reported it.

    If you’re confused you may want to talk with a tax professional who is familiar with these forms.

  • http://www.Credit.com/ Gerri Detweiler

    If you got a 1099-A and not a 1099-C then it’s my understanding you don’t have to do anything yet. Here’s an article on that topic:

    What is a 1099-A?

    But a 1099-C could be forthcoming. If you included the mortgage loan in your bankruptcy then it sounds like you can claim the bankruptcy exclusion on Form 982. Part II will be trickier though, but they may not file a 1099-C.

  • http://www.Credit.com/ Gerri Detweiler

    First, this is not a 1099-C so they haven’t reported cancelled debt yet. That could be because they may still try to collect the deficiency – the difference between what you owed and what they got when they sold the house – from you. So my first recommendation is that you talk with a consumer bankruptcy attorney to find out what your options are if they try to pursue you for that debt. (Please do this – if you are scared now imagine what would happen if they sued you. Please talk with an attorney if you haven’t done so already.)

    If they do report cancelled debt on a 1099-C then you may be able to claim the Mortgage Forgiveness Debt Relief Act exclusion. If you qualify you won’t have to pay taxes on that amount. See this article: Just Received a 1099-C? Don’t Freak Out!

  • http://www.Credit.com/ Gerri Detweiler

    A 1099-A is different than a 1099-C – this additional article may help: What is a 1099-A?

  • http://www.Credit.com/ Gerri Detweiler

    They are just trying to follow IRS guidelines. But it doesn’t mean you owe taxes on it. If you get a 1099-C and the debt was discharged in bankruptcy then you can file Form 982 to claim the bankruptcy exclusion. But they may not file a 1099-C.

  • http://www.zipdebt.com/ Charles Phelan

    D, the 1099-A has nothing directly to do with any “exemptions.” Form 982 is used to declare an exemption under either the Mortgage Forgiveness Debt Relief Act (recently extended retroactively to include the 2014 tax year) or the insolvency exemption. If you had received a 1099-C, then you’d look at one or other of these exemptions from taxable cancelation of debt income. The 1099-A is notification of short sale or abandonment of property, not cancelation of mortgage debt. See other articles on this site about understanding the 1099-A, but the basic idea is that you must calculate the capital gain or loss from the sale/abandonment and report that to the IRS.

    • http://www.Credit.com/ Gerri Detweiler

      D – You may still get a 1099-C reporting the cancelled debt. Even if you don’t, the IRS says you are supposed to report it yourself. You may want to take care of that this year so that you don’t have to worry about it in future years. (I’ve seen lenders send 1099-Cs years after the fact.) Instructions are in IRS Publication 4681. If you find that confusing (and you may!) another resource you may find helpful is the ZipDebt Insolvency Calculator Charles developed.

  • http://www.Credit.com/ Gerri Detweiler

    A 1099-A is not a 1099-C – this article by a tax professional explains: What is a 1099-A?

    And if you discharged the home loan debt in bankruptcy then you should not have to include it in your taxable income. If they send you a 1099-C (they may not since they don’t have to file one), it sounds like you will be able to claim the bankruptcy exclusion using Form 982.

  • http://www.Credit.com/ Gerri Detweiler

    Linda – A 1099-A does not necessarily mean you owe taxes. (At least not yet.) This article by a tax professional can help you understand it. What is a 1099-A?

  • http://www.Credit.com/ Gerri Detweiler

    Do you live in a state like California where the debt is a nonrecourse debt? If it is then you may not be personally liable for the debt. If you don’t understand the form and IRS publication 4681 doesn’t help you, you will need to either talk with a tax professional or you may want to check out Dan Pilla’s book which explains how to handle these forms.

  • http://www.Credit.com/ Gerri Detweiler

    You don’t file form 1099-A – you file Form 982. The instructions for that form are found in IRS Publication 4681. But I have to warn you it gets complicated for a second home and/or rental property. You may still qualify for the insolvency exclusion but even if you do you will have to figure out Reduction of Tax Attributes. We wrote about that here: The Tax Form From Hell: The 1099-C Saga Continues.

    If you can’t navigate it yourself you may need to talk with a tax professional.

  • http://www.Credit.com/ Gerri Detweiler

    If you discharged the mortgage debt in the bankruptcy then it’s my understanding that you can claim the bankruptcy exclusion. I am not a tax professional though so I suggest you read IRS Publication 4681. You may not even get a 1099-c since the debt was discharged in bankruptcy. But if you do, it’s good you’ll be prepared.

  • http://www.Credit.com/ Gerri Detweiler

    My understanding is that if you settle the debt in 2015 that’s when the identifiable event takes place and that’s when the 1099-C will be issued. And currently Congress has only extended the Mortgage Forgiveness Debt Relief Act through 2014. Before you accept their offer I’d suggest you do two things: confirm with an attorney that the statute of limitations has not expired for the deficiency and consult with a tax professional with regard to your scenario. It’s a lot of money, obviously, and I’d hate to see you get stuck with a tax bill you can’t afford.

