Home > Taxes > 1099-Cs and Your Taxes: What You Should Know

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Not many know what a 1099-C is or why they receive it. But these forms can be a little scary because they’re tax documents—and no one wants to mess up their taxes. When you get one, it’s because you had a portion or all of a debt canceled.

It’s important to understand what a 1099-C is and what to do about it to ensure you are filing your taxes correctly. Here’s what you need to know.

What’s a 1099-C?

A 1099-C falls under the 1099 tax form series of information returns for the Internal Revenue Service (IRS). These forms let the IRS know you’ve received income outside of your W-2 income. Any company that pays an individual $600 or more in a year is required to send the recipient a 1099. You often receive a 1099-C when $600 or more of your debt is forgiven or discharged.

When you use credit or take out a loan, that borrowed money is still currency you can use—even if you don’t pay it back. So when debt is canceled, that money is considered ordinary income and is therefore taxable (if over $600), which means you have to report it on your tax return. Yep, Uncle Sam gets a cut of the portion of your debt that was forgiven or discharged.

When you get a 1099-C, you can find the reason you received it in the sixth box of the form. Some common reasons you may get a 1099-C are included below:

  1. You negotiated a settlement to pay a debt for less than the amount you owed and the creditor forgave the rest.
  2. You owned a home that went into foreclosure and there was a forgiven deficiency (a difference between the home’s value and what you owe on it).
  3. You sold a home in a short sale where the lender agreed to accept less than the full amount you owe.
  4. You didn’t pay anything on a debt for at least three years and there has been no collection activity in the past year.

Are My Debts Erased with a 1099-C?

If you know you received a 1099-C because of a settlement agreement, where you paid off debt for less than the full amount due, then you don’t owe anything. If the form was filed because you haven’t made payments for three years and they haven’t tried to collect recently, then you may still owe the debt. Your state’s statute of limitations may determine what debt you are and are not responsible for.

Anytime you receive a 1099-C, check the form for errors. If you find any, first work with your creditor to get the information corrected. If that doesn’t resolve the issue, then you can include an explanation with your tax return. To find out if a 1099-C has been filed, you can request a wage and income transcript from the IRS for the tax year or years in question. The transcript should list any 1099-Cs that were filed under your Social Security number.

Do I Have to Pay Taxes on the 1099-C Amount?

The IRS will automatically assume that the amount listed on the 1099-C is accurate and will expect you to include that amount in your ordinary income when you file your tax return. Depending on the other income you earn and your tax bracket, you could receive a larger tax bill or a smaller refund. However, if you can demonstrate that you qualify for an exclusion or exception, you may be able to avoid paying taxes on part or all of that phantom income.

One of the most commonly used exclusions is the insolvency exclusion. It works like this: you are insolvent to the extent that your liabilities (what you owe) exceed your assets (what you own). If the total amount by which you are insolvent is larger than the amount listed on the 1099-C, you can exclude the entire amount listed on the 1099-C from your income. You’ll have to file Form 982 with your tax return to claim this exclusion.

If the amount by which you are insolvent is less than the amount on the 1099-C, then you may be able to avoid including part of that amount in your income. However, the insolvency exclusion may not be the perfect fit for everyone—there may be another exclusion that fits your situation better.

What if I Don’t Receive a 1099-C for Canceled Debt?

Even if you don’t receive a 1099-C, you are still responsible for reporting canceled debt as taxable income. Make sure you do not leave any forgiven or discharged debt off of your tax return. If you do, you will more than likely hear from the IRS in the future for failure to pay, which will cost you more money in the long run. Look at your credit report to ensure you don’t have any unpaid debt from the last three years.

What if I Receive a 1099-C for Old Debt?

Be careful when it comes to old debt and 1099-Cs. Creditors who follow IRS guidelines should send out 1099-Cs when a debt lies dormant for three years and there has been no significant collection activity for the past year.

Specifically, the IRS 1099 instructions state that debt is canceled “when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31.”

However, the creditor can rebut this cancelation if “the creditor (or a third party collection agency on behalf of the creditor) has engaged in significant bona fide collection activity during the 12-month period ending on December 31.”

If a creditor sends out 1099-Cs years (or decades) after the 1099 deadlines, the responsibility falls upon the taxpayer to explain to the IRS why they believe it should not have been filed that year. Again, there is no specific form for reporting this kind of dispute. You’ll have to include an explanation, and you may wind up arguing with the IRS to get it resolved.

