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It’s perhaps the biggest tax mess of 2012: An estimated 6.3 million 1099-C forms reporting cancellation of debt income have gone out to taxpayers. Some of those forms are being sent to consumers for very old debts that they never thought they would hear about again. To make the situation worse, the IRS is arguably providing inadequate guidance to taxpayers, and even tax professionals have different opinions about how to deal with them.

Why now? Why would creditors suddenly be sending out these forms for ancient debts? “There are all these new 1099 reporting requirements coming out this year,” says Kay Bell, contributing tax editor for Bankrate.com and author of The Truth About Paying Fewer Taxes. There is a push by the IRS to “get more information to get people to pay what they owe regardless of the source.

Here are a just a few comments and questions we’ve received in response to stories on this topic at Credit.com:

I just received a 1099-C from Bank of America. I do not remember the debt, but I have had no dealings with them for more than six years. The statute of limitations on credit card debt in Florida is 4 years. Is there a time frame within which the banking institution has to “forgive” a debt, and a time limitation on when they may file a 1099-C with IRS? —John

I have received three 1099-Cs from a debt collector (Asset Acceptance). I do not recall getting any mail from this company and they are not on my credit reports. I have read a lot of conflicting advice about whether or not this is even a legitimate 1099-C since they are a junk debt buyer. —Charlotte

I’m glad I found this article! I received a 1099-C today for an old credit card debt which dates back to 2001. This date is way past my state’s statute of limitations which until last year (4/11) was 3 years but was changed to 6 years. The debt is uncollectible and unreportable so how can they forgive something they have no right to collect? —Nancy

“If ever the term “blast from the past” were applicable to a section of tax law, the provisions for cancellation of debts would rank near the top,” says Pete Sepp, Executive Vice President of the National Taxpayer’s Union. “Taxpayers can receive some nasty tax surprises from this area of law, some of them dating back quite some time. Also, this area of tax law is among the most complex for individuals and their preparers, definitely in league with the Alternative Minimum Tax and the latest investment income reporting requirements.”

The National Taxpayer Advocate, the independent advocacy arm of the IRS, has noted that 1099-Cs for Cancellation of Debt Income (CODI) can be a burden to taxpayers, stating in a report to Congress that “creditors sometimes make errors on the form that debtors then may have to wage an uphill battle to correct.”

It can be a minefield, agrees Jennifer MacMillan, an enrolled agent and member of the National Association of Enrolled Agents. “There are so many reasons why a 1099-C can be wrong.”

When Are Lenders Supposed to Send 1099-C Forms?

I just received a 1099-C for a relatively small amount, from Capitol One. My credit has been excellent for years, so I called them to find out where this came from. It turns out it was from a credit card I had in 1986, and which was charged off in 1989. But the official debt forgiveness date is 12/31/2011. I haven’t had contact with Capitol One, of any kind, in decades. My question is: isn’t there a statute of limitations on these “forgiveness” shenanigans? —Jim

In the 2012 instructions for Form 1099-C that the IRS provides as guidance to creditors, it states:

“A debt is deemed canceled on the date an identifiable event occurs or, if earlier, the date of the actual discharge if you choose to file Form 1099-C for the year of cancellation.” In addition to the discharge of a debt in bankruptcy, one of the identifiable events is:

“A cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing claim or beginning a deficiency judgment proceeding expire.”

So far, so good. It sounds like the 1099-C should be filed if the statute of limitations for the debt has run out. (The statute of limitations is a matter of state law, and varies depending on the type of debt.)

But wait. The IRS then throws in this caveat:

“Expiration of the statute of limitations is an identifiable event only when a debtor’s affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.”

So it appears the statute of limitations only comes into play if the debtor has been sued for the debt, raised the statute of limitations as a defense against the collection of the debt, and the creditor did not appeal the decision.

The IRS then describes another identifiable event:

“A discharge of indebtedness because of a decision or a policy of the creditor to discontinue collection activity and cancel the debt. A creditor’s defined policy can be in writing or an established business practice of the creditor. A creditor’s established practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy.”

This is of no help to taxpayers, of course, because they would have no way of knowing what the creditors’ policies are. So let’s move on to another one:

“The expiration of non-payment testing period… This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31, plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law.”

Bingo! If none of the other triggers for sending a 1099-C apply, it sounds like the creditor must send one out three years after there has been no payment made on the debt for three years.

Not so Fast (cont.) »

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  • Gray Mann

    I don’t know if you are still replying to questions but I received a 1099 C this month from a debt settled a few years ago. Can I dispute this since the settlement was not done in 2016?? Thanks in advance for any help in this matter.

  • Jeanine Skowronski

    You may want to consult an attorney about your best recourse.



  • patsy

    Hi we received a 1099c for a house we walked away from in 2008.I am 71 just had a heart attack,Have alot of medical bills and prescriptions on a fixed income.the bill is for 119,937.27.The house was sold never received any paper work on what it was sold for.This company is not even the mortgage company we had.what should we do already filled our taxes .

    • Jeanine Skowronski

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



  • Larry Seal

    Can we get a case citing for this? “says Phillip P. Guttilla, shareholder with Polsinelli Shughart PC. “You’d have to dispute the 1099 (with the IRS). He adds:……….a taxpayer recently won a case with the IRS over the timing of the discharge of debt.”

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

    I read your comments in the wrong order.

    What tax year is the notice for? Have you found out who the creditor is and what this is for? I think you need more information before you can properly respond.

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

    Presumably the IRS will send you a CP 2000 notice stating that you underreported your income. In the meantime it would be a good idea for you to find out if you qualify for an exclusion or exception. Then you can file an amended return. We wrote about that here:
    Help! I Did My Taxes Wrong

    And more about these forms here:
    What is a 1099-C? Your Top 11 Questions Answered

  • Jack Meov

    A W-9? They should have your SS# already. Ignore it. You do not have to furnish your SS# to them.

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

      They may be trying to issue a 1099-C. If they do you can claim the bankruptcy exclusion if you discharged your debt in bankruptcy. But I tend to agree with Jack–it’s odd that they don’t already have that information.

  • Jack Meov

    I know I am late, but unless your dad took out the debt in the name of a trust and the trust is still functioning, the 1099C should be in your dad’s name. Since his final tax return would have been filed in 2011 the 1099C is a reporting requirement for Chase, but as the recipient is deceased there should be no need to file.

  • Jack Meov

    Actually it is debts just prior to the 1099C, so it should include the amount forgiven on the 1099C as well.

  • Brandie Ephron

    What happens if you never received the 1099, never been in contact with the creditor and now I have an irs letter saying I owe them..how is this legal

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

      The creditor is supposed to send you the 1099-c and you’ll need to check with them why they didn’t. (Perhaps it went to the wrong address?) In the meantime, I’ve written a more recent article on problems with these forms that may be helpful if you need to fight it: The Little-Known Form for Avoiding a Big Tax Bill

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

    If you have proof that the debt was settled in 2012 and no balance was owed then your credit reports should show no balance owed. You can either contact a consumer law attorney to find out if you have a credit damage case (visit Naca.net to find one) or you can file a complaint with the Consumer Financial Protection Bureau.

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

    Glad you figured it out! Very confusing.

  • Rick

    My wife settled a credit card debt in 2012 for less than what was owed. She was issued a 1099c for the forgiven amount. However, the creditor still lists the forgiven amount as still being owed. When the issue was disputed with the 3 credit bureaus in 2013, the creditor re-reported the debt as owed, restarting the clock on how long it will stay in her file. Can a debtor report forgiven and 1099c’d debt as stillowed, and if not, how do we get them to rescind it?

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

      Rick – The IRS says that the issuance of a 1099-c does not mean the debt is legally forgiven. However, in some court cases, the 1099-c has been used as evidence the debt has been forgiven.

      Who is the creditor (or is this being reported by a collection agency) and exactly what do you mean by resetting the clock? They can’t change the date of a charge off or the original date of delinquency. That sounds like it would likely be a violation of the Fair Credit Reporting Act.

      When did she last make a payment on this account?

      • Rick

        The loan was settled in February of 2012. The creditor (Macys/ Department Stores National Bank) reported the forgiven amount as still owed at that time. When we disputed this with the 3 major credit bureaus, they contacted the creditor who then re-reported the amount as still due in March of 2013. They even reported to one of the agencies that the amount was still in collections (all 3 reportings varied in their claims). It is our understanding that such items remain on your record for 7 years. By changing the reporting date from February 2012 to March 2013, they put another year onto how long that item remains viable on the credit report.
        I also understand that by issuing a 1099c, the creditor gets a tax write off from the IRS. So having taken a tax benefit from forgiving the debt, is it not then tax fraud on their part to continue to report it?
        Thank you.