  • http://www.Credit.com/ Gerri Detweiler

    So sorry to hear what you’ve been through after losing your job. Talk with a bankruptcy attorney – the first consultation should be free: You can find one at
    NACBA. Hopefully they can lay out your options so you can make the best decision in a bad situation.

  • na

    Cant you all see a common theme here… They created this problem, you
    became the beneficiary of the problem and are now being further extorted
    into the pockets of tax professionals, lawyers, etc

  • Marie

    I RECEIVED A1099A and box 5 says Borrorwer responsible for repayment of the debt, but I wasn’t sent anything else, so what am I responsible for? Box 2 & 4 were marked.

    HOw do I file my taxes on this. This is pretty pathetic since I am single woman, loss of income and I paid less than they say whats owed

    • http://www.Credit.com/ Gerri Detweiler

      My understanding is that you don’t have to do anything until you get a 1099-c, but I am not a tax professional. This is my source for that information: What is a 1099-A?

      However that doesn’t mean a 1099-c won’t be coming so I would really encourage you to talk with a tax professional sooner rather than later so you can understand your options.

  • http://www.Credit.com/ Gerri Detweiler

    It is my understanding the 1099-A doesn’t require you file anything with the IRS. Here is my source for that: http://returnthedeed.com/1099-a-vs-1099-c-2/

    It doesn’t sound like there is cancelled debt so you may not receive a 1099-C.

  • jeannette

    My husband owned and lived in his condo from 2006-2010. He rented it 2011 & 2012, The rent received fell short $300 + condo fee $300 and Taxes $100/ month. it cost us $10000 for the 2 yrs. He short saled it 4/2013/. the original loan $168000. The mortgage company forgave him $77000. Are we going to have to pay taxes on this.

    • http://www.Credit.com/ Gerri Detweiler

      You will unless you qualify for an exclusion – and it sounds like the only option may be the insolvency exclusion since this wasn’t your principal residence when the short sale occurred. Have they sent you a 1099-C? I’d recommend you talk with a tax professional who really understands these forms. These forms get very complicated for rental properties and you are talking about a substantial sum here.

  • http://www.Credit.com/ Gerri Detweiler

    The problem is that there may not have been an identifiable event that would trigger a 1099-c yet. If they can still try to collect the deficiency on the debt from you then it’s possible that the 1099-c won’t be issued until up to three years later.

    I would really urge you to get professional tax advice here. It’s not a small amount of money and you may be in a precarious position due to the failure of Congress to extend the Mortgage Debt Forgiveness Tax Relief Act. (You may still qualify for the insolvency exclusion, but again, it’s possible that the identifiable event hasn’t yet taken place.)

  • http://www.Credit.com/ Gerri Detweiler

    Did you receive a 1099-c yet? My understanding is that you have to file based on the information in the 1099-c not the 1099-a. As far as your second question, the IRS addresses joint debts in Publication 4681 but I find it confusing. I’d suggest you start there and if necessary, get a tax professional’s help. (It’s a good idea anyway in the case of real estate where the amounts are often large, to get professional assistance.)

  • http://www.Credit.com/ Gerri Detweiler

    Jean – I doubt it but I don’t know for sure. My suggestion is you talk with a tax professional.

  • http://www.Credit.com/ Gerri Detweiler

    I am not sure what you are trying to challenge. First of all make sure you received a 1099-c and not a 1099-a. My understanding is you don’t have to report this on your taxes until you get a 1099-c, but please check with a tax professional to be certain. If you did get a 1099-c then whast are you trying to challenge? The estimated value? If so then you can look at sources like Zillow, or get a real estate agent to pull “comps” on the property at the time of foreclosure.

    If you are just trying to challenge the fact that this forgiven debt is considered taxable income, then you will have a tough fight ahead of you since that fact has been well established. Instead, you will want to see if you qualify for an exclusion or exception as described in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • http://www.Credit.com/ Gerri Detweiler

    I have to defer to your CPA on this. I am not a tax professional.

  • http://www.Credit.com/ Gerri Detweiler

    Marie – If the debt was discharged in bankruptcy then you can indicate that on Form 982. However you may also have to reduce tax attributes in Part II of the form and that may require the assistance of a tax professional familiar with this form. (I am not certain in the case of bankruptcy. Check Publication 4681 for more guidance.)

  • michelle

    i got a 1099A does tis mean i wont get a return?

    • http://www.Credit.com/ Gerri Detweiler

      It could affect your refund. Most 1099A forms are sent out in conjunction with a mortgage foreclosure. Is that your situation?

  • Tracy

    I have a question. Today I received a 1099-A on a mortgage I filed chapter 7 on in 2003. I don’t owe a balance because I filed chapter 7 and the debt wasn’t reaffirmed. How can they tell the IRS that I am liable for 54,000 when this debt was discharged over 10 years ago? I am furious. Should I contact the IRS, mortgage co, or a lawyer?

    • http://www.Credit.com/ Gerri Detweiler

      Tracy – I am not a tax professional but my understanding is that the easiest way for you to deal with this is to file Form 982 with your return showing that you included the debt in bankruptcy. However, I agree with you that there is probably no good reason for them to send this out ten years after the fact. So my suggestion is that you file a complaint with both the Consumer Financial Protection Bureau and the Taxpayer Advocate. Be sure to name the company that sent it out after ten years, and be sure to note that the debt was discharged a decade ago.