What if I Receive a 1099-C for Debts Canceled in Bankruptcy?

You don’t have to pay taxes on personal debts discharged in bankruptcy. And creditors aren’t required to file 1099-Cs for those debts. If they do, however, you can file Form 982 and claim an exclusion because the debt was included in bankruptcy.

Don’t panic if your bankruptcy occurred long ago and you don’t know where to find a copy of your bankruptcy papers to prove the debt was discharged. Although it’s anyone’s guess why a creditor would send an unrequired 1099-C years after the fact, you likely won’t have to jump through hoops to prove the debt was discharged.

Getting a 1099-C can be confusing, especially if you don’t have a handle on your credit. Avoid future credit surprises by using Credit.com’s free credit report tool.

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  • Nikole Underwood

    I got a 1099-C for a debt that they were garnishing our of my husband’s check which means the debt is being collected on. Now after filling the 1099-C they are still trying to come after my husband. What do we do

  • Gina

    I just received a 1099c in the mail for a truck that was repossessed in 2012.. they told me that as long as they sold it at the auction for he price that was owed in it I would not have to pay. I never heard or got anything again from them, I assumed it sold at the price that was owed on it. But now this came in the mail.. does it mean I owe the 5k it says that was canceled or forgiven?

  • Jeanine Skowronski

    We’ve been getting a lot of questions about 1099-Cs, so we tried to get you some more answers. You can find them here:




  • Jeanine Skowronski


    Sorry for your loss. Unless you were a co-signer on the student loans, you yourself should not be responsible for the debt. Your mother’s estate would be responsible for repaying.



  • Neesie Old

    I apologize in advance for the length of this. I am currently taking a tax course and have learned for the first time about 1099C’s, form 982 and Pub 4681.
    I had a mobile home that I moved out of (and bought another one.) I put the first one under a lease purchase agreement with a gentleman who was to pay JUST the normal monthly payment like I had been paying. The mortgage company was aware of the arrangements. After several years he decided he no longer wanted the home and moved out.
    The mortgage company repossessed the first one and made attempts to collect from me. After explaining to them the circumstances and that I did not have the money to pay off the balance nor did I want the home, they took it to auction and sent me a statement showing the balance still owing after repossession costs and transportation less the money they received from the sale at the auction. They again contacted me and I again explained that I would not be paying the balance and for them to not contact me again.
    Now they have sold the debt to another company and every so often I get a letter from them that says, “we are just making sure we are following the law by the way we are attempting to collect this debt.” I have not received a 1099C, but in all honesty I feel I should go ahead and file the balance of the loan on my tax return, with the proper documentation, but I do not have a discharge date. How will I be affected if I do that on my 2016 taxes if the collectors send a 1099a/c after I do this?

  • Gen Ly

    I recently had financial hardships that caused several credit accounts to get closed and some are even charged off now. Will I multiple 1099Cs for the same year? Also, if the amount is within my tax bracket will I have to pay additional amounts or will it be included already in my tax bracket? Like example If tax bracket is between 37650 to 91150 is 25% and I make 45000 My charge off debt is around 9800 to 10000 dollars. Will this affect it greatly? Thank you!

    • Jeanine Skowronski

      You may want to consult with a tax accountant about your best recourse.



  • susie

    I received a 1099 C this year 2016 on a old credit card I had. Will I get another one next year for the same credit card?

  • crowebobby

    My sole income is less than $14,000 a year from Social Security, which makes me eligible for Food Stamps and is protected from creditors by State and Federal law. I have no other assets of any kind. Normally I don’t have to file an income tax form at all. Will I still have to file the 1099c form I’m going to get from my creditor? (The debt is over 12 years old.)

  • Gary M

    My wife settled a debt for less than owed in 2012 and was issued a 1099C for the forgiven amount. But as recently as 2 weeks ago the creditor reported the debt as still owed to the credit agencies. Don’t creditors receive a tax benefit on the 1099C amount? Having received a tax benefit on a forgiven amount, is it not tax fraud to continue claiming it as owed? I spent nearly two hours on hold today with the IRS looking for an answer to this, I was told by the 2 agents I did talk with that they had no answer “because the IRS does not deal with tax law”. And that’s a quote, I have it on tape!