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

          When you say the loan was settled, what exactly do you mean? They agreed to take less than the full amount as payment in full? Do you have that in writing?

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

    If you qualify for the insolvency exclusion, my suggestion is take it and be done with it! Fighting these forms can be a nightmare. Plus my guess is in your scenario that the cancellation took place when you finally paid off the debt according to the agreement, though don’t hold me to that. (It’s a very interesting scenario and one I haven’t been asked about before.)

    • Panic_Attack

      Corrections. I actually made the agreement in November 2011. It was to a collector on behalf of the credit card issuer (Bank). I called the bank for some clarity (ha ha) and the collector returned the debt back to the bank on May 25th, 2013.

      I have not called the collector. I guess I should have filed the ‘phantom’ 1099c for tax year 2011 but did not know of the involvency sheet option at the time. I just assumed I’d be on the hook.

      I forgot about my measely 401k contributions but it appears to crush most of the involvency when using that May date. And it fell on a day where I had not paid any bills yet so my checking account was temporarily high.

      Sigh. There would be a benefit to using the corrected November date. Less tax !

      That’s my next question. In the worksheet for investment income they want the whole value for a 401k ? (penalties be damned).

      I may be up for a fight but I could afford what I calculated in TurboTax…after payday (Friday) if I just get this over with.

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

        Hhhmmm…I don’t know if the case could be made that the identifiable event was actually in 2012. I’d suggest you at least talk with a tax professional who is very familiar with these forms. Daniel Pilla’s book may also be helpful. I’d love to hear what happens here.

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

    I think he is simply referring to the fact that if the debt is resold to another collection agency that may affect when a 1099-c must be filed. That comment relates to 1099-c forms, not to the rules about what or how a collector can collect from you. Those rules are governed by state and federal laws.

  • Mayra

    I have been dealing with Debt Defense of America, to try to pay back my past due credit cards. So I contacted Chase a few months ago to get an update letter of how much I owe them. The callers were rude, I got tossed around from department to department. A few weeks later I receive a 1099C. What the hell am I suppose to do with this?? I am working on repaying them and they screw me by sending that letter. What should I do???

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

      It sounds like you are working with attorneys to try to resolve your debt, so you will have to address any legal questions to them. But with the 1099-C, the IRS has received a copy and will expect you to include that amount in your taxable income unless you either dispute it or show that you qualify for an exclusion such as the insolvency exclusion. I would suggest you consult with the attorney you are working with about whether you plan to fight the 1099-c. You may find this article helpful as well:
      The Little-Known Form for Avoiding a Big Tax Bill

  • bridget rivas

    if i have a 10/99 to be files do i have 2 years then the third year the irs audits or on the second year they audit?

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

      I am sorry I don’t understand your question at all. Can you try restating it?

  • ann

    i am very confused…….i stopped paying Chase in june of 2010 – so far the 36 month thing would apply however, they did not nor will they send me Copy B of 1099C – i got a copied and pasted version on their letter head with their phone number right in the middle of what they claim was a true and original copy (which it cannot be because it does not say Department of Internal Revenue Service on it. This is what i got and even though it mentions an above referenced account, there is none there.
    I understand you continue to have concerns regarding the validity of the Form 1099-C issued for the above-referenced account. Thank you for taking the time to share these concerns. Please be assured your comments have been taken very seriously.

    Our records reflect the account was taken as a loss to the bank due to severe delinquency on
    April 29, 2011. The account was placed several times for collection efforts that were unsuccessful and later returned to us. This account was never sold. We then updated our records to ensure no further collection activities will occur regarding this account. The Form 1099-C was issued in January 2014, for the tax year 2013.

    The IRS requires financial institutions to report cancelled debts as of the end of the tax year if the principal cancelled amount is $600.00 or more. If you have any questions regarding the Form
    1099-C, please consult a tax advisor for advice. Based on the information provided above, we must respectfully decline the request to rescind the Form 1099-C for the tax year 2013.

  • cassie

    Could you please email me? i received a 1099c for a mobile home that i cosigned for with an ex back in approx 2003 in Alabama. i split from my ex he stayed for a few months then let the trailer go back now im married in a different state and got a 1099c for 15,000 i have no clue what to do.

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

    I don’t have a definitive solution for you, but I would suggest you start with these two articles: 1099-C: The Worst Tax Mess of the Year? and Tax Help: How to Dispute A 1099-C Form. There is no form that I am aware of that allows you to specifically dispute a 1099-C as too old.

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

    Paul – Thanks for your comment. I’ve written about that issue in some of the other pieces I have written on 1099-Cs. My understanding is that this continues to be a controversial and convoluted mess (for lack of a better technical term!)

    For example I found commentary from the AICPA where they pointed to a couple of Tax Court cases involving the testing period of old debts resold later (Stewart, TC Summary Opinion 2012-46 and Kleber, et ux., TC Memo 2011-233). My understanding is that the Tax Court determined the testing period was established much earlier.

    I am not a tax attorney, and rely on professionals like yourself to help educate our readers. Feel free to contact me directly as I am always looking for experts to help with this complicated issue. I will email you directly.

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

    Ugh. Sounds like a mess. First, you should request a wage and income transcript for the year in question so you can see exactly who filed the 1099-C – the credit card company or the collection agency. Who is the creditor or collector? Secondly, I see no reason why anyone should be sending you a 1099-C for 2012 on a debt you paid off in 2006. That’s way too long to send a 1099-C even if one was warranted, but as you see from the comments we’ve received this keeps happening.

    One of our readers took their case to tax court themselves and won. You can read about that here: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

    I wrote more about disputing a 1099-C here: Tax Help: How to Dispute A 1099-C Form

    I would also encourage you to a complaint against whomever filed the erroneous 1099-c with the Consumer Financial Protection Bureau and file a complaint about the filer and the IRS with the Taxpayer Advocate. You can also ask your elected officials in Washington to help: They often have staff members who help constituents with problems with government agencies.

    And of course hiring a tax professional is another option though it may cost you more than it’s worth.

    I wish I had an easier solution for you. Will you let us know what happens?

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

    No idea – have you tried contacting them?

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

    I can understand why you are freaking out. It’s scary. But let’s not assume the worst. The first thing you need to do is to find out what the “income” they are reporting is from. You can order a wage and income transcript for the 2012 tax year from the IRS: http://www.irs.gov/Individuals/Order-a-Transcript. It should explain what that income is from. Once you know, then you can come back here and comment, and we’ll point you to articles that may help.

    I should clarify, though, that I am not a tax professional and can’t give you tax advice, so if the letter tells you something differently, please follow the instructions in the letter. If you aren’t sure what to do, I’d suggest you consult a tax professional with experience in these forms.

  • Rebecca

    We received a 1099-C, Event G last year. Event G says something along the lines of a policy/decision to cancel debt. It was for a loan in which we have a judgment against us for 4 years now, then after 3 years they send us the COD, we file it, and now a year later they are after us again but for more money. Their own lawyers had no idea the company filed the 1099-C before collecting on the debt. Am I in trouble or is there a way out? The judgment was for 5027.00, the COD was for 4100.00, now they want 5800.00 from assets.

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

    If you signed an agreement and the loan was documented it MAY be a possibility. Unfortunately, though, this is is a question that would be best answered by a tax professional.

  • Vashon

    I’ve received phone calls threatening a 1099c for a debt that is 12 years old. Is there a statute of limitations for this?

    • Credit.com

      In most states, creditors have a maximum of four to six years to sue to collect a debt but you’ll need to check your individual state laws to be sure. Some states (like Kentucky), may have SOLs that last as long as 15 years.

      If you’re dealing with a collection, this article is an excellent resource: Seven Ways to Defend a Debt Collection Lawsuit

  • Gina

    My husband received a letter today from IRS that there was a 1099 issued by creditor in 2011. Not knowing what it was about he called the company listed on the letter, and gave them the account number to ask what it was in reference to. In 2001 a car in his name had been repossessed and sold at auction, the 1099 was issued for difference of amount car sold for at auction versus loan amount -$7000 difference they claim (more than half of car’s original price in 2001). My husband never received the 1099, nor any collection activity for this debt ever, that he can recall. My question is- are people often successful when they dispute the 1099 being issued so late, with out any prior collection activity for almost ten years?

    • Gerri Detweiler

      Gina – It definitely sounds like that 1099-C should not have been issued at that late date. I would encourage him to challenge it. Hopefully this piece I wrote will inspire him: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won. Will you let us know how it turns out?

    • Aiona Manukainiu

      What did you end doing?