  • http://www.Credit.com/ Gerri Detweiler

    Do you qualify for the Mortgage Forgiveness Debt Relief Act exclusion?

  • hope

    I received a 1099-A, box 2 shows 29,158.01 and box 4 shows 0.00 and box 5 is not checked for liability, can a bank come after us? Home was foreclosed and sold the same day.

    • http://www.Credit.com/ Gerri Detweiler

      Whether or not the bank can try to collect the deficiency is a legal matter, not a tax issue. You’ll need to talk with an attorney in your area. It’s a large enough amount that I would suggest you meet with a bankruptcy attorney who can tell you whether they can try to come after you for the deficiency. (The fact that is sold the day it was foreclosed upon doesn’t matter here.)

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  • http://none Kelly

    We received a 1099-C for 2nd Mortgage in 2011 from Well Fargo Bank and reported on our income tax 2011 it was included as income, of which we have to now pay taxes on. The Short Sale will close this year April 20, 2013. How can we revise and not pay taxes on the debt forgiveness of $48,000? For the reason 2nd Mortgage monies was used to add Carport. Taxes have already been charged by IRS for 2011 filing of 1040. The 2nd was used only to improve property of new carport. What recourse do we have to get out of pay taxes on this amount?

    • Gerri Detweiler

      Kelly – You can read IRS Publication 4681 and determine whether you qualify for the Mortgage Forgiveness Debt Relief Act. If you believe you do, then you fill out Form 982. But I have to tell you it can get confusing. And given the amount of money involved – $48,000 – I’d encourage you to talk with a tax professional who can help you fill it out correctly. Perhaps they can also help you avoid taxes on the previous amount from Wells Fargo as well. I know it may feel like throwing good money after bad, but it may turn out to save you a lot of money in taxes. Make sure that you find someone who knows what they are doing. These forms get complicated!

  • Colleen

    My house in FL became a rental in 2009. With depreciation its adjusted basis for 2012 is $179k. It was foreclosed on in 2012 and sold at auction on 3/23/12 for $48k. Tax assessments for 2102 show it’s FMV to be approx $55k .
    My 1099-A shows: Box 2 $149k, Box 4: $186K. Box 5: yes
    Do I use their $186k which shows the house was worth more than my debt, or do I use the tax roll or auction price that is much, much lower?

    • Gerri Detweiler

      Colleen – I wish I could tell you want to do but as you know from the story you commented on these forms are a mess. I would really encourage you to get professional advice from a tax professional who understands how these forms work. Not only do you have to figure out how to deal with the issue you raised, but you are going to have to navigate Part II of the form which also gets complicated. I wrote about that in this story: The Tax Form From Hell: The 1099-C Saga Continues

    • Scared Teacher

      I filed before 3 yrs before chapter 7, then foreclosed. Received 1099A…There is a difference of $76,000 between what I owed and what the bank bought it back for at the forecloser. I rented for 3 years prior to bankruptcy and made every payment until then; tenants trashed the place so I had to file chapter 7 and included house (in FL) in the foreclosure. The day I was granted Chap 7, attorney told me to not return and I haven’t…fast forward three years and they finally foreclosed but I haven’t lived there in 6 years (3 with tenants and 3 after the bankruptcy). It isn’t my house as of March 2011. Do I actually have to pay taxes on a house that was included in my bankruptcy, chapter 7 bc I received a 1099A form?

      • http://www.Credit.com/ Gerri Detweiler

        Don’t be too scared yet. First of all, it’s my understanding you don’t have to file anything when all you receive is a 1099A. Here is an article from a tax professional about that: http://www.returnthedeed.com/1099-a-vs-1099-c-2/

        Secondly, if you discharged the debt in bankruptcy and get a 1099-C that form should indicate that the debt was discharged in bankruptcy (code F in box 6 of the form). It sounds like you will be able to fill out Form 982 to indicate that you are claiming that exclusion.

        The more complicated part will be Part II Reduction of Certain Tax Attributes, which may require the help of a tax professional to complete.

  • Niki

    Our home was foreclosed on in Dec. 2012. We had moved out in June and were attempting to sell the house up until the time of the foreclosure.
    Our mortgage lender has refused to send us a 1099-A, insisting they are not required to do so. Is there a way to file my 2012 taxes without it?

    • Gerri Detweiler

      That’s a great question. If you qualify for the Mortgage Debt Forgiveness Tax Relief Act then you want to be able to take advantage of it before it expires. On the other hand, they may be right (for now) in the sense that the “qualifying event” that triggers one of these forms may not have occurred yet. If they are still going to try to collect a deficiency from you, for example, then the debt may not have been cancelled. I’ll have to suggest you consult with a tax pro who has experience with these forms on this one.

  • Sarah M.