  • Natasha Bell

    Hi there.
    In February 2013, as I had been unemployed for a long time and unable to pay, my bank cancelled my credit card debt and sent me a 1099-C form. Now, 2 1/2 years later, they are reporting to the credit agencies that the account is active again, and that I now owe them $18770. Is this legal? Especially after they sent me a 1099-C.

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

      There are several triggers for sending a 1099-C and not all of them require that the debt be forgiven. However, it’s my understanding that some consumer protection attorneys have used the 1099-C to challenge the collection of the debt. I would suggest you get legal advice from a consumer protection attorney. If you are having trouble finding an attorney I suggest you use the search function on the websites of the National Association of Consumer Advocates or the National Association of Consumer Bankruptcy Attorneys.

  • Michelle

    If we received a CP2000 from the IRS never received a 1099 C form from the bank who filed the 1099 C we are in the middle of trying to purchase a home, will this affect it in any way?

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

      Possibly. Talk with your loan officer.

      Generally in these situations you have to go back and figure out whether you qualify for an exclusion so you can file an amended return with Form 982 claiming the exclusion, or you have to pay the tax owed.

  • Alberto

    Got 1099-c for 2013 tax year for truck I bought for friend he didn’t pay so I repoed it from him when talk to bank they said was charged off & basically hung up but the problem is I still have the truck no title don’t know what to do

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

      The tax issue is a separate issue from the one involving ownership in the truck.

      For the 1099-C you need to find out if you qualify for an exception or exclusion so you can minimize the tax bill. You’ll see links in the story above to help you navigate that. It may be necessary to also talk with a tax pro who understands these forms, especially if the amount you may owe the IRS as a result is large.

      As for the truck–that’s a tough one. If you can pay it off (or settle it with whomever has the debt now) that may be your best bet. But if not, maybe a voluntary repo? You might want to talk with a consumer protection attorney.

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

    Yes, they are the same thing. You settled the debt for less than the full balance and the amount they “cancelled” must be reported to the IRS on Form 1099-C.

  • http://blog.credit.com/ Kali Geldis

    Hey Liz —

    This is a really tricky one that is causing headaches for a lot of homeowners. Here’s the gist: mortgage underwriting is very different than credit reporting. For mortgage underwriting purposes (aka how you’re qualified for a loan) any outstanding debts (even ones that are charged off and you receive a 1099-C for) are going to affect your debt-to-income ratio, even if they aren’t impacting your credit scores anymore.

    Read this article on (almost) your exact situation for more help from our Director of Consumer Education Gerri Detweiler:


  • Terri Schofield

    I also have the same problem with Chase. My accounts were charged off, I received the 1099-C and paid the amounts as income in my income taxes and they are still showing as past due amounts.

  • Terri Schofield

    I received a 1099-C for two old credit cards. I had to report the amounts owed as income on my 2013 taxes. Needless to say, the amount I had to pay was large. Why does the amount still show as Past Due Amount on my credit reports when I paid it on my taxes? These accounts were charged off in 2010.

  • Glory to the King

    I received a 1099 c in 2013 with Box 6 saying H. Since it still shows on the credit is the Statute of Limitations for the state I was living in at the time the debt was taken, or the state I live in now. A lawyer I know said some of these banks maintain a Deleware address so they can write the debts out of there and there is a longer statute. How do I find out what statute applies?
    I don’t have the original papers and neither does the bank also (I was told by a lady who worked there.) but they made me come in and sign a papaer again about 3 yrs later (this was a personal line of credit). So could I ask them to prove the debt so I can get it off my credit?

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

      Unfortunately I can’t say for sure which applies, We talked about it in these articles: Statute of Limitations On Debt Collection by State and
      7 Things You Need to Know About the Statutes of Limitation for Debt. (But Delaware’s is shorter than most, not longer.)

      As for the rest of your questions I just am not clear on what you are asking. If you can restate your question more clearly that would be helpful. The SOL/1099-Cs and time period for reporting information on credit reports are all separate issues so not sure what you are getting at.

  • Barry

    Gerri: I had debt discharged due to bankruptcy and got a 1099-C. I understand I check Box 1a & enter the amount discharged on Line 2. Can I leave Part II blank? I’m baffled by the Tax Attributes explanations.

  • Gerard

    My mother and I lent a series of loans to a person we regarded as a close personal friend for business and personal reasons in the amount of more than $30,000.00. We have tried since August of last year to arrange re-payment without any success. My mother is a senior citizen and we believe that the debtor never intended to repay loan. What can we do (generally) and regarding taxes?

