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Earlier this year, questions poured in from readers grappling with how to deal with 1099-Cs they received from lenders reporting “canceled” or “forgiven” debt. I wrote a number of stories addressing the issues they raised, and vowed not to touch the topic again until next tax season.

But the questions kept coming in.

One kept nagging at me: What should you do if you get a 1099-C for a very old debt? Though I had written one story already on that subject, the fact that I couldn’t provide readers with a clearer solution bothered me.

Take Dave, for example. He told us that in 1997 he was in an auto accident. He was out of work for eight months and could not pay his auto loan. The vehicle was repossessed and the $15,000 balance was charged off. The loan was with Chevy Chase Bank. In 2006 – almost 9 years later – he heard from a debt collector but he ignored it. The debt was off his credit reports by that time. Capital One had acquired Chevy Chase bank in 2008, but didn’t try to collect from him. In 2011, he received a 1099-C from Capital One reporting $9,000 in canceled debt for tax year 2010 – about 13 years after he stopped paying on the loan. Now he may have to pay an additional $2,000 in taxes for 2010 as a result.

If Dave’s story was the only one that I had heard, I would think it was an anomaly, but a number of taxpayers have complained about receiving 1099-Cs for very old debts.

As luck would have it, I was invited to speak at a local meeting for financial planners and CPAs. The speaker that preceded me was Jo Ann Koontz, a CPA and attorney who explained in detail some of the challenges taxpayers are facing when it comes to dealing with 1099-Cs. She was a wealth of information on this topic.

So I decided to break my vow and write one more piece this year.

One of the biggest problems with these forms, Koontz explained, is that it isn’t always clear when a debt was forgiven. Creditors are required to issue a 1099-C for the tax year in which an identifiable event took place. That could include a creditor agreeing to settle a debt for less than the full balance, or foreclosing on a home in a non-recourse state where the lender cannot try to collect a deficiency.

But what about when someone, like Dave, just stops paying a debt? In many states, lenders have several years to try to collect. So when is the 1099-C supposed to be sent out?

Koontz explained that in those situations, what the IRS is looking for is the “expiration of a non-payment testing period.”

“The testing period is the 36-month period (not including a bankruptcy stay, if one applies) ending at the close of the year when there hasn’t been any payment or the creditor hasn’t engaged in any significant collection activity,” she says.

She also pointed to the IRS instructions for 1099-C forms:

Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.

So here’s my unofficial, plain English understanding of this. If the creditor hasn’t done anything to collect for 36 months, they need to send the taxpayer a 1099-C the following year. And my layman’s understanding of Dave’s situation is that, in Dave’s case, the lender waited too long to send him a 1099-C.

What’s a Taxpayer to Do?

Most people writing to me assume there is a form you can file with your tax return to let the IRS know that the 1099-C you received is incorrect. There’s not.

In an article about dealing with 1099-C forms on GetOutofDebt.org, CPA Jim Buttonow suggests taxpayers who get an incorrect 1099-C form initiate a dispute by calling the IRS at and asking them to “initiate a Form 1099 complaint. The IRS will fill out form 4598, ‘Form W-2, 1098, or 1099 Not Received, Incorrect or Lost’.” According to the article, the creditor that issued the inaccurate 1099-C will be notified by the IRS of the dispute and asked to correct the form within 10 days. “The taxpayer will be sent a letter and a copy of the form that they can attach to their tax return in the event a corrected 1099-C is not received in time.”

When I asked Koontz about Form 4598, she could not find any recent references to it and believes it was proposed but not adopted. So it may be worth a try, but until we hear from taxpayers who have successfully used it, don’t count on it.

So what should you do? Koontz recommends the taxpayer include the amount reported on the 1099-C form on his or her tax return, then back it out and attach an explanation of why it is wrong. (Form 982 is the form you use when you believe you qualify for an exception or exclusion, but it’s not the form you use if you disagree with the filing of a 1099-C.) It’s a good idea to work with a tax professional to make sure you are handling it correctly.

She warns that the IRS will likely assume the 1099-C is correct and the taxpayer may get a notice of deficiency saying they owe money to the IRS. But that’s not necessarily a bad thing. Why? Because at that point you’ll be dealing with a more knowledgeable IRS employee than if you just try calling the toll-free number listed on the IRS website. “You’ll get someone at a higher pay grade,” she says.

She also shared a recent Tax Court case can that can be helpful in situations like this one. In Stewart v. IRS (2012), Stewart defaulted on a credit card debt owed to MBNA somewhere between 1994 and 1996. The debt was sold to two collection agencies. Stewart did not make any payments and sent the last collection agency, Portfolio Recovery Associates, a cease contact letter instructing them not to contact him again. At that point, PRA filed a 1099-C in the amount of $8,570.71 for the tax year 2008. The court determined that there was no cancellation of debt in 2008.

Raising a Ruckus

Most of the taxpayers who have complained about this type of problem are outraged, and they want to know whether they can “turn in the lender” for not following the rules. Dave wrote:

I don’t pretend to know anything about accounting practices for a large company like that but there has to be laws about what they can and can’t do. And aren’t these 1099c’s with doctored dates an outright lie to the IRS?

While there are “whistleblower groups within the IRS for those who didn’t issue 1099-Cs,” says Koontz, it’s hard to identify a way to complain about a lender issuing a 1099-C – even if it is too late.

Call me cynical, but would the IRS pass up an opportunity to collect more tax, even if the lender is sending the 1099-C form years too late?

She also told me the Taxpayer Advocate’s office is not the correct place to complain about this practice. Although the National Taxpayer Advocate Nina E. Olson has identified these forms as one of the most significant problems facing taxpayers, her office is really designed to make sure that taxpayers get answers to their questions.

And as for suing the lender, Koontz said there may be some class action lawsuits targeting certain lenders, but because this is an emerging issue, potential members of the class may not have yet been identified. If you know of such a lawsuit, feel free to mention it in the comments section below.

Finally, if you’re worried about how your debt or other issues could be impacting your credit, you can check your credit each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.

Learn More (Podcast): Listen to an interview with attorney Jo Ann Koontz, CPA on Talk Credit Radio where she discusses 1099-C’s related to short sales and foreclosures. Download the interview here (right click and choose “save as”); listen online; or listen on iTunes.

Image: 401k, via Flickr

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  • Nek

    Hi. I just received a 1099c for over $35,000 for a foreclosure that happened in 2000. I am reading comments, but still not sure how to proceed? I am seeing statute of limitations, but is that a fact that it truly exists with these forms, I am in MD? I am not sure how to proceed at this point. I can’t afford to add this as income, and though I do have job making ok, i do have another home and can’t afford at what this will do it it is claimed as income. Can you assist? Thanks so much.

  • Brent Williams

    I just received a 1099-c from the USDA from a foreclosure that happened 16 years ago. Will I be able to fight this?

  • A Penny

    The 1099-C comes in handy if you really cannot pay the debt and are on a fixed income. Assuming that you never make much more than what it takes to pay just for basic needs you are okay. If you are on SSDI or SSI or even Social Security Retirement, debt collectors cannot touch this as a garnishment. The best way to take care of Debt collectors is to answer your summons and play their game. They are not going to show up for court, but if you don’t either that they can get a judgement against you. If you do show up and they are not there, then you win. Check put how your state or district does collections. It will be under Civil Court in your State’s Legislation Documents, A good place to start is Nexi Lexi. Another place you want to go to is the FCPA. This has a wealth of information. You can countersuit them for violations. One of the things that I suggest people doing is opening mail that does not have a return address on a legal size envelop. This is usually from a debt collect. You have 30 days which to reply to the letter. I would do it as soon as possible with a letter to ask this company to prove the information in what they sent is yours and to provide the copy of the 1099-C from the account they bought. Only the original creditor can send you out 1099-C’s. So these debt collectors are trying to get you to give them information the do not have and you are not entitled to give that information to them. It violates your rights to privacy and you do not know this company from Eve because you never debt with them. Therefore, apparently they do not have all the information that they bought for pennies on a dollar (Your account or someone with a similar name was bought for like 1/100th of what you or that person might have owed to the original.), you write these people and tell them you are clueless to whom this account belongs and ask them to prove this account belongs to you. About the 1099-C’s, if the bank does not send you one after they sold the account and do not sent the info to the IRS they can get into trouble or if you get one and they fail to send theirs in. Another thing, if someone calls you and tells you someone is bringing you a summons as you and he or she speak, that person is violating the law if you never received any mailings from them in the past. I have had to turn in the same company twice just before my 7 years was up for an account that I won in court.

  • seokiemom

    I have helped a small business for almost 3 years, giving them over 20k. They sold the business and then abandoned me and have not paid ONE CENT back. I want to file a 1099 on them. Would this help me with my business taxes (the loss) and possibly force them to at least pay taxes on that “income?”

  • Jennifer

    It hasn’t happened yet, because it’s in the same year, but I’m wondering if it will happen for next year. I had a car lease with my ex. He stopped paying, which left me on the hook for payments. I couldn’t afford them, and it ended up being repossessed. However, I’m in the process of paying off the remaining balance of the lease. Will I still get a 1099-c even though it wasn’t forgiven? (I’m paying off the total remaining balance of lease, it wasn’t settled or anything). Or is that a different case ?

  • Albert

    Here is my dilemma and should I send this letter to the IRS with my return?

    (1) BOX 7 of the 1099-C shows a fair market property value of 173,056.00. My
    home was foreclosed and sold at auction on August 28th 2009 for $59,100.00. (reference attached image A1 of public record).

    (2) BOX 1 of the 1099-C suggests the identifiable event occurred on 7-9-2015. It has been 9 years and 5 months since I made a payment to CITI MORTGAGE.

    (3) The form suggests that I agreed to settle the debt for less than I owed as an
    “Identifiable code F” -By Agreement-. However, I never agreed to settle this.

    I just called the IRS and got an automated answering machine that
    said “The IRS is no longer answering questions about 1099c’s”. I called
    back and was able to speak with someone who said the IRS doesn’t issue a
    1099 complaint for cancellation of debt. What am I supposed to do?

  • Laura Mills

    I’m not sure what to do. I did receive a 1099-C Cancellation of Debt and applied it to my Federal taxes. Am I suppose to amend my state taxes as well?
    The cancellation of debt is due to a debt that I didn’t have the means to pay off (too many bills not enough income type of situation).

    • Jeanine Skowronski

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

      Thank you,


  • David Lewino

    . In 2013 my wife borrowed 20K from her 401 K,she hasbeen paying it back quarterly and owes about 2K.In October of 2015 we received a letter from the IRS informing us that [redacted] had sent them a 1099 for the tax year 2013 stating that my wife had defaulted on the loan. THIS IS THE FIRST WE WERE AWARE WE HAD A PROBLEM.We had received no prior communication nor did we get a copy of the 1099. We contacted [redacted] and after multiple calls and e-mails they finally responded 1 month later and said that a payment was received late and they had the right to default the loan.To complicate the issue the reason the payment was late was because they had changed loan processing companies. The payment was 2 weeks late.The IRS was resonable they said we just need [redacted] to issue an ammended 1099. [Redacted] is horrible and have done nothing to help and are sticking to their guns saying they have a right. We finally got copies of the letters they allegedly sent and there are issues there. Firstly the letter stating it was our 60 day notice was written 6 days after the loan was already in default ( defauly 9/18/13 letter written 1924/13?) Secondly the letter sais any payments recieved after the default date would be returned( I wished they did then we would have known we had a problem) When asked why they didnt return payments recieved after the default date they said they changed policy shortly after that date, smells like crap.

    • Jeanine Skowronski

      You may want to consult a consumer attorney about your best recourse.

      Thank you,


  • Jeanine Skowronski

    You may want to consult a consumer attorney about your best recourse.

    Thank you,


  • Jeanine Skowronski

    You may want to consult a consumer attorney about your best recourse.

    Thank you,


  • krystlebluewaves

    Just received the dreaded 1099-C form on a $38,000 debt from 2002! It was a mortgage on my mobile home, the mobile home was repossessed when I lost my job back then, I havent heard anything since. Moved on with my life, bought a new house 2 years ago, credit is 700+…. Now it looks like I owe over $8,000 in taxes. So scared! What do I do? This is so unfair!!!!

    • Jeanine Skowronski

      You may want to consult your tax accountant or a consumer attorney about your best recourse.

      Thank you,


  • Krystal Human

    i recieved a 1099c after i have already filed my taxes will this hurt me on getting my taxes back. it has been 16 yrs ago.

    • Jeanine Skowronski

      You may want to consult a tax accountant or consumer attorney to find out what your best recourse is.

      Thank you,


  • Shealynn Mace

    Okay. I am trying to get all the information I can. I was just contacted by [redacted], by a “Director of operations for tax and lean division” from the number [redacted]. She stated that the debit owed is now 2,000$. That she was going to file a 1099C and then the full 2,000$ would be TAKEN from my 2015 income tax. Or that I could pay a settlement amount of 460$. This debit is almost at its seven year mark, though she told me it had fallen off my credit November of this year. I could not find this debit on my 2014, or 2015(That I just pulled) credit report. The only one I could find it on was my 2013.

    Is she just trying to scare me to get me to pay? They come up with all these new ideas, that make me nervous sometimes. Should I just wait and see if I get the 1099C, since I only make 22,000 a year anyways. From my understanding is the 1099C just a form where I would just have to pay TAXES on that 2,000– NOT pay the amount back in FULL correct?

    How would I receive one of these letters? Certified mail? Isn’t it past the ‘three year’ mark for them to even send one of these out to me?

  • Irene

    I stopped paying my credit card over 8 years ago. Collectors are calling me and they said they sent me letters that’s I never received. They said if I do not pay they will take me to court. I do not have the money to pay them.

  • Jen Moll

    I lost my car in a repossession back in 2002. I never heard another word about the car. I just filed my taxes 2014 and only received half the amount I was supposed to get back. Finally I received a letter from the IRS saying I owed them $800 on top of the fact they took $1900 from my taxes for 2012 taxes where [redacted] had reported me for over $9000 from that car. Ten years later they report this! Not to mention I NEVER received or have heard of a 1099-C. These forms should have to be delivered by certified mail. I don’t even know where to begin to fight this. It’s very shady business for a company to just be able to mail the IRS a form and for the IRS to automatically assume this is correct. The IRS should have to contact that person to verify, but no, instead all of us taxpayers have to jump through hoops and spend money to fight.

  • Peggy Dalton

    Gerri, nice piece! I am certainly going to bookmark this one.

    I have been dealing with the nightmare of a Bank of America foreclosure. I wonder if this will never end. I will never do business with BoA again. They are ruthless and don’t care if you get xxx out.