    We are working on selling our home through a short sale. But I am confused as to the tax issues that may arrise. I understand that the 2007 Mortgage Relief act was extended through 2013. I believe that we would qualify to have the tax exempt due to meeting the Qualified Principal Residence Indebtedness criteria. So my question is this… If the house sells via short sale in 2013, when is debt forgiven? At the closing or when the bank sends the 1099? I am wonder this, because I am concerned that the Mortgage Relief Act may not be extened past 2013. And then what if BOA takes a long time sending the 1099 and sends it for the 2014 (or later) tax year?

    • Gerri Detweiler

      Sarah – When your short sale is completed, that should trigger a 1099-C for the tax year in which the short sale occurred. That doesn’t mean the lender will send one out promptly, however. Unfortunately we’ve seen the time frame for mailing these forms all over the map.

      The IRS says that you should report cancelled debt even if you don’t get a 1099-C. So my understanding is that if you complete your short sale in 2013 but don’t receive a 1099-C, you can report it anyway, claim the exclusion (if you qualify) and then if the lender reports it in a different year, you can explain to the IRS that you already reported it.

      I’ll add that I am not a tax professional so for specific advice, I’d recommend you talk with one.

  • Brandi Peters

    We recieved a 1099A and Box 2 less than Box 4. What does that mean? While doing my taxes It only asked for Box 2 and then my federal owe jumped up $40,000.

    • http://www.Credit.com/ Gerri Detweiler

      Brandi – It is my understanding that Form 1099-A does not necessarily obligate you to report anything to the IRS, it is a 1099-c that does. Here’s a source for that information: http://returnthedeed.com/1099-a-vs-1099-c-2/ Have you contacted the company to see if they are sending a 1099-C?

  • Janice Steidle

    My husband and I gave the keys to our bankruptcy lawyer in lieu of a foreclosure in January 2011, we moved out due to military orders Dec 10, 2010. We changed from Chap 13 to Chap 7 Bankruptcy in January 2011. I just now received a 1099-A with box 2 and 4 having the same amount of $105197.44. Any idea what this means. I tried calling IRS but the wait time kills me.

    • Gerri Detweiler


      Was that debt discharged in bankruptcy? If so then you should be able to fill out Form 982 and claim the bankruptcy exclusion. You’ll find more information in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt. If not, do you qualify for the Mortgage Debt Forgiveness Tax Relief Act which is also described in that article? Or if you don’t qualify for that perhaps you qualify for the insolvency exclusion (also in that article). You may have several options for avoiding taxes on this amount but you may have to wade through IRS Publication 4681 to figure out which apply.

    • http://www.Credit.com/ Gerri Detweiler

      Janice – The forms are very confusing, I agree. As Mr. Purdy mentioned in the article above, if box 2 and 4 list the same amount there shouldn’t be cancellation of indebtedness income. But given that you are talking about more than $100,000 here, it would be a good idea for you to talk with a tax professional to be sure. (If you do have CODI, you may qualify for the mortgage or bankruptcy exclusion anyway, so it sounds like you have a number of options available to you.)

  • D Johnson

    I am trying for do my daughter’s taxes, as I have every year but have come up with a few problems. My daughter and her husband became divorced in September 2012 and their house was foreclosed on in 08/2012. At the foreclosure sale, her dad bought, in cash, the house for almost half of what was owed on it. This is where the problem comes in. There were 2 mortgage companies and this foreclosure was brought about by the first company. We we told by her attorney, after the sale, that the 2nd mortgage company was just out of luck. Now, her ex is coming to her stating that the mortgage company is going to take both their tax refunds for monies still owed on the house and that she needs to file a denial letter to the US Treasury Dept in order to keep her refund. She received a form 1098 from the 1st (foreclosing) mortgage company with an ending balance of $39,500.00. Question 1: Is she still responsible for paying the amount not covered in the sale? Question 2: Can either mortgage company take her tax refund? I might add that her ex isn’t and has not been making regular child support payments as court ordered and is now having his wages garnished. She is working part time, struggling to just pay the power bill each month, due to that fact and really needs any penny that she can find. Thank you.

    • Gerri Detweiler

      It is not typical for a mortgage company to intercept a tax refund. My guess is your daughter had an FHA loan and that the federal government is using the Federal Tax Refund Offset (TRO) Program to intercept the refund. As terrific as it is that you want to help your daughter, I suggest she get professional help with this one. You mentioned that she had an attorney – perhaps they can help or refer her to a an attorney who can help. I’d also suggest she meet with a bankruptcy attorney. If she is liable for this debt then she may need to consider filing. At a minimum, a good consumer bankruptcy attorney should be able to help her understand her rights and responsibilities here.

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  • Brian

    I just received a 1099-a form in the mail for a Timeshare that I could no longer pay on. Box number 5 is checked….My main question is this….If both Lines 2&4 are the same what does this mean? And when I file how will this affect my return?

    • Robert West

      I got a 1099a also for a Timeshare I stopped paying as well. I had tried for 5 years trying to get them to take back as I was drinking Kahlua when I signed the Contract. BlueGreen employers were aware of this but accepted my signature anyway.
      This is against the Law “everywhere”. I have filed complaints with Florida AG, OK AG, FTC, BBB, and every other Federal Agency I could find. Not one would help. I found an attorney but he wanted $10,000 retainer, so I just stopped paying. I sent them a letter in advance advising the date and time I was stopping. Making appt with CPA, but saw this and thought maybe someone could help. Hopefully, we will get some answers Brian. Good luck.