  • Marie

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  • Armando

    Hello I had a repo and after 4 years of not paying the final debt I received a 1099-c saying cancellation of debt I toward that to credit bureaus. To update my balance owed, Experian and TransUnion updated balance and bow reflects 0 . But Equifax says that the creditor says I still owe them even thou a 1099-c was issued to pay taxes on money owed. Can j still owed them after they issued a 1099-c??? What can j do?

    • Gerri Detweiler

      Armando – Believe it or not, the 1099-C doesn’t necessarily mean they can’t try to collect the debt! Unless you reached a settlement agreement with the creditor, then whether or not they can attempt to collect is a matter of the statute of limitations for that type of debt in your state. (If you tell us what state you live in we’ll try to give you some general guidelines.) So until that time limit expires, that debt may remain on your credit reports.

      • sheraz khan

        We are kind of in same boat. We are in Ohio. Could you please tell me the time limitation? My husband has been speaking to a lawyer who tells him that he should go after the company to get it off the one credit report! Can you tell if this is a right thing to do? And what are our options!

  • Donald Baugh

    I recieved a cancellation of debt 1099 for 2011 after I already filed my tax return. I reported the debt as being inslovent on my 2012 getting a notice from IRS from IRS showing a descrepency for 2011 for that amount. Do I just write a letter of explanation or do I need to file an amended return for 2011 or both years? Anyone know what to do here?

    • Gerri Detweiler

      Donald – I would suggest you start by calling the IRS and asking them for their suggestion here. Some of our readers have had good results this way. Keep notes from your conversation and if you aren’t getting the help you need you may want to talk with a tax professional.

      Let us know how this turns out!

  • JoLain

    I had a credit card turned over to the courts that went to judgement. I paid it off and now I have received a 1099c on it. I called the Collection Agency number that was on the 1099 and they said I didn’t pay the debt, they forgave it. I have the paperwork showing I paid full satisfaction of debt plus where the payments cleared my bank account. What do I do now? Thank you in advance for any help on this matter.

    • Gerri Detweiler

      JoLain – I would suggest you first call the IRS, explain the situation and ask them what to do. Some of our readers have had success getting it straightened out over the phone. Will you try that and let us know what they say?


    I have a lot of construction depreciation on my home . It has been assessed to be $35,000 to repair it. I am trying to prove Insolvency. Can I deduct this from the value of the home? I have not made the repairs as can’t afford it yet. The damage is severe enough to make the house unlivable.

    • Gerri Detweiler

      Debora – My understanding is those needed repairs would affect the value of the home when you fill out the insolvency worksheet, but I don’t know if it is a dollar-for-dollar deduction. For a question that detailed I’d suggest you work with a tax professional with experience in these forms.


    MY HOUSE IS IN NEED OF ABOUT $35,000. I WAS GIVEN A 3099 for debt forgiveness. Can i subtract the work I need done? I didn’t fix it yet because of no money. Does it lower my house’s value on the Insolvency asset claims?

    • Gerri Detweiler

      You’ll see on the insolvency worksheet (in Publication 4681) that you list the Fair Market Value of the house on line 17. The fact that the house needs repairs would likely affect the value, so it does come into play, but you don’t necessarily just subtract the cost of the repairs.

  • Laurie

    I am in the same situation as many of you are in… 1099C BofA… However, mine may have a slightly different twist. I acknowledge that there were two accounts with them and my husband and I settled on them in 2008. We received our 1099C forms one came and was applied against our 2009 taxes and the other or 2010 taxs. Now in January 2013, I have received a additional 1099C one which their telling me I had in my name only and it charged off in 2006. The twist to all of this is I know that the account numbers of the two accounts we settled on changed a few times. I still have all my documentation and there is a handwritten reference of the different account numbers and the number on the 1099C is on my handwritten note. I have called and spoke to them 8 times now… they keep changing their stories on the phone and I am at my wits end… I spoke to a gentleman yesterday that was quite rude. They ask me to verify my information and I do… I am not disputing that the cards existed… I am just saying that their is a clerical error on their part and they have issued a second 1099C form for debt that has been settled and we received a 1099C and reported it to the IRS and paid dearly for it. I refuse to do it again…. I think what might have triggered all this is my husband passed away April 2012 so that may be why they keep saying it is only in my name… I asked the guy on the phone yesterday to provide me proof of this account to send me all documentation referencing this account. And he was the never to tell me that he can’t their records can only be retrieved for 5 years and they can send me anything… I just have to take their word for it. Which I refuse to do! Now they can tell me that the last payment was in 2005, and that was the last payment associated with this account. It charged off in 2006, they can even tell me the bank account I used which I have not had since 2007. Now on my credit report there are only the two accounts I know of and they indicated that they were settled on and there is no refrence to any other BofA account. And guess what the activity of these two accounts begin in 2006 and end 2008 when we settled and they confirmed at the time of our settlements we were done with BofA, but would probably receive a 1099C form for each of the accounts which we did. Then that was the last I ever heard from them…I have never received any calls, statements, letters, any notification what so ever until January 25, 2013 when the 1099C came in the mail. They did say they were going to send me a letter of the discharge… and that was suppose to be mailed on the 28th of January (still have not recieved it yet). They did ask me to send them any documentation I have that may indicate that they made an error and they would review it and let me know (which I am not sure I should)… Or just save if and send it to the IRS with me completed taxes. I did speak to my tax advisor briefly and he did indicate that there are only so many years they can go back and there is a Statute of Limitations in Michigan and they have to prove that they tried to collect after what would have been my last payment in 2005. This sound familiar to anyone…. L

    • Gerri Detweiler

      Laurie – So sorry to hear of your husband’s death.

      That’s ridiculous that they expect you to have the records for this debt from 2006 but they don’t keep them! I would definitely encourage you to fight it. We’ve had several readers successfully challenge old 1099-Cs. This story may encourage you: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

  • Mitch

    I have not received a 10-99 from Bank of America who through a government program paid off our second mortgage, this is my primary residence, how do I know if I will receive one? Someone said that I was probably excerpt because this is my primary residence, could that possibly be true?

    • Gerri Detweiler

      When it comes to the bank sending a 1099-c or not, your guess is as good as mine. You may never get a 1099-C or you may get one in a future year. And whether it’s taxable or not, it depends. I wrote about one type of government short sale incentives that aren’t taxable in this article: More Confusion Over the 1099-C but that doesn’t sound like the program you used.

      The program your friend is referring to is the Mortgage Debt Forgiveness Tax Relief Act which I wrote about in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt. It’s worth looking into to see if you qualify, if nothing else for some peace of mind in case you do get one of these forms in the future.

  • Vernon Stanton

    It was asset acceptance, LLC. They were just one of many companies that tried to collect this debt. I have a huge file with old credit reports with all the different creditors showing on them. I have moved a couple of times since I last saw the file, but I’m sure it’s in a box somewhere. I have quite a but of information regarding the old debt. I fought it for years with the credit reporting agencies, but it finally just came off of my credit report after the 7 years was up more than a decade ago. I haven’t heard anything since then… until now. I’m wondering if I’ll end up with more than one 1099 c for the same debt.
    By the way, thank you for such a quick response. I didn’t expect that at all. I though my comment would just get lost in the interwebs and be forgotten about in a few days or weeks. 😉

    • Vernon Stanton

      Another thing that I’m concerned about, I filed my taxes almost a week ago and I just got the 1099 c in the mail today. It was post marked on the 4Th. I thought tax forms had to be sent out before then.
      I am on disability due to a tumor on my spinal cord that caused me to lose the ability to walk in early 2010. Before that I was climbing wind turbines. I try to keep my chin up, but these kinds of things sure make it hard. I don’t know whether to cry or get angry. For now I’m just angry, but I have a feeling that this is going to kick me in the rear.
      It was extremely frustrating dealing with the credit reporting agencies over this matter. I would work on it for a few months at the beginning of each year until I would just get frustrated and give up. I did that for 5 or 6 years. It would get removed, then another company would report it. I went in circles with a few companies reselling the debt back and forth to each other, and every time, they would report it again. You should see the notes I have written all over my credit reports and collection notices. I wrote down every person I talked to every time I called, and everything they said that needed to be noted. I can’t believe I’m dealing with this all over again.

  • Vernon Stanton

    I received a 1099 c for a debt that is almost 20 years old. If I’m not mistaken, this article is saying that they should have sent out a 1099 c many years ago. Not only that, but this debt was passed around to more collection agencies than I can remember. I know it came off my credit report over 10 years ago. I never paid the collection agencies because I had paid the original creditor before it went to collection. Then every one of the collection agencies wanted 3 or 4 times what the original debt was.

    • Gerri Detweiler

      Vernon – What a mess. Who actually issued the 1099-C?