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

      Glad you found the article helpful.

  • Craig

    I just ran my credit report and found that a charge off on a credit card back in January of 2013 is just now appearing. Needless to say it dropped my credit rating. Can the credit card company enter this charge off almost 3 years later?


  • Cj

    Gerri, I have a similar question regar5 1099-C Cancellation of debt on a repossessed car. I was a co-signer for a car and received a 1099-C in 2012 and have already paid the taxes on it. However it ia still showing up on 1 of my reports (Transunion). This has haulted my home buying process and I was told by the mortgage loan officer that I shouldn’t dispute because it could further delay the process. I’m afraid they may try to get me to pay it back and I haven’t had/made any contact to the debt collectors on this item for over 5 years and I don’t want the “clock” to restart. What should I do?

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

      I wish I had an answer for you. Your loan officer is correct that a dispute could hold up your mortgage. Have you tried talking with the original lender?

  • Cece

    Hello. I received a 1099-C last year for a repo and have already paid the taxes. The DOLA was August 2008 and the statute for limitations in GA is 7 years. It has fallen off of 2 of my reports , but is still on my Transunion. Should I dispute with Transunion? And if so, how should I go about doing this? We are preparing to buy a home and this is the only thing on my credit that could hold us back…

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

      A repossession may be reported for seven years, so it sounds like you are coming up on that time period in a month or so. The risk if you dispute it is that the dispute itself could hold up your mortgage loan. Please read: How a Credit Report Dispute Could Stop You from Buying a Home. Have you tried contacting TransUnion to find out when it will come off that report? They should be able to tell you.

  • Melissa Curry

    My boyfriend’s return was reduced due to what I later learned was a 1099-C. We had an issue with our auto lender a few years ago, we didn’t agree with the balance due, and requested a copy of the original contract. They must have lost the original, because what they sent us was another copy with a different sales associate’s signature, and a forged signature from my boyfriend. We have a copy of the signatures on our original contract to prove that is so. We wrote a letter to the lender agreeing to pay the current fair market value for the truck, as long as they agreed to not report the debt as a “settled” debt and remove any negative marks from his credit. They agreed to accept fair market value for the truck, and report an I1 rather than I9 to his credit, and release interest in the title. That was in 2012. Now we get a 1099-C for 2014. Is there any way to dispute this?

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

      It doesn’t sound like a simple situation so I don’t have a simple answer for you. You may need to get a tax professional with experience in 1099-C’s disputes involved. This article discusses that:
      The Little-Known Form for Avoiding a Big Tax Bill

  • Sandi

    I received a 1099-C for an old 2nd mortgage with CitiFinancial recieved in 2003. Ironically, on the same day that I recieved a letter from the collection agency First National Collection Bureau, inc on behalf of Springleaf Financial, the company that replaced Citi offering a 90% reduction. When I contacted Citi, they couldn’t tell me how old the debt was. When I asked if they were taken over by Springleaf, I was told no but, they may have some accounts. I defaulted on the loan by the end of 2003 and wondering if what their doing is ethical.

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

      I can’t comment on ethical but I can tell you were are getting a lot of complaints about old 1099-Cs and in your case, yours is really old. This more recent article may help if you want to fight it: The Little-Known Form for Avoiding a Big Tax Bill.

  • sombol1

    In the midst of doing my 2014 taxes and I get a 1099-C for 2013 for a very old debt. I pulled up my credit report in 2009, and it was there stating that in 2011 it was going to come off my credit and that it was being written off. I checked my 2011 credit report and sure enough it was gone. How do I go about fighting this? Will they take the amount from my 2014 tax returns?

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

    Do you qualify for the insolvency exclusion? (Use the worksheet in IRS Publication 4681 and remember to include the amount of cancelled debt as a liability.) If you do, that’s the easiest way to handle it. If not, you may need to try to dispute it as being filed in the wrong year but there is no simple straightforward way to do that. We wrote about it here: The Little-Known Moving Mistake That Will Cost You Big

    Oh and be sure to file a complaint with the Taxpayer Advocate and the CFPB. It’s ridiculous for them to send these out 12 years after the fact.

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

    Our condolences for your loss.

    I suspect that because it was an insolvent estate there is probably nothing you need to do, but I am not a tax professional so please don’t take this as tax advice. I suppose one option would be to wait and see if the IRS reaches out to you. At that point you could decide whether to get professional tax advice. The TurboTax forums have some discussions on this issue going on. That might be another place to try. If I learn something more, I will update my answer.

  • Jessica

    I received a 1099-c from USAA for an old bank account. I filed my taxes with that 1099-c for the amount of 378.26. I paid the taxes on that debt and now I should b done with it right? Well now USAA is telling me that I owe them this money still. I owe them 378.26. Is that legal? For them to write off this debt but still make me pay it back?

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

      It may be. As it stands currently there is a requirement that lenders must file a 1099-c in some circumstances where the debt has not actually been cancelled. That will change. However, you say it’s an old debt. Have you checked your state’s statute of limitations?

  • Rebecca

    So I have a slightly different situation. In late 2007, we quit making payments on our mortgage. In late 2008 or early 2009 the foreclosure was finalized. Except it was a rural development loan, guaranteed by the USDA. Which means when our house was sold at auction for 55k, the government then paid the balance of the loan (33k) to the bank. The USDA then came after us for that debt starting with keeping our tax return for the 2009 tax year. Had we known the hassle it would be, we would have filed bankruptcy back then, but we didn’t. So for 4 years, they kept our tax return to pay down the balance and demanded we fill out a form that we financially were too insolvent to enter into a payment agreement with them. Then in 2013, they sent the remaining debt (about 10k + 3k in newly added interest/fees) to the Department of Treasury for collections. It was (instantly) reported on our credit report as a delinquent debt of 180+ days in addition to already having our original foreclosure on our credit report; a major hit! Our choices were to enter into a payment agreement with them or have them start garnishing our wages. So we made a payment agreement and have been making monthly payments since then.
    The original foreclosure has already dropped off our credit report but so long as we we’ve been making payments on the debt, it still shows up on our credit report as a still delinquent/past due debt of 180+ days (originated in 2009, when they paid the bank) with a last payment/activity date of the month before’s agreed payment; causing quite a bit of frustration and confusion with trying to get any new loans.
    So this year, we filed our taxes knowing that, just like every year before, that the return would be kept but finally this year the debt would be paid in full (just less then $1,000) and able to drop off our credit report all together. So image our surprise at finding our full tax return deposited in our bank account. First I called the department of treasury, since they are the “debt collectors” we’ve been dealing with the last couple of years and they said that the USDA has re-called the debt; they don’t know why, but as far as they are concerned they are no longer coming after us for it. Being quite suspicious after all we’ve been through with them, I called the USDA to find out what curve ball they’re throwing at us now, and they said they have forgiven the remainder of the debt. Any amount already collected (like from my SSDI payments) will be applied to the final balance, but the rest will be written off. So in my exuberance of finally being done and some extra change in my pocket too, I forgot to ask some important questions that hopefully you can help answer for me so I don’t have to deal with calling them back (an arduous task all on its own).
    First, I’m assuming they’re going to file a 1099C at the end of the year. I’m okay with paying whatever tax that is, I understand how that all works. Next though, is how this will show up on my credit report. Had it been paid off, I know it would drop off altogether; but being forgiven on such an old debt, will it restart the 7 years of bad credit again for a charge off (even though we didn’t ask for it and had been making payments) or does it go by when the debt was originally delinquent and we can hope/expect to have it gone by 2016 (7 years after 2009, the date they’ve been reporting it delinquent since)? And the most important question, which would be better/less hassle in the long run: calling them back and paying the debt in full with the tax return (as originally planned; is that even possible) or keeping our tax return and letting the chips lie where they may fall (we haven’t been able to afford a family vacation since they started keeping our tax returns)? Thank you for your thoughts on this 🙂

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

      I wish I knew the exact answer Rebecca. I have no idea how they will report this latest wrinkle. But it seems to me that since the foreclosure was finalized in 2009 it shouldn’t report any negative information after 2016 – 7 years after the foreclosure. There is no specific reporting for forgiveness of debt, though I suppose as you say it’s possible they could report it as a charge off. If they do, though, I’d suggest you dispute it. Try to keep copies of your credit reports updated monthly (this is a scenario where a credit monitoring service wouldn’t be a bad idea).

      As for the 1099-c – if they do send that you’ll want to make sure it’s correct (we’re heard of a lot of wrong forms) and you’ll want to make sure it is reported in the right year. Can you get any documentation that this forgiveness occurred last year? You may qualify for the Mortgage Forgiveness Debt Relief Act exclusion but so far that’s only been extended through 2014 – though it could certainly be extended another year if Congress acts on it this year.

      • Rebecca

        Thank you for your quick reply and good advice! I had forgotten about mortgage forgiveness debt act ~ though I’m not sure if it applies to the federal government, and on the credit report the debt with them was listed separately from the foreclosure as “non-tax federal debt”. But the date is definitely this year ~ as of February 9th, 2015 according to the department of treasury. Lol, probably on purpose *just* to avoid coming under the M.F.D. act! 😉 . Anyways, thank you again; we’ll definitely be keeping an eye on what happens next.

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

          Ah I see. They came after you for the guarantee. I honestly don’t know the tax implications of that.

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

    Ryan – No simple answer to your question. The IRS says that the issuance of a 1099-C does not mean the debt is actually cancelled. You’ll probably have to get a consumer law attorney involved to try to get clear title to the vehicle.

    As for then disputing it, I doubt you can get it both ways. The IRS does consider forgiven debt taxable income and you clearly benefited from it.

    This is one of those very murky situations where you’re going to need to get help from a tax professional, consumer law attorney or perhaps both.

  • samara

    hello, i have a question i did not pay years ago for my Macys credit card, this happened back in 2007, and now it is 2015 and i received a 1099-c form for cancellation of debt. i never did bankruptcy, the amount they put in the form is $995.18 and i already did my taxes this year, what should i do??? this letter came too late, and is for an old debt is there a form i can filled out and send to the IRS???? please can you help me?

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

    The easiest way to handle it is to see if you qualify for the insolvency exclusion. If you don’t, then you may need to try to challenge the time frame in which it was issued. More details in this article:
    The Little-Known Form for Avoiding a Big Tax Bill

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

    Unfortunately, as I’ve written you have to address this when you file your tax return or the IRS will assume it is taxable income. If you qualify for the full insolvency exclusion that’s the easiest way to deal with it. Claim the exclusion on Form 982 and be done with it. If you don’t, then you’ll have to decide whether it’s worth trying to dispute it as filed in the wrong year. I wrote more about that in this more recent article: The Little-Known Form for Avoiding a Big Tax Bill

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

    That’s your call. It’s not a small amount of money – up to you if you want to give it to the government.

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

    Got it. It still sounds like the amount may be wrong, though, and if so you’ll have to dispute it.

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

    It sounds like it may not be correct. It can be challenging to dispute it, but it is possible. We’re written more about that here: The Little-Known Form for Avoiding a Big Tax Bill

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

    Great question but I am afraid I just don’t know the answer…you’ll probably need to talk with a tax professional on this one. I don’t know whether the final tax return would have to be amended or not.

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

    Jason – We wrote a subsequent article about this. It may be more relevant to your situation: The Little-Known Form for Avoiding a Big Tax Bill

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

    Maybe, maybe not. The IRS says that the issuance of a 1099-C does not indicate whether the debt can still be collectible though my understanding is that some consumer law attorneys are using the 1099-C as a challenge to debts that creditors or collectors later try to collect.

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

    So the collection agency has not filed a 1099-C yet? If that’s the case then I guess you will have to wait to see whether they do. If they do, then you’ll have to look at your options.

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

    Was it the collection agency that filed the 1099-C over the debt you disputed? In that case it’s possible they are breaking federal law. It is also possible the 1099-C could be disputed with the IRS. I haven’t seen this scenario before so you’ll need to talk with a tax professional or tax attorney familiar with these forms. We wrote more about disputing 1099-C’s here: The Little-Known Form for Avoiding a Big Tax Bill

  • Angie Jones

    I’m going through the same thing with Americredit. It’s a an old voluntary repossession of a vehicle I had back in 2003 or so. They repo’d it and sold it in 2003. I never had anymore contact with them from that time on. 2014 I get a letter from the IRS and a 1099 from them saying it was a cancellation of debt, the date on the 1099 was 2013. I’m in the process of trying to contact the IRS, and the Taxpayer Advocate to get someone to understand that the 1099 date is a lie. I contacted Americredit and they refuse to send an amended 1099 with the correct year, which is what the IRS told me to do, the first time I contacted them. I’ve run into a brick wall at this point. I’m pretty much recently separated from my husband, I have no job and am living with my mother. I have no money to even begin to give the IRS. Don’t know what to do at this point. So I’m on the waiting list with the Taxpayer Advocate, waiting to talk to someone.

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


      In addition to that, please file a complaint with the Consumer Financial Protection Bureau. If necessary, get your Congressman or Senator in Washington involved. They should have staff who help constituents wade through red tape at government agencies. But first try the CFPB – and please let me know what happens!

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

    Yes, debts discharged in bankruptcy are excluded from taxable income. There is a line to report them on Form 982 if you do get a 1099-c. (You may or may not.) It’s good you are thinking ahead!

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

    I would suggest you dispute it. We wrote a more recent article on that which you’ll find here: The Little-Known Form for Avoiding a Big Tax Bill

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

    Jamie – I sent you an email.

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

    Jamie – The 1099-C is supposed to list the contact information for the issuer of the 1099-c. And I beg to differ with the advice you got. The IRS only knows what these companies report. If the lender that issued the 1099-c then they need to rescind it! You are getting the run around and it’s your time they are wasting.

    Do you have the 1099-c? Did Wells Fargo list its contact information on it?

  • Jamie

    I received a letter from the IRS stating I had a “cancellation of debt” in the amount of $8350. I have no idea what it was for. The paperwork says Wells Fargo but I’ve never had an account with them. I’m sure they received the loan from somewhere else but I am clueless as to whether or not this is even my debt. Wells Fargo has nothing in their system with my SSN. Reading this makes me wonder if it was something that happened back in 1996-2000 when I was married to my ex. We had a vehicle that we turned in to Wachovia and was told we owed about $10,000 towards it… I also had a single wide that I had to let go in 2003 but never head anything at all back on that. Maybe this is from one of those situations. I just wish I knew before I just agree to pay the IRS $1300

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

      Did you already pay the IRS? If not, it sounds like you need to fight this. If you did, I am not sure if you can undo it or not but I think it’s worth looking into. I wrote an updated article about this fairly recently: The Little-Known Form for Avoiding a Big Tax Bill

  • djea3

    forgot to mention that correcting thier paperwork includes thier erroneous 1099 docs with copies to you directly.