      • Gerri Detweiler

        Robert – I don’t know how this will turn out for you. Have you checked Publication 4681 to see if you qualify for the insolvency exclusion??

    • Gerri Detweiler

      Brian – That is a great question. My understanding (and I am not a tax professional) is that if the principal balance and the FMV are the same then it is not triggering cancellation of debt income. The instructions for this form state: Box 4. Shows the fair market value of the property. If the amount in box 4 is less than the amount in box 2, and your debt is canceled, you may have cancellation of debt income. If the property was your main home, see Pub. 523 to figure any taxable gain or ordinary income. Having said that I wouldn’t rule out the possibility that you get a 1099-C from the same company. As you can see from reading the comments on this blog, there is no rhyme or reason to what’s happening with these forms.

  • Michelle

    My husband and I filed Ch 7 in 2011 and included our home in the bankruptcy. We agreed to surrender the home back to the bank. Today I got a 1099A in the mail in my name (not my husband). Balance of principal shows $108,826 and Fair mkt val shows $100,500. Box 3% says YES borrower personally liable. I do not understand what I am suppose to do with this form. Please help.

  • Beverly

    What if box 4 is $0?

    • Gerri Detweiler

      Beverly – Unfortunately I suspect you are going to need to talk with a tax professional who has expertise in these forms. It doesn’t make sense that the FMV is 0. But you’re stuck trying to deal with the mess that the lender has created.

  • Pingback: What is a 1099-C? Your Top 11 Questions Answered | Credit.com News + Advice()

  • kelli

    I have received a 1099-A for a home that went into forclosure in 2007. I left the property in 2009 because the bank told me that i was going to be told to leave so it could be put on auction but instead of waiting around for them to kick me out, I left at the first opportunity i had. The 1099-A says that the abandoned date was April 2012. Three years after i left and the balance of principal doesnt’ include my 10,000 dollor down payment that i put on the loan when i purchased the house. Box two says 69,214.49 and box 4 says 19,900.00 with box 5 checked. Does this mean that i have to pay the remaining balance of box 2 after subtracting box 4? And can the IRS take my tax refund each year until this debt is paid? Do i have to file this year or can i wait?

    • Gerri Detweiler

      Kelli – The IRS will consider this taxable income to you for the year in which the 1099-C was issued. You can’t put it off for another year. Your job now is to figure out whether you can exclude this amount from your income because you qualify for one of the exclusions I talked about in this article. Try reading IRS publication 4681 and if you can’t figure it out yourself, get a tax professional with experience in this issue to help you. Given the amount on money you’re talking about here, it may be well worth it to get professional advice.

  • Sherrie Wood

    I am totally disabled and continue to have numerous surgeries and horrible pain. My student loan was recently discharged. I have not been able to work for the past 13 years and my loan grew to 41,000. I was frightened to read that even though I am totally disabled, I must pay taxes on this. In all the calls I made to the Federal student loan folks, and all of the paper work involved, there was never a mention of this verbally or in writing. I am shocked and so upset about this. Is this correct and is there any relief from continued stress when you are I’ll?

    • http://www.credit.com Gerri Detweiler

      Sherrie – This is a shock for many borrowers in your situation. However, just because that debt was forgiven that doesn’t meant that you will automatically have to pay taxes on it. You will likely receive a 1099-C for the amount of the cancelled debt. Take a look at the Instructions for Form 982 which you’ll find in publication 4681. Use the insolvency worksheet to find out if you are insolvent by IRS definitions. If you are, you can claim the insolvency exclusion. I recommend you do this now rather than waiting until you receive a 1099-c as the calculation is supposed to be done at the time the debt was cancelled.

  • Patricia

    Hello, We have a timeshare that we were trying to ge to cancel due to lies and misrepresation however, they will not cancel either we pay or we go into default. They said that we would get a 1099a in Jan, if we chose to do it that way. However, we are not getting income, so I really don’t understand what that means?

    • Gerri Detweiler


      A 1099-C is sent when debt is cancelled or forgiven. You may or may not have to pay taxes on that amount, depending on whether you qualify for an exception or exclusion. I’ve written extensively about this issue and you’ll find a link to my articles about 1099-C’s here. If you still have questions, I recommend you talk with a tax professional.

  • anonymous

    This is a quote from the above mentioned article
    and this is the same as what the IRS told me to do with my 1099 A

    “So what do you do with Form 1099-A, exactly? First, if the foreclosed property was your personal residence, the foreclosure will be reported on Schedule D. You’ll use the date of the foreclosure (found in box 1 of the 1099-A) as your date of sale. You’ll need to indicate the selling price. This will be either the amount in box 2 or the amount in box 4. Which figure you’ll use depends on the lending laws in the state where the property was located. You’ll also need to indicate your purchase price or cost basis in the property. That information you should have in your records, usually from the HUD-1 closing statement from when you purchased the property. The difference between the selling price and your cost basis will result in your gain or loss. Gains are taxable, losses personal residences are not tax-deductible.