  • Margaret Locklair

    Dear Gerri,

    I am writing concerning a 1099-C sent in January 2013 to my 60-year-old sister, who is totally deaf since birth. The 1099-C said that on Dec. 31, 2012, Bank of America had cancelled a debt for which my sister is responsible. Essentially, I believe, the bank is saying that my sister must claim this money as income in 2012.

    Here is the background. In 2009, my sister received a letter from a collection attorney who said she owed BOA just over $24,000. This was the first our family knew of her long-time email relationship with a man she had never met. He called himself Mitch. After several years of increasingly personal correspondence, Mitch had gained her trust sufficiently to convince her to “watch over” some money for him until he could come here to South Carolina. He told her he wanted to marry her.

    In 2008, following Mitch’s emailed instructions, my sister opened an account in her own name and provided this man with the account number. A $24,000 check was deposited by a third party. When Mitch did not come as promised, my sister tried to force the issue and wrote him that she did not want to watch over his money any more. He then gave her instructions to wire the money to a woman in Nebraska, which she did.

    Apparently, it was eight or nine months before the bank realized that the check was altered, and turned over the loss to a collection attorney. When my sister spilled out the story, I consulted an attorney who advised us to cooperate fully with the bank. (I had already contacted every agency I could think of, from the State Attorney General’s office to the FBI.) Eventually we received help from a local police detective. He tracked down a woman in Nebraska who had been “taken” in the same way my sister had. So, apparently, had a third woman in Texas.

    South Carolina law holds a person responsible for any money deposited in his account. We freely admit that, by this definition, my sister is responsible. But BOA was very gracious in halting any effort to collect from her. We heard nothing more from them after July 2009, when we made our police report and turned over copies of the emails and any other documentation to the bank. My sister had obviously been targeted by an experienced scam artist.

    What I don’t understand is why the bank is using 2012 as the date they wrote off this debt. Had they used 2009 (last collection attempt) as the write-off date, my sister would have likely been considered insolvent. Now she has a small 401K and about $9,000 in savings. Having to pay taxes on $24,000 will be a heavy hit for someone who is deaf, diabetic, lives with our 81-year-old parents and no longer has a job after being laid off in 2011. Last August, she qualified for disability payments of about $600 a month, but it will be some time before she qualifies for Medicaid. Her little nest egg serves as her health insurance, and it is dropping fast.

    From reading your column, I realize that many people are getting surprises like ours in the mail. Here are my questions. First, is the 1099-C typically used to write off a loss from a scam, or could the bank report the loss using some other form? Second, is it likely that the bank could declare the loss for 2009 instead of 2012 ? Third, if I need to contact BOA, who do I ask for (by title)?

    I would like to make it clear that we feel sick about the bank’s loss, but I am also trying to protect a vulnerable member of society from a loss that already feels catastrophic. We deeply appreciate any advice you can give us.


    • Gerri Detweiler

      Margaret –

      I am at somewhat of a loss at to tell you how to proceed here. As I’ve mentioned, I am not a tax professional so I don’t have the experience that they do in terms of how the IRS handles these kinds of unusual situations. It seems to me that the ideal situation is for the bank to issue a corrected 1099-C either showing that this debt was cancelled in 2009 or showing zero as the amount of the cancelled debt. The bank is supposed to provide a phone number on the 1099-c for questions. Is that not there? I realize that will probably sent you to some department that has no clue what actually transpired here but that’s the department that is supposed to help. If they can’t do either, then I will have to suggest you try contacting the Taxpayer Advocate’s office to see if they can help. I’ve heard mixed results but given the situation and your sister’s disability I would hope someone would assist. Finally, if that doesn’t work, then I will have to recommend you consult a tax professional. Wish I could offer a more definitive answer! Please let us know what happens.

      • Margaret Locklair

        Thank you so much for your reply. You gave me the terminology I needed to make the call. I will let you know what happens.

        • Gerri Detweiler

          You are welcome and please do!

  • jess

    I received one of these 1099C forms but my issue is that I do NOT owe a debt, nor did I! Bank of America LOST a 3k deposit of mine. They had record that the deposit had been received but it disappeared from THEIR hands before it posted. This deposit included cash and checks and it can be assumed that one of their employees stole the cash and destroyed the checks. The machine did not malfunction and I made deposits into that machine weekly without a problem. They had record a deposit had been made so they credited back my account. I closed the account because I certainly am not going to do business with a bank that LOSES my money! I heard nothing else from it. And 3 years later I get a 1099C saying “deposit overdraft borrower personally liable for repayment” – which I was NOT a borrower and I did not overdraft anything. How do I get this settled, who do I contact?? I don’t want to be paying taxes on a debt I did NOT owe.

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  • Charlie

    Hi Gerri, I can use some help as well. My wife suffered a major brain injury in September of 2007 from surgery complications. She was 28 at the time and had college loans. I tried to pay them and take care of her and both our kids. Eventually I filed to have her loans forgiven. After 5 years, these were finally forgiven thru the Education Dept. This week I received this 1099-C for $15000. I am struggling with what to do here. There are a couple of things to point out — 1) my wife is totally and permanently disabled thur her brain injury, she is my third child now. 2) she was deemed incompetent as a result and I am now her full-time court appointed guardian. 3)I have files our taxes as married. What can I do here? Do I have to claim my assets for insolvency? With the debt being hers alone — on the 1099-C — can I do this thru her only? She no assets as all things are in my name except for the home. Our family, like many others, cannot afford to pay this. Any advice or help is greatly appreciated.

  • keli

    Hi, we electronically filed our taxes yesterday and then received 2 1099 s for cancellation of debt in the mail today. I’ve never even heard of this so naturally I didn’t expect it. About 6 years ago my husband lost a job and we voluntarily gave our boat back to the bank. A few days later he found another job and we called the bank trying to get it back, but found out they already sold it and didn’t follow the correct procedure. They then came after us for the entire amount even though they had sold it making some of their money back. We then got an attorney and went to court and the judge ordered that we only had to pay back a small portion of the loan, which was 7000 dollars…. We agreed and we’re making payments, then about 2 and a half years ago I lost my job and then my husband had to take a pay cut so we stopped, but never heard anything from them, until today. Anyway, like I said they sent 2, one is for the remainder of the 7000 we didn’t pay but the other is for the 16,337.00 the judge said we didn’t have to pay. Does this sound correct and how is it considered income if we didn’t keep the property?

    • Gerri Detweiler

      Keli –

      Unfortunately, you’re in that mess I have been writing about. I am going to have to recommend you talk with a tax professional with experience in these forms. At issue is whether a. the amounts are correct and b. whether the year in which they were filed are correct. It’s not clear to me whether you should have been sent a 1099-C for the $16337. My guess is probably not, but the IRS is going to probably say, “It depends on the facts and circumstances.” If it was correct, then shouldn’t it have been filed the year in which the judge ordered that you don’t have to pay it? Finally, you may qualify for the insolvency exclusion and that may allow you to avoid taxes on those amounts.

  • aynat

    Do I have to file my 1099-c this year or can I wait?

    • Gerri Detweiler

      Unless you forgave a loan you made to someone else, you don’t file a 1099-c – the lender does. And yes, you must include that income in your gross income for the year in which the 1099-C was issued unless you can show the IRS why it shouldn’t be excluded. You may want to read my more recent primer on this topic: What is a 1099-C? Your Top 11 Questions Answered

  • TerriA

    We received 1099C from Bank of America for a Heloc (Home Equity ) on our primary home. Bank Of America took over Countrywide and as most know Countrywide was found guilty of Predatory lending. Throught the Federal Courts and BOA has to repay homeowners or forgive debt.We were one of many who got caught in the trap. ended up in Chap 13 on arrears of the Heloc, yet we are current on our First mortgage. Our attorney has that end of it handled but advise us to get tax professional of the Forgiveness, On The 1099C #1 date of event, # 2There is the amount discharged, #3 0 interest #4 address ,#5 is checked #6 blank identifiable event code, #7 Fair Market value 0.. What I dont understand is the Code? I search on the Irs forms and Publications in the space where a Event code is, there is no letter . I am So lost! any suggestions would be greatly appreciated.
    Thank you

    • Gerri Detweiler

      TerriA –

      The event code is optional for the lender to include. You’ll find more about that in the instructions for Form 1099-C. But it’s not likely to affect whether you end up paying in taxes due to this cancelled debt. (There is no special treatment that I am aware of for debt cancelled due to predatory lending.) So the question is whether you can exclude this amount from your income either because it was discharged in bankruptcy, you were insolvent, or you qualify for the Mortgage Debt Forgiveness Tax Relief Act.