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

      There is always the option of hiring a debt collector or suing this person to try to collect. As far as taxes go, we’re looking into that for a future article.

      • Gerard

        Thank you. I spoke to person the other night about resolving situation– I want to trust him but I don’t. It is unseemly that a person can essentially steal $30,000.00 and not have it counted as income. There is no leverage to the duped creditor. If it were considered income and the individual debtor had to pay taxes on the money lent it would avoid legal imbroglio and the additional cost to the criminal and civil courts.

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

          You may be able to report it on a 1099 but the problem is if you use a 1099-C then the debt may be considered cancelled and you may not be able to pursue it…

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

    Scott – Dan Pilla at TaxHelpOnline.com has written a book about 1099-Cs that he sells on this site. I don’t recall this specific topic in the book but it’s my understanding that you can get a 15 minute consult with him if you buy the book. (Double check to make sure that’s the case.) That may be a route for you to consider.

  • Scott

    I cosigned a student loan for my nephew and ended up settling with the creditor for less than the amount owed because he never paid. Got a 1099-C for over $18,000. He got one for the same amount. My question is who has to claim it as income? If we both do then the IRS is getting taxes twice on the same amount……

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

      You will find a discussion of this issue on page four in IRS publication 4681. I have to warn you; they don’t do a great job of covering all the various circumstances that can arise. This may be a situation where it will be well worth your while to consult with a tax professional, such as a CPA or Enrolled Agent, who really understands these forms well.

  • Megan

    We had a rental property that was foreclosed on in Feb 2013. In 2014 we received a 1099-A from the mortgage company and I did report what I could on our taxes about the foreclosure. Now today (3/19/15) I received a 2013 1099-C COD from the mortgage co. How can they send this 2 years later? Also there was no FMV listed on the 1099-C…My foreclosure stated that the mortgage co could NOT come after me for the difference, but I do know I have to claim as income. So since I obviously already filed my 2013 taxes based on the 1099-A they sent me…what do I do?

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

      Megan – I am not a tax professional and I’m not terribly comfortable speculating on situations like this where it’s not straightforward. My understanding is that you can file form 8275 to explain to the IRS that you already included this in a previous year’s return and paid taxes on it. More information can be found here:

      The Little-Known Form for Avoiding a Big Tax Bill

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

    I don’t know what tax form you are talking about. Can you explain?

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

      She should file written disputes with the agencies reporting the wrong information and if it’s not corrected she can either get a consumer law attorney involved or file a complaint with the CFPB. More information here: A Step-By-Step Guide to Disputing Credit Report Mistakes

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

    Whether or not the creditor will try to collect depends on a number of things, including the state you live in and the statute of limitations, and whether the loan was also in your name. If the loan was in your name too they could potentially look to you for payment, but this form may also be a sign that they are giving up. It’s hard for me to say. But you do have to address the 1099-C when you file your taxes (again if it came in your name too; it’s hard for me to tell from your questions.)

  • Jan

    There was no will when he passed away

  • Jan

    what if I received this 1099-c for a debt that my deceased husband had. am I know leally responsible for this debt?

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

    The reduction of tax attributes section can be tricky. I wrote about it here:
    The Tax Form From Hell: The 1099-C Saga Continues. It doesn’t usually apply in the case of credit card debt, but I don’t want to rule it out. If you still having trouble you may find this resource helpful: ZipDebt Insolvency Calculator

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

    We wrote that question in this article: Help! I Did My Taxes Wrong

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

    We wrote this article that will hopefully answer your question: Help! I Did My Taxes Wrong

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

    Yes, it is considered ordinary income. However, if this amount still leaves you below the threshold required to file a tax return then should be fine. If it’s a large amount and would trigger the need to file a tax return, then you must do so. If you must file a tax return be sure to fill out the insolvency worksheet in IRS publication 4681. You may be able to avoid paying taxes on that amount if you qualify.

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

    If the loan modification was agreed to in 2013 and the debt was cancelled then, then it sounds like the form should have been filed for that year. But whether it’s worth it to argue the point will perhaps depend on whether your financial situation (with regard to the insolvency exclusion) changed much during that time period.

    I am not sure what you mean when you say you were solvent – do you mean you don’t qualify for the full insolvency exclusion and so the full amount will be taxable?

    As I mentioned, full instructions and the worksheet are in IRS Publication 4681. Other resources you may find helpful include the ZipDebt Insolvency Calculator and Dan Pilla’s book, How to Eliminate Taxes on Debt Forgiveness .