    If the property was a rental, you’ll report the same information as above, but you’ll use Form 4797. I advise people who have foreclosed rental properties to seek assistance from a tax professional as there are additional factors to take into consideration, such as recapture of depreciation deductions, passive activity loss carryovers, and reporting any final rental income and expenses.

    One final tip: the difference between the box 2 and box 4 amounts is not your taxable income or gain on the foreclosure. State law determines whether the amount in box 2 or the amount in box 4 is used as your selling price, and your gain or loss is computed with respect to your cost basis in the property. By itself, Form 1099-A reports only half the information you need to report the foreclosure on your tax return. You will also need information from your own records.”

  • anonymous

    This article appears to be wrong. I called the IRS because we received a 1099 A for two rental properties we foreclosed on. The IRS told me to use form 4797 and that we will have a loss because the amount stated in the FMV box is lower than the basis of the property, and we will receive some of our taxes back. Direct quote from IRS agent, “1099 A is not a cancellation of debt form, it is just a notice stating how much a property was sold for.” I clarified with her that it was a foreclosed property. She said that it is still considered a sale by the IRS. See the article below.


    • Gerri Detweiler

      I appreciate your sharing your experience and am especially heartened to hear that you got helpful advice from the IRS on this matter since that hasn’t been the experience of some of the readers who have commented. I’ve re-read the article and the advice provided by Mr. Purdy, who is a tax professional who deals with this day in and day out. I am not sure exactly what you believe is wrong here. As I mentioned, he says that some clients are getting 1099-A’s, some are getting 1099-Cs and some are getting both! His experience is that lenders are often getting these forms wrong, which add additional problems.
      If you can point out specifics in the article you believe are wrong, I can check with the tax experts I’ve interviewed for these stories (since I am not one!)

  • Head’n Out


    I have a home that may or may not be sold. The second lien holder would only get $6,000 so it appears I may have to go into foreclosure. How does a financial instution decide whether to send out a a 1099 A or 1099 C for an unpaid debt and is one more favorable than the other tax wise?

    • Gerri Detweiler

      Head’n Out –

      Meet with a tax professional about this before you decide how to proceed. He or she may be able to help you avoid, or at least minimize, the taxes you may have to pay on the foreclosure. Better to do that now when you still have the chance to plan, rather than just react!

      As to your specific question, you may get a 1099-A, 1099-C or both. The 1099-A indicates “abandonment” of the property while the 1099-C lists cancelled debt. How financial institutions decide what to send is anyone’s guess. Guess it depends on who’s handling those forms that day!

  • Shirl

    My ex-husband and I were business partners, filing Schedule C, with a joint business line of credit. He ran the credit up to the max of $70,000. Until we were divorced I paid the interest every month, varied between $600 and $800 a month, because he had no work, and was sick a big part of that time. I stopped paying the interest after the divorce was final as the debt was given to him in the divorce. He filed bankruptcy so the bank came after me. I settled with them for one-third of the amount due. I did not receive a 1099 or any other form but I do have a signed document releasing me from further payment. (However, it still shows as the first item on my credit report as settled for less than owed – a black mark on my perfect credit). I want to file a Schedule C for 2011 and close out the company. There was no income and the only expense was the settlement payment. Can I file that as a loss and state that the company is now closed?

    • Gerri Detweiler


      As much as I would like to help you with this, I am not a tax professional and need to suggest you meet with one to figure out how to handle it. The fact that you have a settlement document in writing is good. It establishes the date of the cancellation of debt.

      So sorry you had to go through this!


  • Sniper

    I already file 2011 taxes and received a refund. After that I received 1099-A ( Balance 134k and FMV 121K)

    Can I amend my taxes and fill form 982, I think I qualify for the 2007 Relief Act

    • Gerri Detweiler

      Sniper – I don’t see why not. I’d suggest you consult a tax professional after April 17th. (They are probably pretty busy until then!)

  • Joseph

    I received a 1099-A from the 1st bank but have not received one from the 2nd bank. I called the Lender for the 2nd and they confirmed that a 1099 was filed but they are not cooperating on getting the form to me. Is there a way to get a copy of the form from the IRS?

    • Gerri Detweiler

      Joseph – My understanding is that they are required to send you a copy of the 1099-C or 1099-A. I’d suggest you tell them that if they don’t send a copy you’ll have to report it to the IRS – and then do so.

  • Andrew

    I received a 1099-a this year from my mortgage company. I was the plaintiff in a lawsuit against my mortgage company and the agreed to settle with a DIL. I never missed a payment and DIL was not a foreclosure, but a part of the settlement on my rental duplexes. The law suit was for forgery and fraud. Don’t think I owe debt forgiveness tax, but not sure. Any thoughts?

    • Gerri Detweiler

      You may not, but I am not a tax professional. The legal issue may determine the tax issue. You must address it on your tax return, but as far as how to address it I am going to have to suggest you get good advice from a tax professional with expertise in these matters.