      Read publication 4681 for information on how those exclusions work and if you can’t figure it out on your own I recommend you get professional tax help. I’d imagine this is not a small amount of money so you want to get it right.

      • TerriA

        It is a large amount over 100,000. We are still in Chapter13 for another 2 years. What a mess.I am hoping that we wont get stuck with 30,000 in taxes. Thank you.. I will get a tax Professional. Pretty bad the IRS get ya one way or another.

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  • Maria

    Hi, today I receive the form 1099-c amount of debt discharge $1617.10 , the original amount was $2000 (chase credit card) which it was used for a down payment for my first car back in 2008 and I was making payments and then in 2009 I stop paying because I didn’t have a job because I was pregnant and I was having to stay home so in 2011 I started paying again of course to a debt collector and last year with my income tax money I settle and they said that they will report that I paid that in full, and now I’m receiving this form, and my husband settle last year too with a collection agency from target, will he receive one as well? I’m just confused. Please help! Thank you!

    • Gerri Detweiler

      Maria – If the collector forgave $600 or more of your balance when you settled the debt the IRS requires them to send you a 1099-C for the amount of debt that was cancelled. You can read my other article, 1099-C in the Mail? for more information about your options here.

      And yes – if your husband settled a debt and more than $600 was cancelled, he is required to report that “income” even if he doesn’t get a 1099-C.

  • Dennis Lindsey

    I have a 1099C situation of my own and im not quite sure how to handle it. I got the form in the mail a couple of days ago saying i had an uncollected debt of $20404.44 to Bank of America. This was from fraud check i received in trying to sell my car when i was about 20 years old (debt was from around 05-06) I got a fake check in the mail from some prick trying tp buy my car. I went to the bank and specifically asked the teller if it was a real check. a couple weeks later when i found out the check cleared i went to the bank and they told me i was all set. Subsiquently i did not sell the car and the money was sent back to this “fake buyer” about a month later the bank called and said the check they told me was good to go was fake and i owed them $20,000. The Bank siezed my account along with the $1500 or so of my money that was in my account. I dealt with some local state detectives who said i was innocent of any crimes and took all the information i had. I never heard anything about this $20,000 debt i supposedly owed again. Now here we are today and i have this 1099C form saying i have a discharged debt in the amount of $20,404. What do I do with this? BOA basically told me im SOL and hung up on me. Could really use some advice/help

  • Donna

    I think we all need to start a class action lawsuit for these problems. I filed chapter 7 in july of 2009 and 1/26/2013 i recieved a 1099c from bank of america for a business that is no longer in business and then i also got 1099c personally, I know this is not RIGHT .
    The right thing to do is to stop this from happening, If anyone out there has an answer please email me cause i am ready to move forward with this matter to get it resolved.

    • Angie

      Donna – where do you live? I’m going to see an attorney on Wed.

      • jess

        Absolutely. They are screwing the public over in a way that is very hard for us to fight so that they can write off money to give them more money. They sent me a 1099c for a deposit they lost over 3 years ago and had credited back to me!

        • peg

          ditto. This is such a big mess I am dealing with one from AssetAcceptance that is fraudulent. They have been sent out en mass and after much research of stories on all these I think its is caused by the gov or irs now requiring the forms be sent (which ok but only if they are true and valid!) but then they write up the instructions for what I assume is now a law or something and totally messed that process up so these scam collectors and every financial business is thinking they either have to send them out for everything they ever claimed on their taxes as a write off, as well as the other ones who figured out this mess is a bonus to them and they can feed their bottom line a huge increase knowing they don’t have to deal with the people cuz now the people have to deal with the irs instead. I have today filed 3 complaints so far in my situation, I don’t have the money for an attorney or I would be in front of one pronto as well. I have filed with the BBB, FTC, Consumer Protection Bureau and spoke with the IRS on it all about Asset Acceptance, so far. These people/businesses are getting fraudulent write off credit against their filings and definitely it needs to be stopped. They need to be audited or checked on that what they are filing is true and correct for these 1099-C’s because it sure isn’t in my case and I am willing to bet 98% of em aren’t correct in anyone’s case. SEC probably would be interested in them as well since they are a publicly traded company and reporting a huge profit for their quarters/years – again not a true figure – isn’t this the type of thing that caused this economic crash we are still reeling from as well – phony figures? Could be that a bunch of class actions will be started over this mess, one for each company profiting from these violations.

          • A_n_404

            Please let me know if you guys filed a class action against CitiBank. They’re killing me. I paid taxes on this debt after they issued a 1099-c supposed to the IRS, because I never got a copy of it, and they’ve tripled the debt amount on my credit report and I can’t get it off.

  • Confused

    Thank you for your response Gerri! Ive read about insolvency and I’m still uncertain about it. I currently owe approximately $300,000 on my primary residence but my assets are only $130,000 (401k, savings, etc.). Would that make me an insolvent candidate?

    • http://www.Credit.com Gerri

      It sounds like it. Use the worksheet on page 8 of publication 4681 to be sure.

  • Confused

    I received a letter in October from BOA and they advised they would cancel a debt on a second mortgage in Florida. This wasn’t a primary residence. Knowing that mistakes are common on debts I checked my credit report and I noticed the amount they were “forgiving” was different than my credit report. I sent a letter to BOA to let them know of the discrepancy, telling them I didn’t agree with the “forgiveness” until they confirmed that the amount was correct. I requested they respond within 30 days which they didn’t and I sent it Certified Mail Return Receipt. They didn’t!
    I now received a 1099-C from them, which I still don’t know whether it’s right. What recourse, if any do I have?

    • Gerri Detweiler

      It’s understandable you are confused and the IRS provides practically no guidance on these issues. I don’t have a simple answer for you. Trying to figure out what the correct amount of “cancelled debt” will be may be a nightmare. My suggestion is that you first figure out if you are eligible for the insolvency exclusion. (It doesn’t sound like you qualify for the Mortgage Forgiveness Debt Relief Act since this was not your primary residence.) if that exclusion allows you to avoid including the amount on the 1099-C the you can file Form 982 and be done with it.

      But if you don’t qualify for an exclusion and will have to pay taxes on it, then I would consult a tax professional. In addition if this was a rental property, which would presumably make this a business debt, then you should definitely consult with a tax pro familiar with these issues as it becomes more complicated.

  • Patience

    I recieved a 1099-C yesterday. Called WF. This is a home equity loan from 1997. We lost our home in 2000. We filed bankrupcty and it was dismissed. In all these yrs, this amt has not ever been provided , no collection letters or calls, was never on my credit report. I never had a loan with WF. They evidently purchased a lender that had the debt. I’m in SC. Why should I have to claim this as income 16 yrs after the fact? Please someone help me!!!

    • Gerri Detweiler

      Patience – Taxpayers don’t have to pay taxes on debts discharged in bankruptcy. I wrote specifically about that and what to do in this article: Just Received a 1099-C? Don’t Freak Out! I hope it helps.

    • Gerri Detweiler

      Patience – It doesn’t sound like you will have to include this amount in your income since a. It as so long ago and b. The debt was discharged in bankruptcy. Start by calling the IRS. Some of our readers have received help that way. The IRS agent may ask you to fill out Form 982 and indicate the debt was discharged in bankruptcy. Keep good notes of everything related to this matter in case it proves difficult to straighten out. I also recommend you file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov and the IRS at http://www.improveirs.org/speakup.aspx

  • Angie

    Hi Mark….. I’m glad I checked back in to find your post. I was laughing out loud a lot to your response and mostly conversation with the country bumpkin thug life. HAHAHAHA. I think it is a requirement to have multiple personalities to work for DRS. They can switch it up pretty fast. Professional to Evil in less that 90 seconds flat!!!!

    I had hoped the 1099-C threat was only a scare tactic. I’m very glad to hear that you never received one. All the research I have done points to that result. I became very concerned when I found that DRS “hard” pulled my credit report in December. How can they do that without permission!!!!????? I was livid. The first thing I did was file a dispute with Equifax. The answer I received in Equifax’s response letter is below.
    “We have reviewed the inquiry information for Dynamic Recovery Solutions. The results are: Inquiries are a factual record of file access. If you believe this was unauthorized, please contact the creditor. If you have additional questions about this item please contact: Dynamic Recovery Solutions, 135 Interstate Blvd Unit 6, Greenville, SC 29615-5720”. REALLY???? Oh sure – let me give them a call – I’m sure they will do the right thing by saying they were wrong and have it removed instantly. RIGHT!!!!!

    The second thing I did was send DRS a cease and desist letter. I mailed it certified and received the receipt confirmation back last week. I have not received any correspondence from DRS since. From what I understand they can contact me one additional time to let me know their intentions. I believe there is also time frame in which they are required to respond as well.