  • djea3

    I am not an attorney but I suggest:
    If you have a copy of the pay off notice, then you should send them a copy back with a demand to correct thier internal paperwork and send you a notice that you do not owe anything. Send this certified..not return receipt you will have tracking online to prove delivery.
    Be sure and give them 30 days to have thier response delivered in your hand!

    By the way, releasing the title is in fact prima facia evidence of payment in full in accordance with the original contract (they state that they will keep themselves as lender of record until paid off then release).

    If they do not send you a zero balance, I would suggest finding an attorney that sues banks for collection law violation. That is where you should start and it will most likely be in Federal Court. Most of these types of attorneys will work contingency fee. You may not get much but the atty will and your “creditor” will have huge costs.

    Good luck.

  • Greg

    I received a bill this month from the IRS for a cancellation of debt in 2012. This was for an auto loan that defaulted in 2007. I live in Texas and the statue of limitations is 4 years. Do I owe this $1900 bill?

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

      First of all, whether you owe taxes on the cancelled debt depends on whether you qualify for an exclusion like the insolvency exclusion which we describe in this article:

      1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

      The second question is whether the 1099-C was sent out at the proper time. That’s a little harder to pin down and it depends on the proper date of the identifiable event. We talk some about that in this article: What is a 1099-C? Your Top 11 Questions Answered

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

    Mike – I assume you have read the instructions for Form 1099-C? It says “the debtor may be an individual, corporation, partnership, trust, estate, association, or company” and it definitely sounds like you cancelled the debt, so perhaps they are trying to scare you. (I am not an attorney or a tax professional though, so please don’t rely on this as that type of advice.) Have you tried contacting the IRS for advice? Or do you have a tax professional you work with you can review it for you?

    • concerned citizen

      Payment In Full for “services” or “professional services” not fixed dollars as in credit card or other loan is a negotiated settlement. Laws of Contracts apply here vs. a less than paid in full on a loan vs. credit card with interest rates, penalties, late payments, etc. and statute of limitations on collections. This is a legal question, and the negotiated debt of services rendered would appear to be the lack of cancelled debt. Consider the costs of litigation and the IRS is not going to pay the carpenter’s legal fees. May I suggest he talk with a competent tax professional and attorney first.

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

    Please read our more recent and updated article that talks about how to dispute a 1099-C: The Little-Known Form for Avoiding a Big Tax Bill

  • Snervin

    In September of 2013 I received a letter from the IRS stating that I owe $500 because of this 1099 c being filed for the 2011 tax year. The collection company I had never even heard of had bought my delinquent American Express account at some point and then all of a sudden filed this form. Again I have never heard of or from this company until the IRS sent their letter. Upon talking with Asset Acceptance I was told the last address on file for them was somewhere I lived for one month in 2008 (mind you I had my mail sent to my mother’s house during this time and nothing was filled out with this address at any point). I do not have any records from the American Express account because the whole debt disappeared from my credit report in 2009 and ofcourse I thought everything was over. I have sent a letter to the collection agency requesting all information regarding the account, the amount, when it was purchased, when they ever had me sign an agreement for forgiveness, everything. Anything else I can do?

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

    We’ve written a detailed article that should help:
    What to Do if You Can’t Pay Your Tax Bill

    If you can get into an installment plan, that would likely be a very good option for you. Generally, I don’t think the IRS is interested in seizing your truck for that small tax debt but they could place a lien against your assets if you don’t deal with the tax debt.

    In addition, you will find information about when the IRS takes tax refunds for back taxes on their website here: http://www.irs.gov/taxtopics/tc203.html

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

    We’ve written a detailed article that should help:
    What to Do if You Can’t Pay Your Tax Bill

    If you can get into an installment plan, that would likely be a very good option for you. Generally, I don’t think the IRS is interested in seizing your truck for that small tax debt but they could place a lien against your assets if you don’t deal with the tax debt.

    In addition, you will find information about when the IRS takes tax refunds for back taxes on their website here: http://www.irs.gov/taxtopics/tc203.html

  • junior

    In 2008 we foreclosed a home and recieved a 1099c and 1099a, gave it to our tax preparer at the time and filed and assumed its over and dealt with. Now we recieved another 1099c for the same foreclosure for 2013, we thought this was over with. Why would they send another and do we have to file it again? As its too late to find out, our new tax preparer adviced us to file without it and pay whatever we owe and try to find out after. Will they eventually find out we didnt include it with this years taxes, what would happen.

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

      If you are getting another 1099-c for the same debt then I would suggest you dispute it. The IRS will assume it is correct and that you owe taxes on the debt unless you can show them why it’s wrong. This article should help: The Little-Known Form for Avoiding a Big Tax Bill

      As to why, who knows? We’ve received lots of comments from consumers who have received erroneous forms.

  • Linda

    I receveid a 1099 last year, and consulted a tax professional. The debt was forgiven in a date of 2011. So the tax professional advised that we need to amend the 2011 return. Now the IRS sent me a letter saying that I never reported the 1099C in 2012. Now what do I do?

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

      Linda – if I understand you correctly the debt was forgiven in 2011 and you proactively took care of it by filing an amended return and then the creditor didn’t file it until 2012? Then it sounds like you need to dispute the year of the 1099-C with the creditor and then let the IRS know what happened. Of course, I recommend you consult with the tax professional again – I am not one. (And please file a complaint against the creditor with the CFPB. Someone needs to do something about all these inaccurate 1099-cs!)

      This article may help: The Little-Known Form for Avoiding a Big Tax Bill

      • Linda

        Thank you for your help! A little update on this. I couldn’t find my records for my 1099-C, so I asked the credior for the form. After 4 phone calls of them promising to send I finally received. But its a different letter. The form that I received previously stated that it was cancelled 12/15/2011. This new form now says 1/02/2012, with a clear 2012 mark on it. I know this because even the tax preparer put in the notes on the amended return the date of cancellation 12/15/2011. I remember that was the reason for amending the 2011. This is so frustrating, because I’m not sure how to handle now. I don’t have the original copy of what was sent to the IRS. I believe I can order, but that takes$50 and 75 days, in which I have to respond to this letter soon I’m assuming. I wish there was just someone to call that can fix this mess!

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

          I wish I had an answer for you. These forms can be such a mess. Do let us know what happens.

      • Linda

        What number can I call at the IRS – will that help any?

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

          I doubt it – you can always try. You’d just call the main number on their website to start.

  • Deborah Valentine

    I am 71 years old with a recently forgiven $56,500 student loan. The original loan is about 24 years old. It was sold 11 times and a bunch of banks made a fortune on it. My question is, will I owe taxes on the entire amount or just the original amount of the loan as interest is NOT income, it’s outgo. Or, will I owe the entire amount in taxes. The loan was continuously being made new because it was sold.

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

      It is a great question Deborah and I don’t have a set answer for you. It depends on whether the creditor reports the balance including interest. My guess is they will.

  • Bill

    Hello Gerri, I received a 1099-MISC Copy C form from the IRS which indicated nonemployee compensation on Line 7. My ex-wife is a business owner and the Payer’s amount indicates her business name.

    I have never worked for her company, During the marriage, I was employed by another company. When I reached out to clarify the issue, she indicated the nonemployee compensation amount is for divorce settlement payments (she’d written divorce settlement checks on her business account and the remaining bal. was for a vehicle that was granted to me during the divorce.)

    Am I obligated to pay taxes on divorce settlement checks and the value of a vehicle?


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

      Hi Bill – I have only ventured into the 1099-C issue because it deals with settled debt and my area of expertise is credit and debt. I am not a tax professional, though, and don’t know the answer to your question. You may want to try asking Joe Taxpayer at http://www.joetaxpayer.com. It doesn’t sound right for her to report it this way but I don’t know for sure.

    • djea3

      I believe that the amounts taken by your wife and paid to you using company checks are actually direct income to her. If she failed to pay SS and withhold taxes she may have committed fraud on the IRS.

      Also if she left you with a 1099C from her company (the IRS normally does nto issue them the company does) then she was most likely in violaton of the divorce decree.

      I would do two things:
      1. Challenge the 1099C with copies of your divorce decree and state that in fact this was your wife’s personal income and payme to you ordered by a court.
      2. return to the divorce court and ask for sanctions and penalties against her for violating the court order.

      3. I would consider paying the taxes and having a court order from the divorce court that the full amounts plus interest are due you from her at this time. Wait until the divorce court rules to pay the taxes.
      4. If you choose 3, the court will have to agree with you and you will have to pay the taxes and interest on them. Do not chose 3 unless you are sure that she is solvent enough to be able to pay you the amounts owed plus interest and that the court will aid in collection through the court (as she has proven that she is unwilling to pay in accordance with court orders)

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

    I am so sorry to hear of your father-in-law’s debt. Unfortunately, I have not been able to pin down solid information on this scenario yet and probably can’t get any insights until after April 15th! You are going to need to consult a tax professional who really understands these forms to figure out how to handle it.

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

    Brian – We have written a lot about this issue. There are two stories I recommend you read. The first one will help you understand why you go this form and what your options are. The second will explain how to dispute this form. Based on what you are saying it sounds like the lender filed the 1099-c form way too late.

    What is a 1099-C? Your Top 11 Questions Answered and The Little-Known Form for Avoiding a Big Tax Bill

  • brian

    i post a question but not sure if it went through due to internet connection if you didnt get the post please let me know and i can post again..thanks

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

    That sounds like a really long time for them not to file the 1099-c. It is possible they are sending it later than required to under IRS guidelines. I recommend you read this article: The Little-Known Form for Avoiding a Big Tax Bill

  • Stephanie

    Hi, Gerri
    Is there a statute of limitations on thentime frame that a 1099 C may be filed? I received a call in regards to a debt that is 14 years old for a finger hut catalog account that I don’t even recall opening when I was 19 years old. They are threatening me with a 1099 C I don’t even live in the same state any more they said because the amount is over $600 ($776)? I talked to my CPA and she told me that they cannot do that because the time frame for them to do that has already passed is this correct what should I do?

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

      That sounds like it could be a potentially illegal debt collection threat. I would recommend you file a complaint with the Consumer Financial Protection Bureau. Will you let us know what comes of it? (Also be sure to read our stories about your debt collection rights. This collector may be breaking the law. The Ultimate Guide to Debt Collectors

  • Brenda

    Thank you Gerri for your great information. I have one more question if I may? Who do I order a wage and Income statement from? IRS?

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

      Glad you are finding it helpful! You can request the transcript on the IRS website: http://www.irs.gov/Individuals/Get-Transcript. However, note that for 2013 income, the IRS says that full information may not be available until July of this year.

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

    You will have to amend your federal tax return. Not sure how long you’ll have to wait.

  • Brenda

    I have filed Bankruptcy because of a divorce and which it includes a foreclosure 0f an upside down mortgage and multiple creditors none of which have sent 1099-c. the IRS is not helpful and they said that companies deadline to file 1099-c is May and June. The deadline to mail tax forms or w2 forms is Jan 31. does not make good sense. It seems IRS is setting people who are trying to be responsible and do the right thing up for failure just to add incurring late fees due to the acceptable delay for creditors. How and what should I do? File with information from bankruptcy discharged debts without 1099-c and with an explanation? if not I am sure I will audited multiple times again as I was last year.

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

      Brenda – First of all, the deadline is not May or June so I don’t know why they are telling you that. Look at the current 1099-c form on the IRS website – it says they must be furnished to the taxpayer by Feb. 2nd. So if one of these forms was issued for 2013 you should have received it by now (provided the creditor has your correct address.)

      If these debts were included in bankruptcy then you likely can claim the bankruptcy exclusion to avoid taxes on the debt. And creditors aren’t required to file one of these forms for debts included in bankruptcy, so they may or may not.

      You can always order a wage and income transcript to see if there is anything reported that you weren’t aware of. It’s good you are staying on top of it, but it doesn’t seem like you need to get too stressed over it. At least not yet!

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

    That still doesn’t explain why they claim you owe them money after you requested a payoff. I would suggest you start by sending them a certified letter stating that you believe the 1099-c is wrong, and asking them to reissue a correct one showing $0 owed. State that you requested a payoff when you paid it off, and that the lien was released after you paid it off. You can even enclose a copy of the lien release. See what they say.

    If they aren’t cooperative you are going to have to either try to fight it with the IRS or follow the advice I gave above. I am not a tax professional or attorney, however, so I would encourage you to consult a professional for assistance.

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

    It would depend on what they are claiming you still owe them for. You can certainly talk with a consumer law attorney, or you may want to file a complaint with the Consumer Financial Protection Bureau and your state attorney general’s office.

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

    Please talk with a bankruptcy attorney AND a tax professional with experience in these forms right away. I don’t know if you are too late to file for bankruptcy and avoid cancellation of indebtedness income or not but if you can, you may want to seriously consider it. Otherwise you may wind up owing the IRS a big tax bill. And if it was in your name only your friend don’t have any legal responsibility, as you already know.

    At any rate, cancelled debt on a rental property for a large amount is complicated and is not something you should try to handle on your own without expert help.

    • Befuddled in FL

      Thank you for such a prompt response. My burning question is still, “How long do I have to wait for the Bank to either file a judgement against me for the loan minus FMV difference plus all of the accrued legal fees and interest, or send me a 1099C?”

      I don’t want to speak to a professional when nothing has happened yet and I have nothing to show anyone. I don’t qualify for bankruptcy or insolvency.

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

        That’s the problem. You have no idea when or what they will do. There is a statute of limitations for filing a lawsuit and I believe in Florida it is five years. The 1099-C may be coming at a later date – who knows? These are the big banks we are talking about. But once the 1099-C is issued it will likely be too late to file bankruptcy and avoid the cancellation of indebtedness income. Plus if they wait it is going to be harder for you to recreate the information you need to claim the insolvency exclusion if you can do that.

        It’s up to you, but I personally would not want this hanging over my head without some contingency plans in place.

    • Kris

      This happened to me too, I filed bankruptcy in 2006 and the IRS took $2,000 from my tax return in 2012 for a debt from 2003 that was discharged in my bankruptcy. After I sent them the paperwork showing the debt was discharged TWICE. So what am I supposed to do? Pay an attorney $3,000 to go to court to get back my $2,000? Would the IRS be required to pay my attorneys fees if I won?

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

        Kris – Have you contacted the Taxpayer Advocate? Will you do that and let us know if they are able to help? The other option is to contact your US Congressional Representative or Senators. They always have staff members who help constituents solve red tape problems with government agencies.