  • PK

    As suspected, there have been rulings on this, so the Tax Court has sorted through some of these issues. There is hope on old debt and inaccurate reporting on 1099Cs. The two cases below have to do with timing, and the consumer won against the IRS. These are recent cases and hold some weight. Take a look:
    Gaffney v. Commissioner, TC Summary Opinion 2010-128, 8/30/10
    Kleber v. Commissioner, TC Memo 2011-233, 9/28/11

    • Gerri Detweiler

      Extremely helpful. Thanks much!

  • Donya Alexis

    Hello… I have a question about two 1099-A Forms my mortgage company sent me… The first one that was received has the principle balance of $110,000 with the FMV of $153,000… and it is marked that I am personally liable… A month later I received a second 1099-A which showed the principle amount was $0.00 and there was nothing indicated under the FMV box… what exactly does that mean if you’re able to enlighten me… 🙂 {I have not received a 1099-C form I keep reading about}

    *NOTE – Prior to the foreclosure, we had a house fire… would this have anything to do with the balance changing?

    Thanks so much for answering 🙂

    • Gerri Detweiler


      I wish I could answer your question, but quite honestly, I don’t know. As some of the tax professionals I interviewed for this story pointed out, these creditors are often getting these forms wrong and it can be very difficult to straighten out. I am going to have to suggest you talk with a tax professional for help. (I’d recommend that anyways, since there is a large amount of money involved and you don’t want to get it wrong.)

  • Renee C.

    I am trying to get a clear answer regarding foreclosures, bankruptcy and tax liability. First let me state that I am Illinois. I moved from a property in 2007 and bought a new home. Well needless to saw I have not been able to keep tenants and the maintenance cost, mortgage and stress of the property is now too much. I do not want the property and have not been able to talk to the lender regarding a deed in lieu because it is behind and the foreclosure process has started and I am okay with this. I am looking at filing Chapter 13 as I do not qualify for a Chapter 7. Should I hold off on the Chapter 13 until after the bankruptcy sale so it can be included to avoid the tax liability and or the possibility of the lender suing me for the balance of the debt after the sale of the property? If I filed now would the first property be considered a primary residence since it is not past five years and thus can be listed as an exclusion before the sale?


    • Gerri Detweiler


      I can totally understand your frustration. These are questions that must be answered by a bankruptcy attorney and/or a tax professional such as a CPA or EA though.

  • ML

    Just received 1099 for debt forgiveness.
    This was balance of unsecured credit card. Owner of card is deceased-they died in 2011 and the debit was “forgiven” in 2011. Estate has no funds all unsecured debt was written off and is uncollectable.
    How do we address the 1099?


  • Toni Harmon

    Just got our 1099A from a foreclosure, it was our primary residence, no change in the original load like modification, short sell, having rented out etc… Can I submit form 982 and have this for the Mortgage debt relief act? Foreclosed on 8/18/2011 and forced out in September 12, 2011/

    • Gerri Detweiler


      I’d recommend you read Publication 4681 on the IRS website.

      It describes that exclusion in detail and provides examples. If you still don’t understand it, I’d suggest you contact a tax professional or the IRS.

  • http://gdcapehart@gmail.com becky

    In December of 2010 we received a letter from B of A stating they were selling our home on the courthouse steps and we would have 22 days from that date to move. We moved out December, 2010. They bank would not let us give them a QCD to help with the expense of foreclosure–they said we had to qualify for this. They would not rewrite the terms of the loan (oh they did, but it reduced payments from $2400 to $2200!!! WOW!! our unemployment was $2400 mth and they said we rejected the modification…)

    We just received the 1099-A for abandonment. We did not abandon, their letter stated we had to vacate. They told us they wouldn’t rewrite the loan (said our home was worth $300,000—assessed value was $194,000) and now they say the value is $168,000 (they’ve waited since Jan 2009 to establish this value and finally send out paperwork which is way worse than initially delinquent–value then approx $268,000). What can we do?

    • Gerri Detweiler

      I understand how absolutely frustrating this must be for you. My first recommendation is that you find out whether you qualify for an exclusion or exception due to either insolvency or the Mortgage Debt Relief Act. That seems to be the simplest way to deal with it.

      If not, you are allowed to dispute the amount shown on the 1099-A, but I’d recommend you get a tax professional to help you with that, particularly since this is a large amount of money.

      Keep in mind, I am not a tax expert so I strongly recommend you find a CPA or Enrolled Agent who can help you.

    • michelle

      i was wondering i got a 1099A will i not get a return?

  • Jocelyn S.

    We received a 1099a for 100k difference in the FMV and loan. It looks like we’re going to pay substanial taxes. We purchased the townhome (the foreclosed property) in 2007 and had to move out in 2009 because we didn’t have enough room to raise our growing family. We tried to keep the property along with our current residence as long as possible but with an unreliable renter we had to foreclose in 2011. Is there any hope we may. It have to pay these taxes that we cannot afford?

    • Gerri Detweiler


      Are you working with a tax professional (CPA or enrolled agent) with expertise in this issue? That would be my recommendation at this point.

  • William T

    I meant Box 5 is NOT checked.