    The third thing I did was place a security freeze on my credit with all three credit agencies. The freeze is suppose to prevent them from being able to report any information on my credit report. This step may have not been necessary but I don’t want to take any chances.

    If this goes any further I will hire an attorney for resolution. I’m not that far from Greenville.

    I’ll keep you posted on how it ends and thank you!!!!

  • George Rohlinger

    I received a letter from HUD regarding a loan that was defaulted over 30yrs ago! This debt was including in a bankruptcy almost 14yrs ago. According to the letter the debt is uncollectable but HUD says it must issue an IRS form 1099-C to report cancellation of debt, also states HUD will issure a 1099-C to me and IRS. Of course this is making me very nervous, why after 30yrs would this come up? Should I be worried?
    Thanks George Rohlinger

    • Gerri Detweiler

      George – I am as baffled as you are. They don’t need to issue a 1099-C for a debt that was cancelled in bankruptcy. And 30 years later? I am not a tax professional so I can’t advise you specifically on what to do but my understanding is that you’ll still need to file Form 982 to indicate to the IRS why you don’t believe you have to include this amount in your taxable income. (There is an exclusion for debts discharged in bankruptcy.)

      If this were me I would also file a complaint with the Taxpayer Advocate and my elected representatives in Washington since a government agency is involved here.

      • george

        Thank you for your reply, I sent in a W-9 per request and now am waiting on the 1099-C, you said I should file a complaint, what should I say on the complaint?

        • http://www.Credit.com Gerri

          I’d just explain what happened – that you got a 1099-c for a very old debt that was discharged in bankruptcy and that your understanding is that these forms should not be filed for debts this old or for debts included in bankruptcy. Mention the time/cost or hassle that this is creating for you. I’d also send a copy of your complaint to the Consumer Financial Protection Bureau.

  • Angie

    Hi Gerri – I live in South Carolina.

  • Angie

    I received a threatening call today from DRS Dynamic Recovery Solution. The caller addressed me and asked me to confirm my information. I refused. She told me she has a debt that goes back to 2000 with the last activity being 2004 for Bank of America (Credit Card). She told me I owe a crazy amount $25,000 on a credit card that only had $4,500 credit limit at the time. She said if I didn’t make an arrangement to pay they will be sending me a 1099 C. I laughed at her. First off I don’t owe $25,000 and 2nd the last activity was in 2004. I have not received any mail or calls from them. Should I file a complaint against DRS? Can they really send me a 1009 C after 8 years?

    • Monica

      I just received a similar call from Dynamic Recovery Solution. I only answered the call because it came from a local number (thought is was for my LO daycare). They are trying to collect on a debt back from 2001, way past the SOL. Can they send me a 1099-C, and how does that affect me?

      • Mike

        Monica and Angie – they can send you one and, if they do, you’ll have to address it on your taxes. As you can tell from Gerri’s article, it’s a mess and not an easy road to fight so you’ll probably want to check with a tax pro.

        Also, if you haven’t already, read Gerri’s article What to Do If You Get a 1099-C for an Old Debt as it talks about a recent Tax Court case dealing with a borrower who received a 1099-C for an old debt.

        Good luck!

        • Angie

          I’m speechless. I don’t understand how a debt can be that old with no communications for years and you receive a 1099C for an amount of money pulled from thin air. DRS Dynamic Recovery Solution called me again from a local number. I couldn’t talk at the time but when I tried explain I was sent to an automated message. I had no choice but to hang up. I feel hopeless at this point! I figured it was a below the belt threat,

          • Mark

            Hi Angie. I hope you are still reading this board. I’ve got a little news about DRS. They pull the 1099-c as a huge threat. They did the same thing to me around August of this last year.

            That debt they called about was for a credit card that has seen no activity for over 9 years. The woman speaking to me also added at least 4000 to the original amount requesting about 8000.00. I never once admitted the debt was mine. Instead I quickly asked her to tell me when the last date of payment was made on this account she was calling me about. She went silent for a second and then admitted the last payment was in june of 2003. When I pointed out how far beyond the SOL that debt was she got angry. She pointed out that doesn’t mean the debt is dead it just means you can’t be successfully litigated but I still owed it. I laughed and said she hasn’t provided any proof the debt is mine and after 9 years of no payment, do they need to see a puppet show to understand the debtor probably isn’t going to be making any current payments on it as it would be the debtors choice? If I were you I’d shred that old dusty debt and start calling people about debts that are still within the SOL.

            She was pissed! She quickly rattled off that she was allegedly sitting there with my files to close it out and would now be filing a 1099c and the IRS would be putting a lien on my home, garnishing my wages, and basically destroying my life. As soon as she rambled that off she slammed the phoned down. It was interesting how quickly the sweet woman with the cutest southern accent turned into some thug from the hood hahaha.

            Immediately I started looking for answers as I had never heard of something like that. Along the way I found that DRS uses this as a scare tactic. I also educated myself about how to deal with a 1099-c if I got one. Besides all your current liabilities you can include this debt with them so if they are stupid enough to swear they canceled a 25,000 debt of yours claim it as part of liabilities and see if it takes you to insolvency.

            To ease you a bit about if this particular company will do this to you guess what? Remember when she said she was sitting right there getting ready to cancel my debt and file a 1099-c? Back in August? Never got one and it’s 5 months later. Now either she’s the slowest Clerk still sitting there tapping pads or just like the huge amount she called about it’s all one big fat lie. The trend of complaints about this company using that threat is huge. I can find no trend on line of anyone actually getting that 1099-c from this company.

  • Pennie

    I received a communication from IRS that said a 1099-c has been sent to them for my 2010 tax year and I may need to file amended tax return . The 1099-c amount is appx 9,000. I called the IRS and got a phone number for the creditor CAPITAL ONE! I told the IRS that I had never had a credit card with them or any outstanding debt. So I called the phone number and left a message. I receive a call back from CAPITAL ONE and they left me a msg that they couldn’t find the debt I described so they would need me to send them the letter I got from IRS (yeah right). So I called IRS and they sent me a copy of the 1099-c reporting detail. I called CAPITAL ONE back and a supervisor finally got on the phone with me and said that they bought Chevy Chase Bank and said the discharged debt that was 20 years old. It was a car loan. Here is another kicker…a collection agency is trying to collect the same debt on behalf of Chevy Chase Bank. The lady with CAPITAL ONE asked me if I wanted to pay the debt and I laughed and told her “sure I want to pay you $9,000 rather than pay the IRS and additional $2000+”. It is insane. I lost my husband in Dec 2009 after a long illness and my 2010 taxes were difficult enough. I’m planning to fight this. I am a widow, my house has been auctioned, I haven’t found another place to live, and I have a son in college. And I am disabled. Talk about the straw that broke the camel’s back…it is another example of greedy banking practices!! Hello Obama are you going to address this issue for the “middle class” in tax law?

    • Mike

      Pennie – as I mentioned to nausby above, continued collection activity on an old, charged off account may indicated that the debt was never actually cancelled and, as a result, no cancellation of debt income was earned. Additionally, given your situation, you may be considered insolvent at the time of the discharge and may not have any tax implications. The other thing to recognize is that this debt is possibly beyond your state’s statute of limitations. Gerri has some excellent articles on this so check them out!

      You will definitely want to talk to a tax pro about this – especially since the time to respond to the IRS has likely come and gone. Good luck!

  • Carrie

    We received a notice from the IRS about a 1099c from Bank of America for over $3000. The problem is neither myself or my husband have never had any Bank of America accounts. And when I called them they could not find any information about the account. Our names, ss numbers and the account number were not in their system anywhere. The IRS was not helpful and said just pay the tax. I have no way of knowing what it is for and can’t get any help from either the IRS or BOA! I am not sure what to do.

    • Gerri Detweiler

      Carrie –

      You absolutely should not have to pay taxes on cancelled debt that wasn’t yours! Bank of America needs to issue a corrected 1099-C that shows zero for the cancelled debt. Otherwise the IRS is going to assume it is correct. Call them back and tell them that you need a corrected 1099-C that shows zero. Be firm about this.

      Let me know what they say OK?

  • nausby

    I have a question I received a letter from the IRS this year that in 2010 they received a copy of a 1099c form that i should have filed on my 2010 taxes. Well I never received the 1099C from the debtor so I called the debtor and they sent me a copy of the 1099c. The balance on the 1099c that they sent to me was different from what they sent to the IRS. So I worked everything out with the IRS and now I am receiving calls from a collection agency that was handling the account for the debtor once upon a time. Do I have to pay this collection Agency on a debit that was forgiven when the debtor filed the 1099c?