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

    If I understand you correctly, you defaulted on the debt, then the creditor issued a 1099-c, then you paid the debt. Is that right? I don’t know of any specific mechanism for reporting this so my understanding is that you will have to file an explanation with the IRS stating that you paid the debt.

    If, however, you paid the company and they issued a 1099-c anyway, then you need to send company that issued the 1099-c a letter asking them to correct the 1099-c and report the corrected amount to the IRS. Send your letter by certified mail and keep a copy for your records. If they refuse, you will need to let the IRS know that you disputed the 1099-c because you paid the debt.

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

    I am sorry but your situation is confusing to me Which creditor sent you the 1099-C? The one that settled or one that hasn’t? Has the one that agreed to a settlement been paid by this consolidation company? Did the settlement company explain that you could get a 1099-c for any balances you did not pay back?

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

    Diana – I am sorry I don’t understand your question. Do you not recognize the creditor? Do you not know what debt this is for? If that’s the case then you need to call the creditor who sent the 1099-c and ask them to clarify it for you. And I don’t understand this statement at all: “The tax officer said to wait a month to resubmit.”

  • stormyggirl

    I think I have you all beat on someone trying to collect a debt. This is from a credit card clear back in 1992. Twenty-two years later the collection agency is not only trying to collect they debt, but they are threatening me with a 1099 C. I told them it was not MY debt and I wasn’t going to pay it. Can they still file a 1099 C with the IRS twenty-two years later? I live in Ohio and according to our law there is a statute of limitations of eight years. I’m sorry, but I just don’t understand how companies can get away with this stuff.

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

      I hear you. Quite outrageous.

      If they do file a 1099-C it sounds like you can absolutely fight it.
      In the meantime, please file a complaint with the Consumer Financial Protection Agency and the Taxpayer Advocate. Be sure to name names in your complaint to the CFPB. Debt collectors should not be using this as a threat.

      Or consult a consumer law attorney in Ohio – this may be an illegal threat under the Fair Debt Collection Practices Act and you may be entitled to damages.

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

    Sean I am not a tax advisor but to me the issue sounds like it is that there is no identifiable event – at least not yet. They haven’t cancelled the debt (as indicated by their attempts now to collect) and three years with no collection activity have gone by. If there is no identifiable event then how can they file a 1099-C?

    If it were me, I would fight it.

    This is a large amount so I highly recommend you talk with someone with experience in these forms. But then there is always the issue of what you are going to do about that debt. Are you going to pay it? Settle it? And if you do the latter will you have to pay taxes on the amount that is cancelled? I don’t know your financial situation but if you can’t afford this, it may be one where bankruptcy makes sense to wipe out both the debt and the potential tax liability.

  • Confused

    Hello I wrote but obviously my post was removed. I had a debt from 1997 to GMAC for a car lease. The car was repossessed in 1998. According to the IRS 2011 GMAC/Ally Financial submitted a 1099 to my S.S.N. The IRS is now after me for taxes on this debt. I had filed bankruptcy but it has been dismissed since 2012. How can GMAC come after me for a debt that is so old? Any info would be helpful if possible.

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

    David – One identifiable event is the expiration of the statute of limitations which you said occurred in 2011. (See Code C in IRS Publication 4681). Based on that, it may be possible that the creditor filed the 1099-C in the wrong year. However, I am just speculating since I am not a tax professional. If you don’t qualify for another exception or exclusion, and you feel like fighting it, then you may want to use that as a basis for disputing it. And of course you may want to consult a tax pro.

    Will you let us know what happens?

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

    Gena – The state exclusions don’t always match the federal ones. I am going to have to suggest you talk with a California tax professional with experience with this issue.

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

    My understanding is that this must be handled on your 2011 return. It may require you to amend your return. I am going to have to recommend you talk with a tax professional with experience in these forms.

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

    If the debt is his name and the 1099-C is issued for him then my understanding is that he should file Form 982 with his taxes. I wrote about spouses and 1099-Cs in this article. Unfortunately it’s not always a simple matter and may require assistance from a tax professional:
    Form 982: The Way to Battle a 1099-C

  • Mark235

    A friend for whom I do her taxes just received a 1099-C from Capital One for $7.5K for tax year 2013 for credit card debt. She claims that she never applied for the credit card, never saw the card and never used it. She suspects that her late husband who passed away in 9/1999 applied for the card in her name after he trashed his credit. She has had a FICO score of around 800 for at least 7 years and doesn’t have a history of debt issues. Over the years (4/2001, 10/2002, 4/2010) she had received notices from collection agencies attempting to collect on the debt and she replied back in writing contesting the debt. I called Capital One (the # that was on the 1099) today and they said that they charged off the debt on 1/12/2000 (yes, 14 years ago). The date of identifiable event on the 1099 was 11/15/2013. She received a letter from Capital One dated 6/11/2010 which stated “after researching your account we’ve deleted the above referenced account from your credit file”. The Capital One rep I spoke to today said she suspects that the 6/2010 letter was generated due to a statute of limitation issue. She never filed for bankruptcy and I don’t think that she can use the solvency exclusion.

    Any suggestions as to what her next step should be?

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

      This sounds way too old – not to mention the fact that it doesn’t sound like it is her debt to begin with. I don’t have an easy answer here but the best thing would be for the card issuer to issue a corrected 1099-C showing zero for her. I’d suggest she try to get the issuer to do that but if they don’t, then I would recommend she file a complaint with the Consumer Financial Protection Bureau and the Taxpayer Advocate. State that a. She never had any knowledge of this debt and b. even if she did this is too old. Of course, she may want to talk with a tax professional.

      (I am working on another article on challenging 1099-Cs for old debts as well.)

  • lin lou

    i just a 1099 notice from chase bank say the charge off was for 22,032,so if im understanding this correct that they make my whole tax retrun right , does anyone know how tax it is for this amount

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

      Lin – If the amount is $22032 then you must include this in your taxable income unless you qualify for the insolvency exclusion. How much that increases your taxes depends on how much other income you have and your tax rate. Think of it as if you had $22032 in extra income for the tax year.

      Make sure you read publication 4681 and complete the insolvency worksheet to see if you can exclude part or all of this amount from your income. If you don’t understand it, I recommend you get help: The Complete Guide to Finding Tax Help

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

    Those are very good questions. The problem/question is when the identifiable event occurred. What year did you lose your home to foreclosure? Do you know if it is a recourse or non-recourse loan? What state do you live in? I can’t give you legal or tax advice but will certainly try to point you in the right direction.

    • sunnyfl

      The foreclosure happened in October 2013. It’s a recourse loan. We live in Florida. I sincerely appreciate your insight.

  • Confused

    Hello I had a car lease back in 1997 for a vehicle. I received a deficancy letter from the IRS stating that I didn’t claim it on my 2011 taxes. I am still fighting the IRS to this day regarding this. I never received the 1099 from GMAC which I am pretty sure this debt was sold several times to different collection agencies. IRS is asking for a Fair Market Value of the vehicle that it sold for back in 1998. Like I am supposed to know that. Checked Kelly Blue Book value and it is giving me the value as of now. How do I find this information? I called GMAC and they told me that is not any of my business what it sold for. They claimed 5,277.00 with the IRS in 2011. What can I do about this? Can someone contact me to give me some type or guidance. I have been banging my head against the wall with this since the IRS is the big dog they can basically do what they want and tax you. They sold the lease vehicle back in 1998. Nothing showed on my credit report in 2010 when I filed bankruptcy for my house.

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

      So if I understand you correctly you defaulted on your vehicle lease in 1997 and GMAC filed a 1099-C in 2011? Did you hear from any collection agencies or anything around the 2009-2011 period?

  • stephanie

    Hi, just found your site and im so confused.
    To my understanding if i have a bad debt it will be on my credit for 7 yrs. And the bank can write it off as a bad debt and get relief from the hardship.
    So why now does the irs have the right to take sonething fron years ago and apply it to todays income? And the sad thing is…some people….alot my guess could have filed bankruptcy under the old laws that would have protected them. This just seems wrong!

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

      Yes, 1099-C “income” is another reason for consumers to consider bankruptcy in the case of overwhelming debts, but unfortunately they don’t know that until it is too late.

      As for the why – you’d have to ask Congress about that one!

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

    No it does not mean that unfortunately. They have to send the 1099-c according to IRS guidance. I talked more about that in this article: What is a 1099-C? Your Top 11 Questions Answered

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

    The IRS considers cancelled debt taxable income, even though the lender got the truck back. You don’t have to have a gain to owe taxes on cancelled debt. Please read my first article on this.
    1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

    If you qualify for the insolvency exclusion, that is the easiest way to deal with this. But if you don’t then an argument might be made they filed it too late. Disputing that can be tough, though and you may need help from a tax professional.

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

    Probably. The charge off happened, even if you later settled the debt with the collection agency. And the 1099-c really don’t have anything to do with the reporting of the information on your credit reports since that’s a tax matter. Of course, without knowing all the details I can’t say for sure.

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

    Sandy – you may very well be right. I’d suggest you fight it. We wrote about one of our readers who did that through the Tax Court: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

    We also wrote a story about how to dispute a 1099-C: Tax Help: How to Dispute A 1099-C Form

  • Bobbie

    I have recently received two phone calls from a collection agency in one week, for a previous bill for my husband that I have only been married to for almost 2 years, the lady proceeded to tell me if my hu sband does not take care of this $11,900.00 that is due she will proceed with a 1099, I asked her what year this was from she said 1996. I told her I had no clue about it and I would give him the message, she was asking where he worked, address and so on. I told her thats been over 18 years and shouldnt it be wrote off, she said yeas it has, but he still owes for all the taxes that have occurred over the years. and if he did not return call and work something out payment wise, she would have no choice but file 1099 with IRS. I do not understand.

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

      She is using the 1099-C as a threat to try to collect the debt. It is far too late for her to send a 1099-C but the problem is there are no penalties (as far as I know) if she does. So this is a new threat collectors are coming up with to scare people into paying.

      No doubt the statute of limitations has expired on this debt so this is the only way they can get you to try to pay.

      What state do you live in? What state did he live in when he incurred the debt?

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

      First, you should never pay a collection agency based solely on a phone call. If the initial contact is by phone, the collection agency is required to mail written notice of the debt. That’s the law.

      I suspect this could be an illegal threat. I am not an attorney or tax professional but based on my research I see no reason why a collector should be sending a 1099-C on a debt that is 18 years old. I would encourage him to file a written complaint about this agency with the Consumer Financial Protection Bureau and send a copy to your state attorney general’s office.

    • Djea3

      I am not an atty but:
      Hey, this person violated all kinds of laws in talking to you at all. YOu are NOT your husband and not on the debt. She has committed federal crimes as far as I can read the law.

      I would seek an atotrney that sues collection agencies!

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

    When you say you were notified by the IRS, what tax year was the 1099-C issued for?

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

    Are you saying you received something from the IRS? If so, what tax year did they say it applied to? You need to order a wage and income transcript for that year from the IRS to see what was reported.

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

    The question is which tax year the 1099 was issued for. (If it was sent in Jan 2012, for example, then it would have likely been for TY 2011.) That’s the year it needs to be addressed.

    When you get the copy please come back here and comment again and be sure to specify which tax year it is for.

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

    Have you tried to see if ypu qualified for the insolvency exemption? is so that would be the easiest way to deal with it. You could fill out form 982 and claim the exemption.

  • Kelly

    I just received a notice from the IRS regarding a cancellation of debt for a repossession in 2008. I never received a 1099-C from AmeriCredit. The difference shows $8,905. Is it correct, that in 2008, if the fair market value of the vehicle is more than the cancelled debt, it should not be included as income?

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

      Kelly – What tax year was the 1099-c issued for? What do you mean by difference? What is in Box 2 – amount of debt discharged?

  • Deanna

    I received a letter today from IRS that my old bank has cancelled/forgiven my debt which is a car loan. My question is..will I get the title for the car that the bank has/had or was the title sold to the debt collector 4 years ago?

    I was contacted once by the debt collector then over the years moved, changed phone number etc and was never contacted again.

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

      There can be a difference between cancellation and forgiveness. Do you know which is the case for your loan? By letter, do you mean you got a 1099-C? Was the loan canceled/forgiven by the bank but not by the collection agency?

      • Djea3

        I am not an attorney however logically:
        I am unsure that there can legally be any difference. If there is a collection agency, then they work for the bank. It would seem that if the bank cancelled or forgave the debt then the agency working for them can no longer collect as it is forgiven. Best to send a copy of the 1099C to the collection agency with a notice to cease and disist as the debt is cancelled by law.

        If the debt was sold and another party owns and is attempting collection, that would require the negotiation (sale) of a negotiable instrument (loan) to the third party. In that case the original lender has no interest in the note and does not own it, therefore it can not issue a 1099C. Sending proof to the IRS that the original lender sold the note and does not have the right to 1099C would be appropriate.

        There would still be an outlying question of the negotiated sale agreement between the new owner and originator ow previous owner. If there is a buy back clause in the agreement, the 1099C might have initiated a buy back. In that case the debt was gorgiven by the orignial holder and that holder by sending the 1099C may have repurchased the note.

        I would argue the latter to everyone first if it was me. It used to be rare to sell non-recourse, but is common today. So there may be a chance that the action of the original holder has repurchased the note 9whether paid for yet or not).

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

    Yes, unfortunately you’ll need to deal with the IRS on this. They don’t have a simple form that says, “This 1099-C is in error,” so you’ll have to contact them to find out how to proceed. If it’s any help, some of our readers have had their problems like this cleared up on one phone call. Hopefully that will apply to you too!

    (PS: Make sure you get a corrected 1099-C from the company that issued it. They need to send a corrected form to the IRS with a copy to you.)

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

    Yes, we’ve written a lot about this. The IRS considers settled debt taxable income and requires you to include it in your income unless you can show that you qualify for an exclusion. (You may be able to avoid this tax bill if you do qualify for an exclusion, so before you pay this bill to the IRS, learn about how this works and get professional tax advice if needed.) I’d suggest you start with this article: What is a 1099-C: Your Top Questions Answered

  • george

    I cosigned for a grandson a college loan of 6700.00.in 2006. The lender wrote the loan off a year later. per my credit report.
    Now collectors are calling. and in letters stating they have been assigned to collect the loan balance. They do not say that they have bought the loan.My state of Delaware has a statute of 3 years for collections.Any suggestions?

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

      Is it a private loan? If so, then the statute of limitations may have expired. However, that won’t necessarily stop them from trying to collect. It may simply mean that if they sue you to collect you can appear in court and raise the statute of limitations as a defense.

