What Is a 1099C Cancellation of Debt?

Form 1099-C reports canceled debt to the IRS.

The Internal Revenue Service treats certain canceled debt of $600 or more as income. If a financial institution cancels your debt of at least $600, you must report the canceled debt as income with your year-end tax reporting and forward a copy of form 1099-C to the Internal Revenue Service.

Significance

Businesses in the financing industry, such as banks, bank subsidiaries, credit unions and the government, must report canceled debt of $600 to the IRS.

Function

Financial institutions report canceled debt on the 1099-C information return, filing a copy with the IRS and forwarding a copy to the debtor.

Time Frame

According to the Internal Revenue service, file form 1099-C in the year that an identifiable event occurs unless the debt is canceled before the identifiable event occurs—in which case you would file form 1099-C in the year of the cancellation.

Features

In addition to demographic information, form 1099-C includes a description of the debt, the date the debt was canceled, the amount canceled, and whether the debtor is personally responsible for the debt. A checked box also notes that the debt was canceled in a bankruptcy proceeding.

Considerations

The IRS states that filing obligations for form 1099-A can be coordinated with form 1099-C if you cancel a debt in connection with a foreclosure or abandonment of secured property within the same year.

References

• IRS: Instructions for Forms 1099-A and 1099-C - Main Contents