    • http://www.credit.com Gerri

      I have moved this question to the Credit.com forums. You’ll find my response here.

    • Mike

      nausby – continued collection activity on an account may indicated that the debt was never actually cancelled and, as a result, no cancellation of debt income was earned. You will definitely want to talk to a tax pro about this – especially since the time to respond to the IRS has likely come and gone.

  • Jerry Gunter

    I have $25,500 of cancelled debt to add to an $80,000 income for 2011. My income has now dropped and I am not going to be able to pay these taxes. My assets, such as home and perssonal belongings are more than my debt so I can’t qualify as insolvent. What are my options?

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

      First, make sure you calculate the insolvency exclusion before you settled the debt, not after. If you still find you have to include that amount in your income but can’t pay, there are options. I wrote about them in this article: What To Do If You Can’t Pay Your Taxes. It’s a bit older but the same options still apply. (A few details have changed, though, so you’ll want to check for updated information on the options you choose to pursue.)

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  • http://www.credit.com TD

    Thanks for the valuable link. I had another close look at my 1099-A:
    (1) the amount in Box 4 is larger than the amount in Box 2, i.e. the FMV is larger than the amount owed. Does that mean that I am not liable to any tax liability, regardless of 1099-A or 1099-C?
    (2) there is a check mark in Box 5. Would this be irrelevant given item 1 above?

  • http://www.credit.com TD

    I owned a house through Aurora Loan Services where the mortgage was higher than the value of the house. After trying various times, and filling lots of forms, Aurora refused to modify the loan. The house was then foreclosed, and sold in 2011. I recently received a 1099-A from Aurora. Should I be getting a 1099-C instead? In my case, how can I benefit from the Mortgage debt Forgiveness Act, and not ending up being liable for income taxes on the foregone amount?

    • http://www.credit.com Gerri

      TD – The 1099-A versus 1099-C issue is definitely confusing. I wrote another story about that. You may want to read that next: 1099-A In the Mail? How to Avoid Taxes on Cancelled Debt. Either way, if you qualify for the Mortgage Forgiveness Debt Relief Act you should be able to exclude that “income” from your income for tax purposes. You may need to slog through Publication 4681 or talk with a tax professional.

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  • Sherri


    I just spent an hour on the phone with an IRS agent to ask about the situation that may occur with the issuing of a 1099-C and the Mortgage Debt Relief Act. I received a 1099-C for a second mortgage that showed the cancellation of debt as March 2011. I reported this on my 2011 tax return and was able to avoid taxes because of the Mortgage Act which expires at the end of 2012. I wanted to know what would happen if the bank decided to come after me for the money owed on this debt anytime after 2012, and we ended up settling for an amount less then what was owed sometime in the next 4 years, which is what is left on the Statue of Limitations for this debt. The IRS agent said that the law was not clear and that if this happened we may have to declare taxes on the forgiven mortgage debt even though it was reported during the time for the exception to this event. She said to hope that the bank did not seek a judgement or try to collect this debt. This problem could be experienced by many people in this situation and the agent I talked to was not clear on how the IRS would handle this problem. Just something else to worry about with the 1099-C.

    • Gerri Detweiler

      Sherri –

      Wow. Completely confusing now! I am not sure that she is right about her advice. Although I am not a tax advisor, based on my conversations with some it’s my understanding that if you already listed this CODI on your tax return you shouldn’t have to exclude it again at a later date. But who knows…?? At a minimum it would likely be a headache to straighten out. It really is a mess.

    • Rebecca

      That sounds Exactly like my situation! I short sold my condo in 2011 and carried 2 mortgages. A primary and a HELOC both by jp Morgan Chase. I was held responsible for the full amount if the HELOC and settled with them in Nov 2011. I received 1099-c’s for bothof them stating the amount of “cancellation” and claimed them on my 2011 taxes. I hired a CPA to assist with our taxes during this time as I wanted to fill out a 982. No problem, taxes filed, refund received, no further notices from IRS or Chase. My husband and I just filed our 2012 taxes and Yesterday I received another 1099-c for the same HELOC with an additional $2k tacked on to the amount cancelled with an “event” date of 01/10/2012. I am SO CONFUSED and worried!! I short sold in May 2011, settled the debt with Chase Nov 2011. So why another?? Did you get your problem handled? If so, what happened?? Thanks so much!!!

  • emily

    i just received a notice from the IRS that I owe taxes on about $2300 of debt cancellation. I remember the situation; FIA collections agency threatened to sue me if I didn’t pay $4000 immediately. I ended up paying half of it, and I assume this is for the half they “forgave”. My question is: I never received a 1099-C from them, and I’m surprised to see it coming up after filing 2 tax returns since the cancellation of debt. Are they obligated in any way to send me a 1099-C?

    • http://www.Credit.com Gerri


      Yes, the creditor that filed the 1099-C is obligated to send you a copy. Is it possible they didn’t have your current address? You can ask the IRS how to file a complaint though I am not sure how far it will get you.

      In the meantime, you can request a copy of your tax transcript from the IRS for the year in question and talk to a tax advisor to find out if you qualified for the insolvency exclusion for the year in question. If you do, you may be able to amend your return for that year in order to reduce or eliminate this tax bill.

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  • Gerri Detweiler


    The 1099-C should be for the difference between what you owed and what you settled for. That sounds like $18,000 in your case. You’ll have to include that as regular income on your tax return. However, you may not have to pay taxes on that amount if you qualify for an exclusion or exception. We’ve published a number of stories on how to deal with 1099-Cs. I would suggest you read those and consult with a tax professional if you need help.

  • Sylvia

    My credit card company just sent me a letter that they will charge off my account or they will forgive 12, 000.00 of my 30, 000.00 debt. Thewy will send me a Form 1099 C. What is the tax on this?


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  • erica

    A collection agency called and said they would file a 1099c and garnish my wages can they do that?

    • http://www.Credit.com Gerri

      Erica –

      I will ask you the same question I asked Dama in the previous question: how long has it been since there has been any collection activity on this account? If it’s been more than three years this may be an illegal threat. In addition, collection agencies generally can’t just garnish your wages without going to court first and getting a judgment against you (except in the case of certain debts owed to the government).

      I am concerned you could be dealing with a collection agency that is making illegal threats. I’d suggest you read my article, 11 Ways a Debt Collector May Be Breaking the Law

  • Dama Lee

    I received a call on an old debt. I told them the SOL for collection had expired then they threatened me with the 1099-C. I have always known that that could be done by the original creditor but I did not know that it could be done by someone who purchaces bad debt. Thats like them getting tax credit for a bad investment. If I make a bad stock investment, I can count it as a loss but I can not send the stock a 1099-C can I?? If the original creditor does not issue the 1099-C I will fight it and as old as my debt is what year would I have to claim the 1099-C on? The year it is issued or the year it went into default?

    • Gerri Detweiler

      Dama –

      How long has it been since you made a payment on this debt? The collection agency may be making an illegal threat by telling you that if you don’t pay it will file a 1099-C. Under IRS guidelines, 1099-Cs should generally be filed for the tax year in which you settled or three years after no substantial collection activity. It wouldn’t hurt for you to get a free consultation with a consumer law attorney with experience in debt collection. You may want to read my article about what to do if you get a 1099-C for an old debt as well.

  • Holly Watkins

    I was placed for collection by 5/3rd bank for a $5oo credit card balance back in 2000. I paid $70/week or when I could to the collection agency until the balance was paid off. About 3 years later, I received a call from another collection agency to pay this debt. I sent in proof of my payments and the calls stopped. Since then, I have received calls from about 10-20 agencies over the last 9 years. All leaving me alone after I give proof. Today, 12 years later, I get a call from an agency that says if I don’t pay this debt, they will issue a 1099c. This is a first for me. What is your advice? I’ve had this taken off my credit about 6 times. It’s getting sooooo frustrating!!!

    • Mike

      Holly – you should find out soon if they issued a 1099-C. It’s possible that they were using the threat of the 1099-C to get you to pay. If they did issue one, you will want to talk to a tax pro about how to address this on your taxes.

      Ultimately, if you ignore it and don’t show it on your taxes, you will receive notice from the IRS saying that you didn’t report the income. It should be possible to provide the documentation to the IRS showing that you paid the debt and that no income was earned.

      Good luck!

  • Chuck

    I too got nailed hard because of Bank of America. I had a very old credit card with them which was closed in 1999. All of a sudden in 2012 the IRS sends me a notice I owe them $1,900 because of this cancellation of debt. I contacted BofA and they stated the last activity on the card was in 2003. Problem is, it was a government travel card and was turned in when I left the military (again 1999). Now what would apply because the IRS just sent me a notice today saying they are going to levy my property and such for this debt.