      If it is a federal student loan, there is no statute of limitations. They can try to collect indefinitely and they can go after your tax refund, even your Social Security payments if you receive them.

      We would encourage you George to talk with a consumer law attorney familiar with these issues to understand your rights so you can reply with confidence when they try to collect from you. You’ll learn more at TheStudentLoanLawyer.com

  • Gerri Detweiler

    The two issues – how long these accounts are reported and when the creditor must send a 1099-C are technically unrelated. The IRS requires that creditors send 1099-Cs under certain circumstances that I outlined in my articles, while the amount of time that accounts can be reported is covered by the Fair Credit Reporting Act.

    However, if you have not made any payments on this debt for six years and there has been no substantial collection activity recently (it wasn’t sold to a new collection agency that tried to collect, for example) then it sounds like the creditor could be late in sending the 1099-C.

    My suggestion is this: If you qualify for the insolvency exclusion to avoid paying taxes on this cancelled debt, take it and be done with it. (Do file a complaint with the taxpayer advocate though: http://www.improveirs.org/speakup.aspx).

    If you don’t, then you’ll have to try to pursue some of the strategies described in my article to fight back.

  • lynda

    we sold our home as a short sale getting a 1099-c settlement paid in full at a lower amount. we are both 65 and getting social security checks. will we have to pay taxes on amount forgiving.

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

      Lynda – it would depend. Gerri talks about this in another article here, and here. Here’s a quick excerpt:

      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 you 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.

      Still confused? Read 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt then tackle the insolvency worksheet on page 8 of IRS Publication 4681.

  • Lyn

    I have another question to go with all of the above. I have a hospital I owe money to. Originally worked out a payment plan however with the economy could not keep it up. I was threatened I was going to get a 1099 and the rest of my debt would be a write off and reported to the IRS. About 8 months later In early April I received not a 1099 but a
    W-2 for the amount owed. I took responsibility and reported this on my taxes and paid. At least am still paying off in installments. Last week I received a law suit for the exact amount. They are now suing me after I reported the W-2. Is this legal? Can this be done? Please I hope you read this and are able to answer. It would be deeply appreciated. Thanks so much for the article. Very informative. Lyn

    • Gerri Detweiler

      First of all, Lyn, I don’t know why you received a W-2 and not a 1099-C. That sounds like a mistake to me. As to the issue of them trying to collect, the IRS says that a 1099-C doesn’t prevent a collector from trying to collect. Whether they can do so is a matter of state law. However, there is recent court case that may be in your favor: Bank Cannot Issue 1099-C And Subsequently Try To Collect. I would caution you that this is how one court interpreted the law. However, you may be able to raise a similar defense to this lawsuit. I would encourage you to contact a consumer law attorney in your area for advice.

    • Gerri Detweiler

      Lyn – First of all, a W-2 reports wages – not cancelled debt. So it sounds like they sent the wrong form. As for the second question – can they sue you after sending a 1099 for the same debt? The best answer I can give is maybe. While the IRS specifically says that a 1099-C does not mean there can be no further collection activity on the debt, there has been at least one court decision that came to the conclusion that the 1099-C meant the debt was cancelled. I’d encourage you to find an attorney who is familiar with both 1099 issues and debt collection.

  • Danny Overstreet

    I. too, have been hit with a 1099C for an old (12-13 yrs) debt. Portfolio Recovery Associates started collection efforts about 4 years ago. Due to their constant calls, I wrote them a “cease and desist” letter in 2010. No word from them since. However, the IRS sent me a letter that I owed $2K in taxes for the 2012 year. PRA had apparently filed a 1099C of which I was totally unaware. I spoke with the IRS and asked them to dispute, which they agreed to do. Almost 3 months later I received a letter from IRS, stating that PRA verified the charge was legitimate. Actually, they said “PRA verified that they paid you this amount.” I don’t understand how an original creditor, whoever this was, can write off the full amount years ago, sell it to a collection agency for pennies on the dollar, who then writes off the same full amount and tries to force the debtor to pay taxes on said amount? This is very wrong in my opinion and a tricky way for the IRS to extract taxes on unsuspecting citizens.

    • Gerri Detweiler

      Danny – Personally I still think you should fight this. The person at the IRS missed the point here. The debt was 12-13 years old! That debt sounds like it was outside the statute of limitations and it’s way too old for them to be sending a 1099-C. (Not to mention the fact that they didn’t send you a copy.)

      I don’t know if it’s still too late to bring an action against the collection agency, but if I were in your shoes I would contact a consumer law attorney with experience in debt collection cases. (You can visit Naca.net for a referral.)

      At a minimum, please be sure to file a complaint with the Consumer Financial Protection Bureau and the Taxpayer Advocate: http://www.improveirs.org/speakup.aspx

  • melissa

    my husband received a 1099-c that was dated for the end of December 2012 for the balance of a credit card. we did apply that form to our 2012 taxes. We have not pay anything since 2009, not even a settlement offer. How should that reflect on his credit report?? a $0 balance since a 1099-c was filed??
    I did confront the credit card company and they will not change it. what should I do?

  • Kris


    I received a 1099-c for 2012 for an unpaid credit card that was closed in 3/2006. On my credit report it states ” dispute resolved reported by grantor, closed 3/2006″. The report also shows ” last active 5/2006″ . Can they do this?

    • Credit.com

      They can. The 1099 doesn’t erase the debt so the collection would still be reported in your credit report until it reaches the statute of limitations for reporting. The dispute statement means that you (or someone) must have filed a dispute to against the collection and the dispute was investigated and resolved as reported by the creditor (the grantor).

      For more on how long negative information can be reported, see How Long Does Negative Info Stay on My Credit Report?

    • Gerri Detweiler

      Kris – It sounds like it’s too late for the creditor to file a 1099-C. Unfortunately, as I explain in my article, the IRS has no specific procedure for disputing an old 1099-C so you’ll have to follow the tips I described in the article. You may also find this piece helpful: http://blog.credit.com/2013/04/taxpayer-v-irs-3-stories-where-taxpayers-win/

  • Lorraine

    I have been refuting a supposed cancelled debt that is trying to be added on to my 2010 return. A collection agency claims the 1099 was mailed out but to date I have never received anything. I have records showing the debt was part of a debt consolidation plan and I had made payments on it for 8 months until I realized the company in charge was mis-managing my money and I took over payment on 8 of the 10 accounts myself at end of 2010. This supposed “cancelled debt” was one of the two I did not resume payments on though it shows as a negative credit entry on a June 2011 credit report I happen to have. It is not listed any place on a credit report that I got about a year later in 2012. IRS claims the collection agency sent them a form and says the debt is valid, and so, that is all they need. I have a copy of the form and the majority of the info they provide about me personally is not even correct, but the IRS is saying it is still justification of the cancelled debt. I have been in grad school and have over $50K of student loan debt about to become due and do not have the $2000 they are claiming I owe in back taxes for this debt I NEVER got any notice on until IRS sent me the form saying it had not been on my 2010 return. That was in August of 2012. I am growing tired of going back and forth with the IRS. Is there anything I can do to just prove to them I don’t owe this money on my 2010 return? While it may have been cancelled, I just do not see how 2010 was “selected” as the target year given I have provided so much documentation to the contrary. Thanks!

    • Credit.com

      Lorraine — Based on what you’ve explained, this particular debt was one of the two that you did not resume payments on, which leads me to think it was most likely never paid.

      “This supposed “cancelled debt” was one of the two I did not resume payments on though it shows as a negative credit entry on a June 2011 credit report I happen to have. It is not listed any place on a credit report that I got about a year later in 2012.”

      Did you pay the debt in question? If the debt was never paid, the lender/collector is legally within their rights to issue a 1099 so it’ll be difficult to prove otherwise unless you paid the debt. If the debt was paid, you should be able to provide proof of payment to the IRS to address the problem. If you’re not able to get anywhere with the IRS on that front (assuming the debt was paid), consulting with a tax attorney may be your next best option.

  • JeanKarney


    In 2011 I recieved a forgiveness from American Express for $6300.00. I did recieve the 1099-C from American Express and reported this income on my Bussiness 2011 Tax returns. These cards where in the business name but I was the personal gurantor, (as the company didn’t have enough credit history to receive the card). today I received a letter from the IRS stating I didn’t report this income, and now own them. Would I be personaly lible for the bussiness?

    Thank you

    • Credit.com

      Since you’ve already paid taxes on the forgiven debt through your business, you shouldn’t have to pay on the same amount twice on your personal taxes. It may just be a matter of contacting the IRS and explaining that you’ve already paid the debt. As a first step, I’d call the IRS directly and speak with a tax representative. It may be something you can clear up in just a matter of a minutes over the phone. If that doesn’t work and you hit a road block, a tax professional would be able to help you get it cleared up.

  • Jordan Braswell

    I just received a response back from the IRS and they are asking me to give them the Fair Market Value (FMV) of the vehicle that was repossesed. Is that my responsibility when Americredit Corp did not fill it out information (box 7) on the 1099-C form and they have that information. Where would I even find that information since Americredit was recently bought by GM Financial? Did they file the 1099-C to late? Thank you for your help with this question. Please see my letter to the IRS I sent on 3/27/13 below
    Warm regards, Jordan Braswell

    To whom it may concern:

    This letter is in response to your correspondence dated March 4, 2013 with AUR Control Number 500140882. After reviewing the afore-mentioned document, I do
    not agree with the changes stated for tax year 2011. Enclosed please find documents that I believe support my reason for disputing the information provided.

    First, this debt was incurred for the purchase of a 2000 Mazda Miata (car loan) in January 2001. Due to reasons beyond my control, I was unable to make payments and the car was repossessed sometime in late 2004 or early 2005. I believe the above-mentioned vehicle was sold at auction by Americredit Financial Services shortly thereafter. Based on information I gathered from my credit report dated 2/7/2011 (copy enclosed for your reference) this account was closed on 1/2005. I have also enclosed a copy of my 1099-C Form, as I believe it was not filled our properly. Based on the information I read when a car is sold at auction the sale price should be deducted from the outstanding amount (if any) and difference should be reflected in box 7.

    Secondly, I do not agree with the decision to allow Americredit Financial Services to submit this information 6 years and 8 months after it occurred. It is my understanding that under the Statue of Limitations for the State of Florida for these situations is 5 years, hence, the time frame to report this matter was expired at the time information was provided to your office. I have also enclosed documents regarding the Statue of Limitations.

    I hope after reviewing my case and documents provided that your office will agree with my information and reverse your decision to change information on my 2011 Form 1040A, as well as removing interest charges.

  • Gerald

    I received a 1099c in the amount of 11,000, and I reported it on this year tax return. My question is, #1, is the debt now resolved?, and #2, I am trying to clean up my credit, so what steps do I need to take to have this debt removed from my credit?

    • Gerri Detweiler

      Those are great questions. The answer to #1 is maybe. The IRS specifically says that receiving a 1099-C doesn’t mean the debt has been forgiven. Instead, you’ll want to find out whether the statute of limitations has expired on the debt, and if so, then the creditor or collector can’t successfully sue you.

      The answer to #2 is that the debt will remain on your credit reports for as long as it can be legally reported. How are they reporting it? As a collection account? If so, then this article The 7 Biggest Questions About Debt Collections & Your Credit clarify it should help clarify it.

  • William

    I don’t understand how debt from a car loan can can be concidered income. The money I earned and that I would have used to make the car payment was taxed but the car payment nor the interest (even if I had all the payments) was never a deduction to reduce my taxable income. The creditor was able to write the debt off and reduce their taxable income. It seems to me that if I now have to show the amount discharged as income then I am being taxed twice but was never allowed to claim any deduction. Can someone please explain.

    • Credit.com

      William — unfortunately, this is the way the law works. If a creditor is unable to collect the payment on loan (or the vehicle) and they forfeit or forgive the debt, the IRS gives them the right to write it off in a 1099. Otherwise, they actually get stuck with the debt/loss without being able to claim the loss — and still have to pay taxes on the full amount as though they actually collected it.

    • Gerri Detweiler

      I don’t disagree entirely with you. I wrote some about this in this piece: What is a 1099-C? Your Top 11 Questions Answered. I think it’s a lot easier to see in situations where you ended up with something of value but you didn’t pay back the money you borrowed. It’s harder to see when you lost that item plus were dunned for the debt!

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  • RonC

    My question is can American First still collect on the debt, After they sent me a 1099-C form, I thought it meant that the debt was cancelled ? Now the collection agency is after me for the debt.

    • Gerri Detweiler

      The IRS specifically says that the fact that a 1099-C has been issued doesn’t necessarily mean it has been cancelled. There are situations where the creditor is supposed to issue a 1099-C even if it hasn’t cancelled the debt. (That doesn’t mean the 1099-C you received isn’t wrong – that’s a possibility as well.) I’d suggest looking into what the statute of limitations are for old debts in your state. It may be that this debt is too old.

  • janeen

    I just received a letter from the IRS saying that I owe taxes due to an increase in my income from a 1099-c from an old auto debt that was repossessed back in 2007 for $8,813. I never received the 1099 back in tax year 2011 and how can they consider an old debt to be income? I dont understand…:-(

  • Michelle

    Hello, I’m so glad to have found your page! I am a army wife of 21 yrs and 15 years ago I was going to join the army too, to provide a better life for or kids. Well someone above had other plans and the #3 we had been hopeing for 2 years beat the odds of BC! So now we were soon going to be a family of 5 a camero, upside down on it couldn’t trade out of it. We vollentery gave it up. About a month went by they told us they sold it for 1500. It was a 9000.00 car. They wanted the difference my husband asked to see a bill of sale where they sold it, and we would try to work something out. They couldn’t produce it. So he told them to call back when they had it. This was the spring of 97. Never heard anything else from them. Last Jan after we filed we got a letter stating that in 08 we failed to add the 1099-C To our taxes and now we owe x amount. We tried to dispute it 2 times. We never received a copy of it to file. 2. They changed the sale date to like 05. I don’t understand how they can do that to us. In 08 we had plenty of cushin to have added it, it just makes me mad that they can do that after so many years, I need to file taxes for this year but wanted to see if there’s anything I can do. We have no paperwork that’s why the IRS took FMC’s side.
    Please help, army wife on a wire

    • Gerri Detweiler

      Michelle – I don’t have a specific solution for you but it definitely sounds to me like you should not have to be dealing with this at this late date. Eleven years later? Does the DMV have any records by chance? Do you still have the VIN number somewhere – maybe in some old insurance papers? Then you could try running a Carfax perhaps…(I don’t know if they go back that far.) Maybe one of our readers has an idea.