    (Note, I personally would recommend you not assume anything on one of these forms is correct. I’ve heard of too many mistakes. Double check your own records and documentation of the deal you struck with them.)

  • http://www.credit.com/ Credit.com Credit Experts

    You should file an amended tax return. The IRS explains how here: How to file an amended tax return.

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

    The IRS will assume this is income unless you tell them you qualify for an exclusion, which you have to report on Form 982. They may or may not catch it yet, but they will at some point. So you need to figure out a. if you qualify for an exclusion and b. address it on your tax return, most likely by filing an amended return.

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

    Elizabeth – it sounds like the 1099-c is reporting $3236.61 in cancelled debt. The IRS expects you to include that amount in your income unless you can show that you qualify for an exclusion, such as the insolvency exclusion.
    Instructions and the worksheet are in IRS Publication 4681. Other resources you may find helpful include the ZipDebt Insolvency CalculatorDan Pilla’s book How to Eliminate Taxes on Debt Forgiveness .

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

    My understanding is that you must file a tax return along with Form 982 so I assume you have to file the amended return. If you qualify for the exclusion then you don’t add it into your taxable income.

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

    If the loan was in your name then you are legally responsible for it. The divorce decree doesn’t change the agreement with the creditor. So I don’t see how you can pass the 1099-C along to her. But I am not a tax professional so you certainly could try consulting one. If you learn something different, I am sure our readers would be interested in knowing that.

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

    Who knows? As I’ve written in a number of stories, there are all kinds of problems with these forms and given how lenders bungled loans in the mortgage meltdown it’s no surprise these forms contain mistakes as well. If you can’t figure out how to fill out Form 982 get a tax professional who understands these forms to help you. And file a complaint against the lender with the Consumer Financial Protection Bureau or get the Taxpayer Advocate involved.

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

    You can be sent them (we’ve seen 1099-cs for 20 year old debts!) but that won’t necessarily mean they are correct. This article may be of interest: The Little-Known Form for Avoiding a Big Tax Bill

  • Brian

    I had an investment property that was foreclosed in 2010, The bank has
    not issued a 1099-C and I presume that they will try and collect at some
    point. A current IRS audit of my 2010 filings and the auditor claims
    that I should have put the COD on my 2010 taxes. I didn’t because I
    thought the balance was still debt and it still might be, but the bank has
    made no attempt to collect. The property was mismanaged by a third party property manager, so we was foreclosed without my knowledge. The foreclosed event was recently posted to my credit report only after the IRS started calling the bank. I wasn’t in a position to pay the dept or the taxes, so I just left alone and waited to hear the position of the bank. Still waiting now five (5) years. I understand that some point I would either settle the dept or claim the COD. Can the IRS choose the year if the bank doesn’t file the 1099c or pursue the debt?

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

      The IRS generally doesn’t know about this unless a 1099-c is filed, though in your case it looks like it came up in an audit. Do not assume the IRS auditor is right. Are you working with a tax professional? If not you may at least want to get Dan Pilla’s book on this topic. He’s very knowledgeable about the problems inherent in these forms and ways to reduce taxes owed as a result of them.

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

    Hmmm…interesting. That’s not the IRS position in their official publication. (See IRS publication 4681 which says “The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt.”).

    An identifiable event can be triggered after three years of non-payment and no collection activity. If if the state statute of limitations is six years, then it is conceivable that the 1099-c could be issued after three years but the statute of limitations has not yet expired and the creditor may sue the debtor for the balance owed. Having said that, there are some consumer law attorney’s who are challenging these debts when the lender sues, claiming that the issuance of the 1099-C indicates the debt is forgiven.

    As for the credit reporting issue, I am really surprised an IRS agent would advise you on the legality of whether this debt can be reported. That matter is covered under the Fair Credit Reporting Act and the IRS would have nothing to do with that.

    However, I am not saying don’t fight it or that you don’t have the basis for a lawsuit. I’ve seen a lot of mistakes with these forms. I’d love to hear what happens with your case. I hope you are successful in getting this cleared up and we would love to hear how it goes for you.

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

    If $600 or more was cancelled then yes, per the IRS instructions they are supposed to file a 1099-C.

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

    Because the IRS instructions tell them to. There are several triggers that require a 1099-c to be filed, and one is non-payment of the debt and no significant collection efforts for three years.