    • Gerri Detweiler

      Chuck –

      It certainly sounds like there’s something wrong here. Even if it’s correct that the date of last activity was 2003, then the 1099-C should have been issued before now. You’re probably going to have to get a tax advisor to help you fight this. I’d suggest you check out my more recent article on this topic: What to Do If You Get a 1099-C for an Old Debt

  • Mike


    Your article felt like an account of my very own 1099-C adventure. In 2010, a well-known company that buys old, out of statute debts for pennies on the dollar issued two 1099-C after I reminded them that the debts they were trying to collect on, which were from the mid-1990’s, were well beyond Florida’s statute of limitations. I have contested the issuance of the 1099s with the IRS but, as of today, they are holding to the fact that I owe tax on the reported income. I am in the process of preparing my second letter and will be citing a number of Tax Court opinions that say the debt is considered to be discharged “as soon as it becomes clear that it will not be repaid.” In addition, I will be contacting the Taxpayer Advocate and requesting assistance as there is something wrong with a system that allows a financial institution to claim that a tax event occurred years, and possibly even decades, after the actual event occurred. The problem is compounded by a system that presumes the accuracy of the information submitted to the IRS and then requires taxpayers to contest the filing with the very agency that stands to gain the most.

    Thanks for the article – it’s good to know that I’m not alone.

    • Gerri Detweiler

      Thank you so much sharing your experience. I hope you can get it straightened out. I agree it seems crazy that there is no straightforward to resolve this. Will you let us know how it turns out?

      • Mike

        Hi Again,

        I thought I’d give you an update on my situation… When I wrote my original comment, I was in the process of preparing my second letter to the IRS’s automatic underreporting unit. Well, not surprisingly, they still didn’t agree with me and the end result was that I was blessed with a statutory notice of deficiency. I recently filed a petition with the Tax Court and have received the IRS’ answer and am awaiting the next step in this process.

        The facts of my case are quite similar to those of the Stewart v. Commissioner (2012) so it is my hope that I will eventually get to talk to someone with the IRS who will actually listen and, if not, I guess I will get to tell my story to the Court. If you’d like, I will continue to provide you with updates about how things progress.

  • Kelly

    now i’m scared! i just read your article from last year and i’m worried that there have been 1099-c’s filed and we don’t know about them. is there a way to find out? we always get a tax refund so i just assumed everything was ok.

    • http://www.Credit.com Gerri

      I didn’t mean to scare you! The only way I know to find out is to contact the IRS.

      Any of our readers who are tax professionals have any other suggestions?

    • Gerri Detweiler


      I just spoke with JoAnn Koontz, CPA and attorney with Koontz Associates. She said it’s simple: Just call the IRS at 800-829-1040 and request your wage and income transcript for the tax years for which you are concerned about. The transcript will list any 1099-C’s reported to the IRS under your name/SSN. Hope that helps!

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  • pk

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

    • http://www.Credit.com Gerri

      Thanks so much!

  • pk

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

  • FlaRiptide

    If the 1099C was sent by a collection agency they technically may only submit the amount they purchased the debt for. Yet, they submit for the full amount of the debt they tried to collect. Thus, their 1099C is invalid. (The 1009C should equal the loss they are writing off on their taxes. This amount is the purchased amount, not the full debt amount). Also, the collection agency would need to prove that the debt is valid. It is unlikely the collection agency will be able to do this on an old debt. It would be my stand against the IRS that the debt and collector of same are unknown to me and thus the 1099C is in error and assumed invalid. Handling the situation with the IRS is the better idea, handling with the collection agency is the worst idea.

  • Tim

    Gerri, not sure if you can handle a question from the other side of the coin: a business unable to collect on an account and wishing to write off the amount as an expense. Can an individual business complete the 1099C using the IRS instructions and send them out throughout the year? (This would be done after multiple attempts to collect of course). and second, is there a minimum amount threshold (e.g could a business file a 1099C on debts as small as $40.00?) This business provides counseling services and has multiple clients that are not paying their bills….the total of all uncollected debt would make this worth our while. Thank you in advance for your reply.

    • Gerri Detweiler


      I’ll have to suggest you read the instructions for Form 982 and consult with your accountant. I am not sure it’s necessary to file a 1099-C for these small debts in order to write them off, but your accountant can tell you for sure.

  • David


    I received three 1099-Cs this year. I was expecting two, but not the third which came from a collection agency after I settled that obligation with them. It’s my understanding that only the original creditor can issue the 1099-C, not a collection agency. I find conflicting findings here. What’s your opinion. If this is an option, I would like to challenge this 1099-C.

    • Gerri Detweiler

      Interesting question, but I can’t offer an opinion as I am not a tax professional. If you read the instructions for Form 1099-C, you won’t find collection agencies listed under the list of who must file. Regardless, though, I don’t see anything that says they can’t file. The fact is, however, that the IRS has the 1099-C from the collection agency and so you are going to have to respond to it. Challenging it may not be easy. You’ll likely need to find a tax advisor or tax attorney willing to assist you.

      • David

        Thanks, I understand and appreciate your reply. Interesting though……if a collection agency buys debt from a credit card company (pennies on the dollar) then the debtor agrees to a settlement (huge profit for the collection agency…..yeah!!!) then the collection agency gets a tax credit when they file the 1099-C! Poor consumer 🙁

  • T Long

    I had student loan forgiven around for $75,000 this loan was in 1994 I have not a full time job since that time. I received 1099c fro NElNet. What are the ways I can be exempt from this tax other then being insolvent by using form 982. If do have to use form 982 and claim insolvent what type attachments I have send along with 982. I do see a asset and liability statement worksheet on pub 4681. Do I copy this as format to send the irs????

    • Gerri Detweiler

      T Long,

      We aren’t tax advisors so we can’t give tax advice, but if you read Form 982 and the instructions, and still aren’t sure what to do, call the IRS and/or consult a tax advisor. It’s a large enough amount of money that you’ll want to make sure you fill it out correctly. I don’t see anything in the instructions that requires you to attach the worksheet, but again, you’ll want to talk with a tax professional or the IRS.

    • Curious Lady

      You don’t provide enough information for anyone to respond. There are only a few types of exclusions, insolvency just seems to be the one that is used quite often.

  • D. Omer

    My daughter had a car repossessed about 5 to 6 years ago. The credit union said she still owed 2200 on the loan. She was out of work and unable to pay for a long time and heard nothing from them. A few months ago she got a court summons from a collection agency over they debt and Lawyer fees were now included. She called and made arrangements to pay $50.00 per month which is about all she can afford. They did take it to court, and got a judgement, but they are not garnishing her wages because she made arrangements to pay. She started payments in January 2012. The end of January she received a 1099-C from the credit union saying the debt was cancelled. The date showing on the 1099 c is Dec 27 2010. We called the credit union and they said yes they cancelled the debt, but we still had to pay the collection agency. They said they don’t sell the debt they just outsource it for collection. How can they say they have cancelled the debt and she has to claim it as income, then still collect for it. Also why if they cancelled it in 2010 did they not send the 1099-C in 2011. Does she still have to pay this debt to the collection agency, and how could they get a judgement against her if the debt had been cancelled.

    • Gerri Detweiler

      It’s really not clear whether they are correct here in the 1099-C they issued. Unfortunately, it’s one of the many complicated scenarios the IRS has not addressed clearly. (A 1099 doesn’t eliminate a court judgment though, if that’s your main question.)

      Based on what the tax advisors I’ve spoken with have told me, the easiest route to go is probably for your daughter to figure out if she qualifies for the insolvency exclusion. Use Form 982 and the instructions, plus the worksheet in publication 4681. If she does qualify, that’s probably the fastest route for her to put it behind her.

      If not, then I’d suggest she speaks with a tax advisor as challenging these forms if they are not correct is not an easy tax.

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

    Great resource article, Gerri. This issue seems to get more complicated with each passing year. As a professional who has worked in the debt settlement field for 15 years, I find it astonishing that 1099-C forms are being issued for debts that are beyond the SOL period. We’ve never seen this in the past, but given the huge mountain of credit card debt cancelled by the major banks during the past 3-4 years, there are probably millions of 1099-Cs yet to be mailed out to consumers. Worse, it used to be that a 1099-C meant the consumer was absolutely done with that debt (tax issues aside), but some creditors keep right on trying to recover against debts they have already issued 1099-Cs for. Talk about adding insult to injury!

    • Gerri Detweiler

      Crazy isn’t it? The worst part is when consumers just don’t know if the whole mess is behind them. Seems like this policy could push more toward bankruptcy. Is that what we really want?

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