      I’d still suggest you consider challenging it. One of our readers took it to Tax Court and he prevailed. It seems like the collector or lender would have to come up with the documentation if it came to that (though I am not an expert on Tax Court procedure. It seems like it’s worth a try. Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

      • Michelle

        I had to file my taxes for this year even though we were still tring to dispute it they took it out of our refund. Do you know if we can still challenge it. My husband and I are honest people and tried to settle this back in 96 with no response from anyone. I should have filed for an extention, but I was scared to get into more trouble.


        • Credit.com

          Michelle – Unfortunately, we’re not tax advisors and can’t answer whether or not disputing the refund is even an option. This is really a question that should be answered by a tax professional (whether a tax attorney or tax advisor), to make sure you’re getting the right answer and the best advice for your situation.

          It may be worth a try, though. We have written about some success stories from other taxpayers who have challenged these forms and succeeded: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

  • Art MartinMaik

    What is with these banks. Bank of America filed a 1099C for and a repossession
    which took place in 2008 for a Motor Home. We purchased in 2002. We told them to pick it up as we no longer had the available funds to pay the $884.00 a month payment. They never filed for judgment or or hassled us after they repossessed the motor home in 2008. We never had a collection agency or the bank send us bills or call us. In 2008 as with many people my practice slowed down to a crawl and my wife;s hours were cut back. We stopped paying the payment is 2007. We sold our house in 2007 and paid off most of our credit cards . Today we are almost debt free since all our credit cards are paid off. We make receive enough money from Social Security to pay our rent and utilities. My wife has enough income to pay our food and monthly bills. My wife is 72 and I am 75. We don;t make enough to have to pay taxes. We did not file for bankruptcy we were able to pay everybody by negotiating our payoffs. We have n
    no assets. This 1099 for $58,000 would sink us so we would have to file bankruptcy.which we do not want to do. According to what I read from other posts we can file for insolvency. How can a bank file a 1099 five years after the event happened. The motor home was sold two months after they repossessed it in 2008. They did not keep sending us bills so we though it was settled, .

    • Gerri Detweiler

      I agree – it’s a mess. I’d encourage you to file a complaint against the bank with the Consumer Financial Protection Bureau and report this problem to the Taxpayer Advocate.

    • Djea3

      I am not an attorney but as I understand the law:
      1. THey must provide complete accounting including all documents and sales invoices to prove the actual loss.
      2 They must bill you, failure to have biled you is proof that there is no debt and never was.
      3. Failure for this activity to show an actual ammount owed in your credit report is further evidence that no amount was ever owed. (if they reported the credit then they must report the bad credit and amount owed or they have violated state and federal laws most likely).
      4. Failing to bill you and failing to give accoutning allows you to use full fair market value for the vehicle as the amount paid when you returned it to them.
      5. Using that value, they probably owed you money.
      Using that value and them not paying you, one could argue that you can 1099 them for the amount they should have owed you. In other words, 1099 them in the same year they 1099 you and offset the difffences in accounting. This might allow the IRS to get some fun from it. Certainly if there is NO manner of correcting the false and illegal 1099, then you can do so with another 1099 using your accounting which is just as valid as thiers.
      6. There are attorneys that sue credit collectors for illegal activity under the FCRA. Find a good one, he may sue them in federal court for you under a contingency and resolve this with funds in your favor.

      Lots of ways to go here I think.

  • John

    I never received a 1099-C from a creditor or collection but I received a certified letter from the IRS last week notice of deficiency that a collection agency reported about $5000. Now the IRS said that I have to pay about $1700 in taxes. The debt is so old that I don’t’ even remember probably from 1997-98. Quite frankly I don’t’ even remember this account.. Any advice? Thanks in advance.

    • Gerri Detweiler

      Fight it. I wrote about another taxpayer that did just that successfully in this story: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

      And when you find out who the creditor is who sent you the 1099-C (you can request a Wage and Income Transcript from the IRS for the year in question that will list it) please post it here – and file a complaint against them with the CFPB and the Taxpayer Advocate.

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

      Yes John – you will want to fight this. I would encourage you to talk with a tax professional with experience in these forms. If that is not an option, then you can try talking with the IRS directly. Some of our readers have reported success by simply explaining the situation to them. (But I can’t promise that – and again, I am not a tax professional.)

      If that doesn’t work, you may want to pursue this through Tax Court. I wrote about one of our readers who did this and succeeded. You’ll read his story here: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

      • Katrina Harris

        hello Gerri, I am in the same situation now like John. I never received a 1099c. I moved from Va to TX about six years now. I had a car that was repo 16 yrs ago. Now I have a letter from IRS saying that I owe 3,669.00. What shall I do, I need help?

        • Jeanine Skowronski

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

          Thank you,


  • Maria D.

    I received a call about a gas credit card from 2001, which I dont even remember having. They gave me all my personal information to assure me it was my debt, including where I was working at the time. Problem is, I filed for Social Security in 2000 and havent worked since. How liable will I be for this very old debt? thanks

    • Maria D.

      Social Security DIsability ^^

    • Gerri Detweiler

      Maria –

      Anytime a debt collector calls you should ask them to send you a written notice of the debt. In fact, this is required under federal law.

      This debt is very likely outside the statute of limitations. That’s a matter of state law, and in most states it runs anywhere from 4-6 years from the date you last made a payment. If the debt is too old, you can simply write the collector telling them that you know the debt is too old, and asking them not to contact you again.

      If the creditor has a judgment against you that would be a different story. If you’re not sure, check your credit reports. Judgments will usually appear and will be listed with the word “judgment.”

  • Mysty

    Oh lovely…Just got the notice from IRS that we owe an additional $1122 in taxes for 2011. Apparently the IRS received 2 1099c forms….one for around $3600 from FAI (credit card) and the other for about $700 from some collection agency. They listed my husbands social…but he doesn’t recall the debts. Nor did we ever get a copy of the 1099’s. I think they may be really old (back from the early 2000s). Is there a way to get a copy of them? You would think that the IRS would devise a program in which to dispute them since this seems to be a growing issue. OR at minimum put a copy of the 1099’s in with the notice.

    Thank you in advance for any assistance you can render.

    • Gerri Detweiler

      Mysty – You’re right. What a complicated mess! First the collectors were supposed to send your husband a copy of the 1099-C. In fact, the IRS requires them to be mailed to the taxpayer before they send them to the IRS! I am not a tax professional so I can’t give you tax advice but if this were me, I would first call the IRS, explain that I never got the 1099-Cs in question and that you aren’t even sure that these were your debts. Ask them how you can get copies of the 1099-Cs in question. Then come back here and let us know what they say.

    • Justafactjack

      Wonder also why IRS and the DOJ don’t STOP these banks from sending out false/fabricated 1099-C’s after they include interest, finance charges, late fees on top of late fees, interest on top of interest…. They should ONLY BE Allowed to report the ACTUAL BASE PRINCIPAL BALANCE. This is So Out of control! Banks and Credit Card companies are doing whatever they want and thousands of people are suffering – If they could not pay the debt, it is obvious that they cannot afford the TAXes being charged – AND they still have Collection Agencies calling on the same debt? Atrocious. What is definition of Deceptive Trade Practice.

  • http://www.geocon1.com John M

    Dear Gerri, Thanks for the information it is just what my lawyer said- but I still wonder why a bank would attempt to get away with this action? I own a business which has subcontractors from time to time I am required/supposed have them fill out a W-9 which is not a problem with a properly established firm. But in the construction field there are many fraudelent companies. I have recieved fraulent insurance certificates/documents and fraudelent contractor and business licenses, and fraudelent identification cards. Thanks you for you help and information. John M.

    • Gerri Detweiler

      Who knows?? As you’ll see from reading all the comments on our stories on these forms they are often a mess.

  • John

    I recieved a 1099-c from capital one bank cancellation of debt for $1573.00. I went through a personal bankruptcy in 2012 and the debt was discharged through the bankruptcy. It also states reason A. In the box on the 1099-c and the date of the event is the discharge date of my bankruptcy. had a bankruptcy attorney for the bankruptcy and I sent him the information and he has told me that capital one cannot send out a 1099-c for this debt. But the bank is being sneaky as they have sent the 1099-c to my company name and put in my entire social security number on the form. I am confused, broke and I hired a tax professional in the past to handle an audit nad he did nothing except collect his fees. Also I need to state that the credit card I had had a $600.00 limit and was very close to being paid off. I stopped using the card in 2008 and what the bankruptcy attorney does is go through your credit report list all the debts, and you meet with him if you have any debts personal or otherwise and list them in the bankruptcy. So my big question is how can these banks get away with this? I have been out of work for 3 years now and I was self employed. I just do not see why these forms should be sent out. I can see the bank is trying to lower their income by sending this 1099 out to pay less taxes but I am not sure what to do when I finalize my taxes. My experience with the IRS they just want money and having read through your blog I can see that there is no clear cut way to dispute this 1099-c. Thanks for any information you can give to me.

    • Gerri Detweiler


      The good thing is that you do not have to pay taxes on debt discharged in bankruptcy. You can file Form 982 to show the IRS it was included in bankruptcy. Read this article: Just Received a 1099-C? Don’t Freak Out!

      I hope that helps!

    • djea3

      I am not an accountant or attorney but,
      1. Anything discharged in BK is done, there is no debt and your insolvency stops the 1099 from being available to the bank at all. They already got to write the debt off.
      2. This is a false 1099. Have your accountant include the 1099 in your taxes and refer to your bk case in a reference, Have him note that this 1099C was fraudulent as it was handled in BK.
      3. Contact a really good attorney that sues creditors for illegal colection practiced under the FCRA. Let the attorney SUE the LENDER for attmepting colleciton of a BK debt (usually federal court and usually contingency). They are NOT allowed to attempt to collect in ANY WAY. The sending of a 1099C is in fact a collection attempt. In fact it might be good to have the Attorney notify the IRS that the lender seems to have written off the value TWICE and therefore owes the IRS money form fraudulent filings. If done properly, the Attorney can make it a report of flase filings with IRS (claiming that the lender has done this to all its accounts) and you may recieve up to 10% of the total taxes owed by the lender. That would be justice.

  • Shannon

    Hello, recently i have been receiving calls from a collection agency every day about an old account with sears. I had a sears credit card in 1997 and i believe i owed about 200 dollars. It was on my credit report up until recently. After all the charges they are asking me to pay 671 dollars. I read somewhere that if I pay this that it will go back on my credit report. Is this true? Also, wasn’t this debt written off already? Are they legally allowed to keep harassing me about this? Thank you

    • Gerri Detweiler

      Shannon – Am I correct in understanding that you defaulted on this debt in 1997? If so then the statute of limitations has no doubt expired and there is no reason why a debt this old should appear on your credit reports. Ask the debt collector for their address, which they are required to provide you. Send them a certified letter stating that you know the debt is too old and instructing them not to contact you again. Send it with proof of delivery and keep a copy for your records. If they contact you again after that, talk with a consumer law attorney.

  • Sylram

    I have question. In 2005 i was in an auto accident, and because my vehicle was totaled I had to purchase another truck that same year. In 2006 my husband and I separated and that same year in August 2006 the truck was repossessed. I called to have the vehicle surrendered. I never knew how much the vehicle was sold for nor did i know if there was a balance due since I had been separated from my spouse and I moved. I never received any notification from the lender or no collection attempts were made and then now i get a 1099-c and it is for 10,000. The cancellation date for the debt was listed as 10-14-12. Can I use form 982 for insolvency? Dont know were to look or what to do.

    • Gerri Detweiler

      Sylram – Start by reading Publication 4681 and filling out the insolvency worksheet. If you qualify for the exclusion that may be the easiest way to handle it. (You would then fill out Form 982.) Remember to include the $10,000 debt in your liabilities since insolvency is calculated before the debt was cancelled. However, if you fill out the worksheet and discover you are not insolvent by $10,000 or more then you are probably going to have to seek professional tax help. You have a somewhat complicated situation because it appears the creditor sent the 1099-C out later than they probably should have. But the IRS doesn’t have a specific procedure for disputing that fact.

  • Jennifer Petru-Gilbert

    Last year I took care of an outstanding debt and settled an amount with (Asset Acceptance,LLC). A couple of weeks from sending the full payment to them. I get a letter from them saying that the reference account was closed payments made after the closure are being refunded. They sent me the checks and I got my money back I sent them. Well now I have received a 1099C form for $5,230. I’m kinda confused, can they do this? Thanks!

    • Gerri Detweiler

      How strange! If they did cancel debt then they are required by the IRS to file a 1099-C. But you may not have to pay taxes on that amount. You’ll want to read this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

    • Gerri Detweiler

      It’s very odd situation, but it does sound like they cancelled the debt and therefore they must send you a 1099-C per IRS guidelines. I were you I’d try to find out whether you qualify for the insolvency exclusion. If you do, then you can avoid paying taxes on some or all of this amount. You’ll find instructions in IRS publication 4681. If you do wind up having to include this amount in your taxable income, you are still coming out of this ahead since your tax bill will be lower than paying 100% of the debt.

  • Sherrie Cummings

    I received a 1099C from a mortgage lender. The twist is that I am involved in a class action lawsuit with the mortgage lender from unfair practices. The lawsuit has not been settled and has not even gone to trial as of yet. We have had several trial dates set but a criminal trial takes precedence and therefore has been continued many times I contacted the attorneys involved in the case and the only thing the said was they could not suggest but indirectly mentioned to seek the advise of a CPA. I am concerned about how this may affect me since this has not been settled or went to trial.

  • Dan

    I was able to get a couple of these resolved through the US tax court. Its kind of a pain but here’s what I did on one of the 1099-C’s I received. I had a car repossessed in 2000, and after the bank auctioned the car off there was a difference of $12,000, they didn’t send me a 1099-C till 2011. So I went ahead and filled my 2011 taxes ignoring the 1099-C. After a couple months I received a “statutory notice of deficiency” or its also called a 90 day letter. Now you have 90 days to petition the US Tax Court, which I did. In both instances with a lot of help from google searches, they settled with me without going to court after I explained that the bank didn’t follow the proper rules for filing a 1099-C. They were both done under the Court’s simplified small tax case procedure and cost $60. Its a pain, but it seems to be the easiest way to beat a 1099-C.

  • BK

    I’m curious about how the IRS can apply a penalty or interest if a customer didn’t claim the debt cancellation in the year the 1099C form was issued because it was sent to the last address on file with the bank (generally no longer the customer’s residence.) I would think the IRS should be able to confirm the 1099C was sent to an outdated address and therefore shouldn’t hold a customer responsible for reporting something they never received. Do you know if there is any recourse on the IRS forgiving penalty/interest on not reporting the 1099Cs during the tax year they were issued due to non-receipt?