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

    I am sorry but I am not sure I understand what you are asking but if you read the IRS instructions for 1099-C forms you will see their explanation as to when a 1099-c must be filed. Beyond that. I’d recommend consulting with a tax professional as I am not one.

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

    I am going to have to suggest you get legal advice. I’d suggest you talk with a tax attorney who really understands 1099-cs. I have interviewed a few in my series on 1099-C’s or you can ask around locally. (I doubt the “hold harmless” stipulation gets you off the hook with the IRS, but I am not a tax professional so I can’t advise there.)

    And while it’s terribly frustrating I have to agree that it’s probably a good idea to put off the wedding until you get this straightened out – you don’t want to drag your new spouse into this mess.

  • Brandie Ephron

    I just received a bill from the irs for my 2012 taxes stating we owe money but never received a 1099 how is this legal?!

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

    There may be a violation of the Fair Debt Collection Practices Act here. If there is, an attorney who normally represents consumers in these types of cases will likely take your case at no charge to you since the collection law firm would have to pay your attorney’s fees. I’d recommend you consult an attorney asap.

  • lydster

    I had a credit card with hsbc bank 2005 then they wrote it as charge off 2007 didn’t know they were charging me debt cancellation fees in the beginning then they declared me dead to 3 credit bureaus the only way that could be removed from credit bureau is from hsbc I sent letter demanding they correct there mistake but not reopening the acct. they then in 2010 sent me a 1099c for the amount that was on credit bureau as balance owed now they sold off debt to 5 different collections should I ignore them

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

      You can’t ignore a 1099-c. It has been sent to the IRS and the IRS will consider it income unless you can demonstrate otherwise.

  • Brandi

    I received a letter from the irs saying I had unclaimed income for 2012 from a creditor. They filed a 1099c to the irs for a lessor amount of the loan. Are they still allotted to report to my credit report a failure to pay to this day for the full amount?

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

    This is a great question. There’s been talk that the tax laws will be changed by the time most of this debt has been forgiven, but it hasn’t happened yet. Currently you would pay federal taxes on the forgiven debt (and my understanding is it would all be reported in a single tax year) unless you qualify for the insolvency exclusion. If you live in a state with no income tax then it wouldn’t be an issue. If not, however, there may be a state tax bill as well.

  • Amanda Squier

    i just received a letter from the IRS regarding my 2012 taxes, they say i didn’t include information from form 1099-C and now owe them money, we never received this form and when i called the company listed on the letter they said it’s from an account from 2007, HOW IS THIS LEGAL we never received anything from them and this is from almost 7 yrs ago i don’t know what to do or where to go from here any help????

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

      Amanda – You aren’t the only one. I’ve written about 1099-Cs for old debts in several articles on this blog. It’s a real mess. I think the most recent article will be the most help. It’s going to take some work (the IRS doesn’t make it easy) but you can fight it.

      The Little-Known Form for Avoiding a Big Tax Bill

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

    Yes, as it says in the example for Greg that I pointed out above, you do not enter the debt excluded as income. If you have no other income then you enter “0.” As for the rest of the tax return, I am sorry but I am not a tax expert so I can’t help with that. However, it’s my understanding that most of the major tax preparation software programs support this form so you can always go that route if you don’t know how to handle it yourself.

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

    Victoria – It certainly sounds like you may qualify for the insolvency exclusion. Your first step is to fill out the insolvency worksheet in Publication 4681. If the amount you are insolvent exceeds the amount of cancelled debt then you fill out Form 982 indicating that and attach that to your tax return. Complete instructions can be found in Publication 4681. (Look at the example for “Greg” on page 5.)

    • Victoria

      Thanks! I did the worksheet and filled out the form..my only question now is: why would I have to include a 1040? I have no income. I can’t take any deductions because I haven’t been working. So I don’t understand why I would have to send this in.

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

        You need to show the IRS why you are not including that $105,000 in your taxable income. They received the 1099-C and assume it is income unless you can demonstrate otherwise. Oh and be sure to keep a copy of your worksheet and any supporting documents for your records in case they question it.

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

    It doesn’t necessarily mean the debt is forgiven. The IRS says a 1099-c must be issued if there is no substantial collection activity for three years. If the creditor or collector tries to collect the debt, though, I would suggest you consult a consumer law attorney. There have been some cases where consumers have asserted that the issuance of a 1099-c means the debt is forgiven. (The IRS does NOT take that position, however.)