  • William T

    I just received a 1099-A regarding my foreclosed home. I was kicked out in June of 2011. The amount of the debt was $382000 and the FMV of the property is $281000. Box 5 on the form is. Or checked. What do I do? I have no assets, no job and a student loan, in deferment, of $45000. I can’t afford a lawyer or tax expert. Can I do a 982 by myself?

    Should I call the IRS?

  • Mickey

    My husband and I have already e filed our taxes and are waiting on our return. I just received a 1099-A in the mail, what do we need to do?

    • Gerri Detweiler

      We’re not tax professionals, so we can’t give you specific advice, but keep in mind that the IRS received the same form. So until you show them (if) that income should not be included in your taxes, your return may be held up – or you may get a notice stating there is an error. It would be a good idea to call the IRS and ask what you should do. Make sure you read through my article and then check the instructions for Form 982 to determine whether you qualify for an exclusion or exemption that will help you avoid paying taxes on that “income.”

  • http://credit.com jeff layne

    I received a 1099-A, in the mail, with a principal balance of 175,124.31 and a FMV of 49,000. We walked away from the home it was our primary home for 10 years. I do not know how to handle this document. IS it cover under the debt relief act of 2007. I live in KY. NOW AND THE HOUSE WAS IN FL. We are worried about it. The date of lender acquisition was 07/26/11

    • Gerri Detweiler


      It doesn’t matter where the home was located. What matters is whether you qualify for an exclusion under the Mortgage Forgiveness Debt Relief Act.

      The IRS provides more information about this exclusion here:


      You can read it and see if you feel comfortable filling out Form 982 yourself if you believe you qualify. If not, please see a tax professional for help as soon as possible. This is a large amount of money and you don’t want to run into a situation where you owe the IRS a large debt.

  • Shane Sparks

    What can I expect from a Primary residence that I walked away from with a second mortgage?

    • http://www.Credit.com Gerri Detweiler

      Shane – You need to meet with an attorney asap. Depending on the laws in your state, the lender may try to come after you for the deficiency. In addition, you may receive a 1099 which could have tax implications.

      A bankruptcy attorney can help you evaluate whether you need to consider filing to avoid either of those scenarios. The first consultation will be free and confidential.

      Please make sure you get advice soon.

  • http://www.Credit.com Gerri Detweiler

    GH – Generally, the 1099A indicates abandonment of the property. It does not indicate whether they can still come after you for the balance (recourse) and it doesn’t indicate whether the property was sold or not. As Mr. Purdy indicated when I interviewed him, some lenders send both a 1099-A, and some send a 1099-C, while others send both. He also pointed out that there are mistakes made.

    Please find a tax professional with experience in real estate issues to help you handle this. There’s too large amount of money involved to take a chance that you do it wrong and then hear from the IRS a couple of years down the road.

    In addition to the tax issues, you must find out for sure whether you could be held liable for the deficiency. If this is a recourse loan, the lender could potentially come after you for that balance. This may not happen right away, so don’t assume that just because you haven’t heard from the lender that they aren’t going to try to pursue the deficiency. It would be a really good idea for you to talk with a bankruptcy attorney.

    I know that letting the property go into foreclosure was probably a very difficult decision, but it was only the beginning. If you really want to put this behind you so you can breathe, you need to make sure you get professional advice.

  • GH

    Can anybody help? I have received so many different answers to my question…I received a 1099A for a rental property in Georgia that went into foreclosure. The property was to be auctioned on November 2 2010 but I never received any notification that it was purchased. The only thing I received was a 1099a dated November 2 2010 with a balance outstanding of $111,936.61 and the same amount in Box 4 – FMV. Box 5 was a ‘yes’ for personally liable. What does this mean? Has the lender assumed the property at full value? Am I responsible for the complete debt as nobody purchased it? Did anyone purchase the property? Will I be advised at a later date? Do I need a 1099C? What do I do……can I continue to breathe????

    • Gerri Detweiler

      GH – The experts I interviewed for my piece agree this topic is a minefield. Forms are often wrong and it’s very hard to get them straightened out when they are. The best advice I can give you is to talk with a tax professional (CPA or enrolled agent) as soon as possible for guidance to minimize the taxes you’ll have to pay as a result. I wish I could give you more DIY advice but given the amount of money involved, and the fact that you’re talking about the IRS here, I’d recommend you get expert help.

  • Pingback: Debt and Taxes: What You Need to Know | Clear Bankruptcy Blog()

  • http://www.credit.com Gerri Detweiler


    I don’t have an easy answer for you. I suggest you find an attorney with expertise in both real estate and tax issues for help. Perhaps your CPA can recommend someone. One of the experts I interviewed for this story, Bill Purdy, does that kind of work in California and he says he had routinely dealt with bank mistakes. As he told me, “These are the same folks who wrecked our economy.” Hopefully our CPA can refer you to someone.

  • Mark Wallin

    In July of 2010 we did a DIL with NCB Bank of Oh. They sent a 1099c. My CPA said that they should have sent a 1099a, because they excepted the Deed as full payment, so there was no cancellation of debt. We refiananced so we are not protected by the Fed or the Cal Laws. We asked the bank to change to a 1099a, but they refused. What can we do to make them change??

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