    • Gerri Detweiler

      Good question. Hypothetically, my guess is the IRS would say the taxpayer is supposed to report the cancelled income regardless of whether a 1099-C is issued. (They do say that in Publication 4681.) But given that the sometimes convoluted formula for figuring when an identifiable event occurs, it can be tough for the consumer to know when to report it.

      • Peg

        I would think the company that supposedly forgave the debt should be required to then send out a letter stating as such, before any 1099-c is sent out – sure would help in a lot of these issues, and if necessary it could be disputed with the creditor/collector prior to it becoming a big huge mess for the government to deal with all the disputes on the ones that are improper and invalid. Otherwise how does the consumer know if a debt is truly “forgiven” or is it just reported as such then sold off to the next collector to do the same thing a year or 3 later again.

  • alyic

    Received on. Feb 5, 2013. Three. 1099-c on old debts. Over 13 years ago. From same collection agency. Have correct address and ssn. I never received. Or heard from this agency. Not sure dollar amounts are correct. Weird part about this on 1099-c form on box. 6. Empty regarding identifiable code event blank. Shouldn’t. That be filled out if this is legitimate. 1099-c form. Your article statess check with your statue of limitations on debt. Are you stating that cjeck statue limitations. Of. Debt occurred. Or when moved to another state.

    • Gerri Detweiler

      Alyic – What is the name of the collection agency? Is there a phone number listed to call them to find out what’s going on?

      As far as the statute of limitations goes, that generally starts from the date you stop paying the debt. If you moved from one state to another then it’s a good idea to know what it is in both states just in case. But very few states have statutes of limitations that are 13 years or more so therd is a good chance it has expired.

      I need to reiterate, though, that the 1099-C and the statute of limitations are two separate things.

  • lynn

    i get a social security disability. i have very limited income. i got a 1099c. do i have to file taxes. i only had 8,000 in ssa and 20,000 on a 1099 for student loan. what do i do?

  • Darcy

    My husband received a 1099-C from BOA today for an account that was “charged off” in 11/08. As far as paying the tax, I will pay whatever I have to and will consult our accountant. However, my question is about the credit bureau. Do you know how this will affect the credit report and does BOA also send this information to the credit bureau? We’re trying to clean up our credit and wondering what this 1099-C means for that.

    • Gerri Detweiler

      Darcy – Great question. A 1099-C is a tax matter so the lender won’t report that form to the credit reporting agencies. However, if there was a debt charged off in 2008, then that account is likely already listed on your husband’s credit reports as a charge off. The 1099-C doesn’t change that in any way. The only way I can see it affecting your credit is if it triggers a large tax bill and the IRS files a tax lien.

      • Peg

        See this is exactly what I have been saying in that if these are invalid sol expired debts, reporting period expired debts, then this is a new way for these collectors to improperly relist this on your credit report – again illegal and invalid! People you need to be filing a complaint with the FTC on this as well. I have against Asset Acceptance for a 1099-c I received that they never even had the right to collect or have in the first place – nor did they at all – they just sent out a 1099-c period thats the only communication I got from them (mine was dismissed in court to another collector in 2006 – I won the case then!) They are just buying up portfolios like they always do but using this method as a new way to bump up their bottom line and profits at the expense of fraudulent reporting to the IRS as credit against their own taxes with these 1099-c forms that should not be getting sent out at this time now for I would say atleast 98% of the people getting them.

  • Cliff

    I received a 1099-c today from Americredit Financial Services. I purchased a car financed through them in 2002. I defaulted on the loan and filed for Bankruptcy in 2003. I never made another payment. The Loan was charged off and taken off my credit report in 2010. Why am I only now getting this 1099?

    • Gerri Detweiler

      Who knows? These forms are creating a mess. You don’t have to pay taxes on debts cancelled in bankruptcy. You can fill our Form 982 and note that your debt was discharged in bankruptcy and that should take care of it.

      I also recommend you file a complaint with the Taxpayer Advocate: http://www.improveirs.org/speakup.aspx

  • Stacy

    I received a 1099 for a timeshare that my ex-husband defaulted/foreclosed on. I have already filed my taxes. The original loan was received in my name; however, divorce papers claim that he is responsible for timeshare debt. The 1099 is in my name with my social security number. Although I am not responsible according divorce decree, what are the steps I need to take to contact the IRS and have it removed from my name?

    • http://www.Credit.com Gerri


      I ran your question by Bill Purdy, an attorney with the law offices of Simmons & Purdy. Here’s what he had to say:

      There’s no such thing as contacting IRS to remove it from her name. The 1099 is in her name because the debt is in her name. She needs to see her divorce counsel immediately and have the decree enforced to collect the money from her ex. This may be very difficult.

      She also needs to have a professional review her status one moment before that foreclosure occurred to see if she is taxable on the 1099. There are several exclusions that might apply. If the 1099 is for the same year she already filed she will need to amend her return to include the 1099 and explain it.

      The big problem with divorce decrees is that they don’t bind banks or the IRS.

      Not one bit.

    • djea3

      I am not an attorney or accountant, but if you have a court order then your ex owes you the money….therefore:
      I know that this sounds crazy, but you can 1099C your ex husband. THis creates a loss in the amount you had gain and balances your taxes. I know that it is a year later..but that might be ok.

      Send a 1099c to your husband in the same year that you were given one (his problem that it was delivered late). then amend your taxes accordingly. Lender 1099C is written off against your 1099C loss and your husband gets to pay the actual taxes. Note in the proper place in your 1099C to your husband “court ordered”. You may wish to use 1099C him in the next tax year and take ther credits then instead of amending it so hearing this now might still help you.

      Most people dont think of the simple ways to balance an account. The easiest way is to use the system to do so. you recieve a 1099C about something a court has ruled is another’s responsibility, you 109C that person under the court ruling. The IRS can’t complain at all, and frankly they dont care. They just want paid the taxes one time only.

      I have known of divorcees that could never collect from a dead beat dad. After the kids were grown and gone they were owed hundreds of thousands including interest. A few of them found that they had very high income at that time and no deductions. THey used 1099C to write off the debt of the ex husband in child support. They would never see a dime anyway as the husbands had businesses and hid income.

      Result, the husbands owed tens and tens of thousands in taxes, and had to pay them without being able to even consider and plan for that “income” to have its taxes paid. The ex-wives wound up having huge write offs when needed.

      Hope this helps.

  • Pete in Utah

    I had several credit cards that I was able to close with a reduction in payment during 2012, how long do I have to wait for a 1099-C before I can file my taxes?

    • Gerri Detweiler

      Great question! They are supposed to send them out by the end of January. However, keep in mind that we’ve received tons of complaints from readers who have received these forms years after they settled debt or stopped paying on it. And the IRS says you are supposed to report it even if you don’t get a 1099-C. So you may want to go ahead and wade through Form 982 now rather than waiting until you get a 1099-c later. If they send you a 1099-C next year, you can explain that you already included it in 2012. Make sense? Of course, I am not a tax pro so please get advice from a qualified tax professional if you need it.

  • Jim

    I received a call last month from what I am sure is a scam artist. An indiviual left a message and said I or my lawyer should contact him reqarding a 1099 form they are going to file. The only credit dispute I have ever had concerned a Sears charge of about 4000.00 maded in 1999 by someone using my a SSN on a credit app. Sears and I resolved this dispute and they took the charges out my name. All of my recent credit reports show excellent history. Obviously, i’m not going to return this scam call but would like to know what I could do just in case a 1099 C is filed. Also I wonder how frequent this scam is being used. Thanks

  • Barbara in California

    I just receive a 1099-c from Citibank for my husband who has been deceased since June 2007. Box 1 is showing the date of identifiable event as 05/14/2012 with a debt of $1,549.86. I am assuming that this is when the debt was forgiven? My husband did not have an estate and we did not have joint credit cards so now what do I do. It also has box 5 marked stating “If checked, the debtor was personally liable for repayment of the debt”. If this is considered his income for 2012, it is certainly the only “income” he has. This is bizarre.

    • Gerri Detweiler


      I turned to expert Bill Purdy to answer your question. He is an attorney with The Law Offices of Simmons & Purdy:

      If the deceased husband had an estate and now it is closed legally, send a copy of the final income tax return for 1040 up till the date of death and a copy of the final form 1041 fiduciary income tax return for the period until the estate closed. Closing an estate, however, does not therefore wipe out this 1099-C for 2012.

      Some people ignore these notices post death and just wait and see what happens. This has never been my favorite way to do things where the IRS is concerned. The automated nature of IRS correspondence can make an Olympic sized swimming pool out of one raindrop.

      The IRS will likely need another Form 1041 for 2012. Should be a pretty simple income tax return. Just the debt relief would be on the return as income, and the estate would be insolvent by the amount of the debt, since there are no offsetting assets. Therefore there should be no no net income and no tax due.

      If the estate was insolvent at the time, (and I bet it was) the moment before the debt was discharged, then there should not be any income taxable. A form 982 would need to be filed with the form 1041 for 2012 and an insolvency worksheet showing that there were no assets and presumably only this credit card liability at the moment before the debt was forgiven.

      This negative net worth (the epitome of insolvency) should offset the amount on the 1099-C. Please have a competent CPA help fill out these forms and this should go away.

  • Pingback: Just Received a 1099-C? Don’t Freak Out! | Credit.com News + Advice()

  • Jen

    I just received a 1099-c saying to add the amount $27,094.24 to my taxes as earnings. I already filed my taxes and we are getting almost $8,846 back. I got this form after filing my taxes. Am I going to get in trouble? Will I still get my $8,846? Will they pay me the $8,846 and send me a letter later saying I owe money or will they just hold my return and not give me anything? Is this an automatic audit? If I would of gotten the 1099-c before filing my taxes. How much do u think I would have to pay?

  • Mandi

    I had a credit card that I had in like 2001 or 2002 that i had charged off and was told it was charged off due to the fact that I was on bed rest and unable to work and pay it. On May of 2012 I get a letter from IRS stating that I did not report income on my 2010 tax return and now they want me to pay $668.00 to IRS because of this unreported income. Why are they just now sending me this and should I just figure out way to pay it or should I fight it since my understanding was that it was charged off way back in 2002.

    • djea3

      Try this.
      Write a letter to the IRS telling them it was written off in 2002 and that any income was at that time. Tell the IRS that any statute of limitations has run long before now.

      Tell them that there has been no collection activity since 2001/2002 and that under state and federal laws this amount was not and is not owed and in fact became un-collectable (check your state laws for times, usually 3-4 years) by 2005 or 2006. Tell them again that any statutes rearding taxes and filings have run out.

      Tell the IRS that the 1099C was knowingly filed fraudulently by the lender/collector and that if they have taken the deduction, then they have committed tax fraud willfully. Ask for a full investigation and audit of the lender. Claim that the lender must have done this more than once and that you want to be paid 10% of any income they recieve due to this audit in accordance with IRS policy. Tell them that you want 10% of the taxes that they deducted for this false 1099C filing regardless of any other results of the audit.

      Send copies to your US senator’s office and Congresman’s office. Be sure to show that you sent copies there in your letter.

  • Lorrie

    I recieved a 1099 C for 5,544. This was for a truck which I could not afford after an injury to my knee and wasn’t working. I called the bank and had them pick it up. They sold it at auction and the 5,544 was the difference of the loan. This was in 2006. I only had an income of 7292. I am unemployeed and do not have the money to pay the IRS. Is there any way I can get out of paying taxes on this debt? Please help me out,
    Thank You,

    • Gerri Detweiler

      Lorrie –

      The easiest way to deal with this is to use the insolvency worksheet in Publication 4681 to determine if you are insolvent. If you are and your debts are larger than your assets by the amount listed on the 1099-C, then you can file Form 982 to show the IRS that you qualify for the insolvency exclusion. If not, then it may get a little more complicated. You may need the help of a tax professional to figure out what to do. There may be a case to be made that this debt is too old for them to send out a 1099-c now, but that’s not a simple thing to handle on your own.

  • RP


    So am I to understand that if you pay the tax on the amount declared that no subsequent collection efforts are allowed since you have paid the taxes and that closes out your liability?

    • Gerri Detweiler

      Not necessarily. This is a tax issue. I wrote about your specific question in this new story: What is a 1099-C?

  • Denise

    We purchased an “account protection plan” on one of my husband’s consumer credit cards, and paid monthly fees for the insurance. Unfortunately, my husband began having strokes and became disabled; one of the factors for which this “account protection” coverage would pay his balance. After a bit of a fight, the insurance coverage paid the claim in 2011, which was about $3,600. Lo and behold we just received a “bill” from the IRS stating that we owe $999 dollars in taxes for this “account protection” policy payment to the credit card. We never heard a peep from the bank that paid the claim that they were reporting it to the IRS, and I am totally at a loss. The bank, HSBC, has a bad reputation for dealings with Best Buy customer credit card holders. I assume it is being treated as cancelled debt, but it really isn’t cancelled debt. It’s an insurance claim/payment. I don’t know what to do about it. I don’t trust HSBC. I have sent a letter to the IRS explaining that this was a payment from a purchased insurance policy, and that we are disputing the 1099 from HSBC. Any advice for me?

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

  • John

    Was a vehicle I surrendered 5 years ago.

  • John

    I just received a 1099-c saying to add the amount $16,563 to my taxes as earnings. I already filed my taxes and am getting 8,000 back. I got this form after filing my taxes.nam I going to get in trouble? Will instill get my 8,000? Will they pay me the 8000 and send me a letter later saying I owe money or will they just hold my return and not give me anything? Is this an automatic audit? If I would of gotten the 1099-c before filing my taxes how much do u think I would have to pay?

    • Gerri Detweiler


      I am not a tax professional, so I can’t comment whether or not this will definitely hold up your refund. But I think you can safely assume that the IRS received the 1099-c and that when your return is processed the income won’t match up. That may delay your refund. If it doesn’t, you will likely receive a notice from the IRS at a future date. So I’d suggest you figure out whether you can exclude this amount from your income, and then contact the IRS to find out how to amend your return – or work with a tax professional to do so. If you need more information, I suggest you read What is a 1099-C? Your Top 11 Questions Answered.

  • Abby

    My car was repossessed by Bank of America in 2010 and BOA sold it for 13K. Apparently I owed them $18207 for which they filed a judgment against me in Jan 2011. I have hired a lawyer to fight the case which is still in court. I received a 1099-C from BOA stating that they have discharged $18,250.04 on 6/28/2012 under identifiable event code G. Do I mention the 1099-C in my taxes?