  • JRB

    Can insolvency relieve taxpayers of income tax with amounts on Box 6 coded G?

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

      Yes if you qualify.

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

    Dispute the 1099-c with whomever filed it whether that is the original creditor or the collector. As for whether it is on your credit reports, you’ll need to check that by getting your free annual credit reports.

  • disqus_qKz1SsQBf4

    My 2012 return was audited and they found that I hadn’t filed at 1099-C for a charged off debt. I never received the 1099-C and had no idea it had been charged off. I went through a difficult divorce and lost my shirt, to say the least, so I’m not all that surprised by the charge off, but I was never made aware of it, either. The interest/fees on the debt are almost double the amount of the original debt. I am working with my tax professional on the filing side, but I have two questions I hope you can answer. Is there a limit (%) amount that can be charged in interested in relation to the original balance? Also, will this item now be removed from my credit report?

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

      This is actually a very important question if you don’t fully qualify for the insolvency exclusion. If you think you were overcharged in interest you should consider disputing the 1099-C in writing with the issuer. But whether they did overcharge you is difficult to ascertain. We wrote about that here: Can a Debt Collector Double My Debt?

      This article covers disputes: The Little-Known Form for Avoiding a Big Tax Bill

      The 1099-C has nothing to do with how long the debt is reported on your credit reports. That’s covered under federal law.

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

    My understanding is that she should file to report the 1099-c “income” and back it out with Form 982 if she qualifies for an exclusion. Otherwise the IRS will consider it taxable income and she may be notified that she owes money or is entitled to a smaller refund. (Unless the amount is so small that she still doesn’t need to file.) You can learn more here: http://www.irs.gov/uac/Do-I-have-to-File-a-Tax-Return%3F

  • http://www.credit.com/ Credit.com Credit Experts

    Unfortunately, we are not tax professionals. We’d recommend talking with a tax professional or visiting a tax preparation site where you can ask this question. (Also, the form you’re referring to is most likely Form 1098, where mortgage interest is reported; a W-2 form is a wage and tax statement from an employer.)

  • unsure in AZ

    My home was sold in a foreclosure in 2012. I received a 1099 A in 2013 and filed last year. I was told I would receive a 1099 C this year and as of yet I have not received anything. Is there a way to find out if they filed with the IRS without contacting me?

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

      You can request a wage and income transcript for the year which will list all income reported. But it may be a little too early to do that since my understanding is the creditors have to transmit those forms to the IRS by the end of February. You may want to contact the IRS for more information: http://www.irs.gov/Individuals/Get-Transcript

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

    You’re right – you are going to need a tax professional with experience in these forms. Make sure you find someone who knows what they are doing. And so is his cosigner unfortunately.

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

    It’s doubtful as the threshold is $600 or more in cancelled debt. They could send one, but probably not.

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

    Unfortunately it doesn’t matter whether or not he received his degree. If he didn’t pay back student loan debt, a 1099-c is issued. You have to include it in your taxable income unless you can show you qualify for an exclusion. You may qualify for the insolvency exclusion. It is described in detail in IRS Publication 4681.

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

    As I mentioned in another comment, you need to decide whether to fight the creditor or pay the debt and amend your tax returns. One question is how long has it been since you paid anything on this bill? The statute of limitations may have expired for them to collect the debt. In addition, some consumers have been able to use the 1099-C as evidence that the debt has been “cancelled” and shouldn’t be collected. (Can’t rely on that defense in all cases, but it has been used successfully by some.)

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

    The amount they list as cancelled debt in Box is the amount of cancelled debt that you must include in your income unless you can show you qualify for an exclusion or exception. Many people do, so make sure you read Publication 4681 and/or consult a tax professional for help.

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

    How long has it been since you paid anything on this? The statute of limitations may have expired. In addition, some consumers have been able to use the 1099-C as evidence that the debt has been “cancelled” and shouldn’t be collected. (Can’t rely on that defense in all cases, but it has been used successfully by some.)

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

    You can request a wage and income transcript for your 2012 tax year that should provide information about the 1099-c. But it sounds like the main thing you need to do is to see whether you qualify for the insolvency exclusion. If you do, you can amend your 2012 tax return and hopefully avoid paying this tax bill. In addition to the articles referenced in the article above, there is some helpful information in Daniel J Pilla’s book How to Eliminate Taxes on Debt Forgiveness .

