IRS 1099-C will see an estimated 5.5 million people or even more filing this form for the current tax year. The receivers of this 1099-C form are the debtors who receive loans from the private financial entities or from federal Government agency who are creditors offering different loans to consumers as prescribed and eligible.
The creditors or the lenders have to file this form 1099-C with IRS supposing if they have canceled or forgiven $600 or more of the debt money that is able to them by the debtor. A copy of the filed IRS form 1099-C will be required to send by the lenders to debtors or the consumers who owe money to creditors.
Reasons to Receive a Copy of 1099-C Form
The consumers or the debtors who have negotiated with the financial entities for the consideration of lowering the amount of settlement as they owe and the financial entities considered the request and then forgave the rest of the amount.
The debtor owned a home through home loans from financial entity but when that went into foreclosure will naturally have deficiencies between the real value of the home and what a debtor actually owed the financial entity, this certainly would have resulted in the financial entity either forgiven the amount or the amount is kept as unpaid by the debtor.
When a consumer sold a home in a “short sale” where the lender agreed to accept less than the full balance due; or
The consumer as a debtor did not pay anything on a debt for at least three years and there has been no significant collection activity for the past 12 months.
But if one is not exactly sure why they are getting one of these 1099-C forms, they hopefully will see a code in Box 6 of the form that describes the “identifiable event” that triggered the lender to send this form, so one can match that code up with the reasons listed on page 3 of Publication 4681 from IRS.