    • Gerri Detweiler

      Abby – You must address this when you file your taxes. The IRS received a copy and expects you to include it in your taxes unless you qualify for an exclusion or exception or can demonstrate another valid reason why you do not have to include that amount in your taxable income. If you qualify for the insolvency exclusion that may be the easiest way to handle it.

      • Abby

        I was plannning to file my taxes without including the 1099C info and respond to IRS if my taxes were pulled out after an audit as I may come across knowledgeable IRS reps that may help me resolve the issue.

        I strongly believe that I should be eligible for the insolvency exclusion as the car was sold for 13K by BOA at the auction. The rest of the amount that BOA mentioned on the 1099c definately exceeds the fair market value of the vehicle. My only concern is how I can prove the fair market value of the vehicle back then.

        • Abby

          I spoke with an accountant who stated that I can file the 1099C on my taxes and back it all out (insolvency exclusion). All I need to do is keep paperwork proving that my liabilities exceed my assets which is the case. I believe I don’t have to pay taxes on 1099C at all. Thanks a lot for your advice

          • http://www.credit.com Gerri


        • Gerri Detweiler

          I am not a tax pro so I can’t offer you tax advice, but it seems to me if the vehicle sold for 13K then that was the fair market value. After all, the lender would try to maximize the amount it received in order to reduce its losses if you didn’t pay.

    • djea3

      Abby, I hope that you get this.
      If they sold it for 13K then they MUST credit you 13K for the amount rexcived. THat means you owe them 5 K.

      If you have already handles this, you can still send the creditor a 1099C for the 13K they never paid you or credited to your account. This will credit your taxes the next year and tax them on the 13K they have received.

      Talk to your accountant and attorney. Use the system to get the proper balance. The bank can’t fight a 1099C any better than you can, Failure to balance the account propery may mean they owe penalties and taxes as well.

  • Abby

    My car was repossessed by Bank of America in 2010 and BOA sold it for 13K. Apparently I owed them $18207 for which they filed a judgment against me in Jan 2011. I have hired a lawyer to fight the case which is still in court. I received a 1099-C from BOA stating that they have discharged $18,250.04 on 6/28/2012 under identifiable event code G. Do I mention the amount on the 1099-C in my taxes?

  • Chad Wells

    This is just another example of the dysfunctional USA. I’ve had these companies call 15, 20 and 25 years on old debt with no activity. It got to the point long ago that we are held hostage and cannot literally even have a phone in our own names. Pretty sad, they should have time limits of 3, 5 or 7 years and huge penalties and financial sanctions for companies that violate those laws.

  • Tom

    I just received two 1099-C forms from Bank of America for the same credit-card account. The first indicated some $3,900 in discharged debt on an account for which the “borrower was personally liable,” and the second (marked “corrected” and received a day later) says no debt was discharged and that the “borrowed was NOT personally liable.” Does this means the debt was excused or does it mean the creditor is going to resume collection? Both notices include a Dec. 31, 2012, date of “identifiable event.” I appreciate any consideration in clearing up my ignorance and confusion.

    • Gerri Detweiler

      Tom – Do you know what debt this is in reference to and what the background is?

      • Tom

        It was a credit card that fell into collection when I was hit with a triple-whammy of divorce, a cut in pay and the death of a parent. I was under a payment arrangement, then the collection law firm went out of business. The debt has languished for a few years, and I expected to hear from a successor agency … but heard nothing until the 1099-C statements arrived over the weekend.

        • http://www.credit.com Gerritp

          Tom –

          As far as collections go on this debt, you’ll need to find out if the statute of limitations have expired. (That’s based on state law.)

          The 1099-C is another issue. If the second 1099-c says zero and the box “corrected” was checked then you may be OK. But I have to say I am not completely confident in the accuracy of some of these forms, especially for old debts. I’d suggest you consider talking with a tax pro to make sure you handle this correctly.

          • Tom

            Thank you so much for that prompt and prudent reply.

          • Tom

            Just what IS an “identifiable event,” by the way?!?!??

  • Jen

    I settled two debts in late 2011, though the final payment I made was in January 2012. At tax time I didn’t get a 1099-C and wasn’t sure if I should have. I called the collection agency and they said they wouldn’t be sending one. I asked to clarify that the “forgiveness” was in 2011 and they agreed and gave me the final amounts. I tried to contact the original creditors but had no success getting anything but redirected to the collection agency.

    On advice from a tax professional I included that in my 2011 taxes and paid whatever extra.

    But today I got a 1099-C for each of the two debts. That I already paid taxes on last year. The date of “identifiable event” is long after the settlement and final payments.

    How do I handle this without having to double pay?

    • Gerri Detweiler

      Jen –

      You’ll need to include an explanation with your return describing why you didn’t include it in this year’s income. Unfortunately, I don’t see a place on Form 982 that specifically addresses this issue. So you’ll either need to call the IRS and ask them for instructions or consult a tax professional. Shouldn’t be that hard, should it?

  • Brian Sunday

    What happens if you receive a 1099-C from BoA and it just has your name and no SS number on it? It just has 000-00-0000. How does the IRS know this is you and not someone else? This debt expired on January 15, 2013, so how can they post date their claim to 2012? Their has been no contact with BofA for 42 months.

    • Gerri Detweiler

      How very odd. I assume it has your correct name and address on it right? I assume the IRS can match it with that information.

      What do you mean that it “expired” on January 15, 2013?

      • Brian

        It has the correct name/address on the 1099-C, however the next week a letter was received from a collection agency (KSG) that claimed they needed the SS number inorder to file with the IRS. It also states “failure to do so will result in a $50. fine from the IRS.” I have never heard of a $50 fine from the IRS, usually it is much greater to force compliance from the taxpayer. I am thinking this debt has been passed around so many times the original paperwork has been lost and if KSG tries to submit the 1099-C with no SS number, the IRS will toss it in the trash.

  • Christine

    I’m curious about a 1099-c my husband just received for a car we surrendered. The amount owed at the time of surrender was about 3500.00 (the car was paid off according to us but the bank added the cost of “insurance” because they claim we didn’t have any even though we proved that we were covered the entire length of the loan). Anyway, we received this 1099 but it doesn’t look like anything official, just a typed letter from the bank. It’s not even completely filled out it just states the dollar amount that was “forgiven”. My question is how is this considered income? I don’t have the car anymore nor do I know what the bank did with it after it was returned. I was expecting a letter stating what they sold it for and what my “difference” would be to pay, not something like this! They didn’t give me 3500 that I didn’t pay back to count as income, how is this legal?

    • Gerri Detweiler

      What was the amount in the 1099-C? When was the voluntary repossession?

      • Christine

        The paper says the identifiable event was 10/16/2012. It sounds about the same time they picked up the car but not 100% sure of the exact date due to them taking a long time to finally get it after we notified them of the surrender. The “amount of debt discharged” says $3527.47. There are other lines listing the loan number and a yes after saying “was debtor personally liable for repayment of the debt?”. This is only in my husbands name but he doesn’t have an income and now wonder how this will mess up my tax outcome due to filing jointly.

        • Gerri Detweiler

          Christine – The first thing I would suggest is that you get IRS Publication 4681 and fill out the insolvency worksheet on page 8. If you qualify for the insolvency exclusion – and it’s large enough that you don’t have to pay more taxes due to this cancelled debt – then you may want to just file Form 982, claim the exclusion, and be done with it. If you don’t, then I would suggest you talk with a tax professional. (It’s a good idea to talk with one anyway.) You may need to look at other options for reducing your taxes or disputing the 1099-C if you believe it’s incorrect.

  • Mary

    I have a car loan that I defaulted on in 2000. They took me to court and got a judgement for 6900.00. Today, I received a form 1099c for 6203.00 in the mail from that company. It is 13 year later….is that legal?

    • Gerri Detweiler

      Mary –

      That’s the problem I was pointing out in this story. Lenders should probably not be sending out these forms many years after consumers defaulted on the debt but the IRS doesn’t have a clear procedure for handling this when it happens.

      I am going to have to suggest you talk with a tax professional to figure out how to dispute this. Work with someone who is familiar with 1099-C issues. You may want to show them this article and the reference to the Stewart v. IRS case.

  • nita

    I received a notice / bill from the IRS this year for my 2011 taxes stating I owed $259.00 for a 1099-C I had not claimed on my tax return.(I never received the 1099-c to submit with my tax return). I paid by their due date not wanting to be on their bad side… this was for an old debt that was wrote off by the credit card company seven years ago and was no longer on my credit reports.
    Is it to late to dispute with the IRS since I have already paid it?

    • Gerri Detweiler

      Nita – Do you know who the lender or collection agency was the sent the 1099? Can you describe the situation in a bit more detail?

  • Troy Youel

    In may i received a letter from IRS that i owed taxes from a car loan my ex wife filled bankruptcy on back in 2001. She took this loan for the car in settlement. eleven years later. I’m told by Irs i owe taxes. In court battle with ex over this issue. Is there any way to settle taxes on this?

  • l troyke

    i hope kay/kay solves her problem. i have an attorney friend. i think i will beat them at their game because hsbc had to bring me back from dead first correct credit bureau report then they cancelled my debt 1099-c . then they also were sued by consumers for fraud in chargeing debt cancellation fees to credit card holders with their monthly fees which they can not do. the consumers won the case http://www.esslinger.com i am hoping i am right. maybe i am thinking . i will let you know what happends Geri

    • Gerri Detweiler

      Please do let us know how this turns out!

  • l. Troyke

    I had a debt from hsbc/capital one credit card which i had a charge off on. then one day i wanted to get a credit score but had none because hsbc reported me as being deceased. which took over a year to ssraighten out. can they legally just declare somebody deceased. the credit bureau told me hsbc the the only ones who could remove the decease from credit report. i had to llitally prove i was not dead. what theyput me through. then they sent me a 1099c debt cancellation for original debt which i then paid taxes in 2012 for year 2011 which the debt date cancellation was. now they reopened same account number same debt as hsbc/capital one who are the actual same place. so they reported to credit bureau as new debt. account was closed 2007 it has been 5 years now since closure of debt and i did pay taxes. what can i do. i have no credit score please i need your help lydia

    • Gerri Detweiler

      As much as I’d like to give you a step-by-step guide as to what you can do, there is no simple procedure for disputing an inaccurate 1099-C. My best advice for you is to work with a tax professional. You may also want to see if you can get help from the Taxpayer Advocate’s office in your state: http://www.irs.gov/uac/Contact-Your-Advocate!-

      • L. Troyke

        Geri more info. HSBC was sued by Esslinger and won case. HSBC was charging card holder a debt cancellation protection plan which was illegal. this case was won recently for the consumers. i received notification. HSBC had no right to declare me dead originally. then I received 1099c debt was cancelled 12-28-11 then 2012 capital one bought out HSBC bank and now had reopened same account. I will find a tax preparer. I believe this account should never have been reopened.

        • Gerri Detweiler

          Ugh – sounds like a royal mess. Wish I could offer more specific advice.

  • l troyke

    they are ignoring the 1099c like it doesnt exist.

  • L. Troyke

    i had a old charge off from HSBC credit card in 2007 then all of a sudden in 2011 listed me as deceased to the credit bureau I was told to prove that I was alive. they then proceeded and. they sent me 0n 12-28-2011 a 1099-C debt cancellationfor that debt which I proceeded and sent to the IRS which I paid taxes for year 2011. I cant seem to get through to HSBC/Capital One and the credit burean that the debt was forgiven. and they reopened the debt and added on interest for year 2012. what can I do. This is just tearing me apart. because they just dont get it. what can I do.

    • l troyke

      what can i do.

    • Kaykay

      Going thru same thing, same bank. Got 1099-c and filed it on 2011 taxes. Have med bills in collection and poor credit so never applied for credit. Tried to be added to aged mom’s account at bank I have been with for 20 years and was told I was dead. Called bank and they informed me they have no record of how they decided I was dead. Informed me I would be liable for full amount of dept. I informed them I would not pay anything till I contacted my attorney. Can’t afford attorney! No answer from them about the income I had to report to IRS. I was told they have no answer for me on that.1 I think they do it on purpose.

  • Camille Howard

    Thank you for writing another article. I did not know about Stewart v. IRS….I could be Stewart! The only thing different is I had a car financed through Jayhawk in 1996. Their bankruptcy caused a mess for me and I was never able to obtain the title to my car or get anything showing it was almost paid off. I could not sell the car so when I married and moved away I left the car parked at my family’s home. In 1998 I was contacted by phone regarding debt..but the amount was the entire amount I finaced the car for. I asked for documentation and I never heard anything else. The car was finallly repossessed in 1999 or 2000. I received nothing telling me I owed more money..and

    Note: The rest of this comment has been moved to the Credit.com forums. Read more and join in the discussion here.

  • Linda King

    When a form 1099-C is submitted to IRS do that mean, you do not have to pay taxes on any forgiven debt under a short sale from lender of your home you were living in

    • Gerri Detweiler


      Unfortunately, just because you were living in the home that doesn’t mean you automatically qualify for the exclusion under the Mortgage Debt Forgiveness Relief Act. You need to read publication 4681 carefully to figure out if you qualify. If you don’t qualify for that, you may qualify for an insolvency exclusion. If you aren’t sure, I’d suggest you consult with a tax advisor. If you do qualify, you’ll need to file Form 982 to demonstrate to the IRS why you aren’t including the cancelled debt in your taxable income.

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  • Marie

    Just in an update. So I called the IRS advising them that I need to dispute the 1099C and can they initiate the dispute. The answer was no. However, I explained this may have come for an already discharge Chapter 7 that was done back in 1994 after the death of my husband. I was insolvent. The IRS rep looked it up and now tells me she has closed the account and I will be receiving a letter stating so. Again this debit was from 1994 I never received a 1099C, only notice from IRS
    I can only stress, don’t ignore this paper but fight it. I think most should probably have not been sent out.
    Good Luck everyone.

    • Gerri Detweiler

      Thanks Marie for telling us how this turned out for you. Hopefully others will get helpful responses from the IRS as well. Does make you wonder why these are going out now, though, doesn’t it?

  • Marie

    thank you for writing about this. I received first a 1099C information that I owed tax from the IRS that was the first time I even heard of this. The year I found out from Capital one bank was some 18 years ago when I filed a Chapter 7. April 1994. At this point I will try and contact the IRS and see what the next steps are. I don’t even think 1099C was around at that time.

  • Mike


    I just posted a comment on one of your other articles and stumbled onto this one. Thanks again for your attention to this issue and I’ll keep you posted whenever it’s resolved.

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