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

    Corrine – Was this a joint debt or hisindividual debt? Are you talking about student loans? Was the amount very large?

    Our condolences for your loss.

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

    The creditor says that you did not pay this debt and as a result it is considered “income” that you must include in your taxable income for the year unless you qualify for an exclusion such as the insolvency exclusion. You will find more information in this article: http://blog.credit.com/2013/01/what-is-a-1099-c-your-top-11-questions-answered-64306/#comment-1238336196

  • Rachael

    My ex-husband and I sold our house in a short-sale last year, so the debt should be forgiven based on the Mortgage Forgiveness Debt Relief Act of 2007 . The bank sent us one 1099-C, so how do we file the information? Do we both enter the entire amounts, or do we divide them in half? Or does it not matter since it is all forgiven debt? His social security number is the main number on the account and the bank sent the 1099-C to him. I can’t find the answer to this question anywhere.

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

      If they sent it to him with his social security number then I would expect he would file it. (The form goes to the IRS so they have the same information you do.) But it is one of those areas I haven’t found complete information about either, so you may want to check with the IRS.

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

    State exclusions don’t all match the federal exclusions but unfortunately I don’t have a list for all states. You will need to consult a local tax professional.

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

    You are not likely to get one. We wrote about HAFA payments and 1099-Cs in this article: More Confusion Over the 1099-C

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

    What a great question Michelle. I wrote about those payments more in this article: Double Whammy: Mortgage Settlement Payments Will Be Taxed Part of it may depend on what kind of payment you received. This IRS publication further describes how to handle these payments: http://www.irs.gov/irb/2014-2_IRB/ar09.html

  • http://www.credit.com/ Credit.com Credit Experts

    If someone steals your personal information and uses it to open an account anywhere, that person should be held responsible. That is identity theft. You can read more here: Identity Theft: What You Need to Know

  • Troy Morris

    My mother had a credit card that I was listed as an authorized user. I helped her run a business with it and later used it for her bills etc… I had very little credit and never had a credit card myself. In 2009 she died and some how I became the owner of her debt. I asked for the records and they sent me from 2009 on but nothing from while she was alive. I challenged the debt but they insist that it is mine despite the fact that they would have never given me a credit card in the first place. Now they have sent me a 1099-c that says they will report the principal balance to the IRS. $4800.00 and that they will continue to provide account information to the 3 credit bureaus. What can I do about this?

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

      Troy – I don’t know of a simple way to dispute this as the IRS does not, to my knowledge, have a form that allows you to report that a debt for which you received a 1099-C was not yours. My understanding is that you’ll probably need to send the IRS a letter of explanation. We talked about disputing 1099-Cs in a couple of other articles: Tax Help: How to Dispute A 1099-C Form.

      I would also suggest you file a complaint against the card issuer with both the Consumer Financial Protection Bureau and the Taxpayer Advocate

  • Carol g

    I just received a 1099-c from a debtor my deceased sister owed. She passed away 2 years ago and we have no reason to file another tax return. Do we have to file for her again to let the irs know she is deceased.

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

      Please talk with a tax professional. You may have to amend her final return – not sure.

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    I have a client who received a 1099c with Interest included in the debt forgiveness by agreement. He also received a 1098 for the mortgage interest. Should I take 1098 interest on Sch A and report interest forgiven as “other income” to keep numbers distinct.

  • http://mike@gunshops.com Mike Gray

    Had an accident, wife didn’t think I would work again. divorced I wanted to improve myself
    I went back to college. I couldn’t do it. I got a 1099c for 57k+ I am now married again.
    It is not fair to my wife for my debt. I didn’t plan to get hurt and I know the IRS could care less. Should I file separately and try for insolvency? If it weren’t for her I would be homeless on what I get from social security.

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  • Dona Collins

    Thank you so much for this detailed explanation of the 1099-C. I talk to friends and clients about the implications of settling debt all the time, especially when we talk about short sales on homes. It is often hard for people to recognize that while a short sale is saving them from foreclosure and *more* credit damage, there are still implications. The difference between the value of the home and the settled upon amount is not a “gift” from the creditor. Still, the amount you’d owe the bank or the damage to your credit would be far worse than the taxes you owe on the difference, so I still think it’s a win-win situation in the end.

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

      So true – though if it is their primary residence they may be able to avoid paying some or all tax on that debt. Still it’s complicated enough to often require help from a tax professional – and waiting a few years after the fact to just see what happens it’s a great idea.

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