What is Form 1099-C?
Form 1099-C, Cancellation of Debt, is an informational return form used to report the user’s “Cancellation of Debt,” from the lender that forgave, cancel, or discharge the debt. According to the IRS, any debt owed by the filer that may have been canceled, forgiven, or discharged becomes taxable income.
Common types are:
- The return of property to a lender
- Abandonment of property
- The modification of a loan on your principal residence
- Resolving a credit card debt
The user does not have to file Form 1099-C when there has been a fraudulent debt and has been canceled due to identity theft. The canceled income is used as other income on Form 1040 (or Form 1040-SR). The Issuer will send the taxpayers a Form 1099-C by January 31.
How to File Form 1099-C?
The form includes details on the creditors and borrowers, for the debtor the form will ask for the names, addresses, Tax Identification Numbers (TIN), and the associated account number. The amounts reported on this form may include principal, interest, fines, late fees, penalties, and administrative costs. The filer will receive a Form 1099-C by January 31 in the year after the debt was canceled or forgiven. If you have any questions on regards what the form might be requiring or might have the wrong information contact your lender and request a corrected form. Now that you know about the IRS Form 1099-C, you can work with a great tax advisor or preparer to get the most accurate tax report and have the most out of your return.
Who Uses Form 1099-C?
The lender files a 1099-C with IRS and the IRS sends the filer’s a copy of the Form 1099-C. You may file Form 1099-C if the user is:
- A financial institution (such as a domestic bank, trust company, building and loan association, or savings and loan association).
- A credit union.
- A corporation that is a subsidiary of a financial institution or credit union.
- A federal government agency.
- Any organization whose significant trade or business is the lending of money.
To obtain more information on the form 1099-C, click here
The filer may be able to exclude the cancellation of debt income if one of the below conditions applies:
- The debt was discharged in bankruptcy.
- The debt was qualified main home/farm indebtedness (applies through 2025).
- The filer was insolvent.
- The debt was qualified real property business indebtedness.
When is the Form 1099-C deadline?
|IRS Paper Filing
|IRS Electronic Filing
Note: If the due date/deadline falls on a Saturday, Sunday, or federal holiday, the filer will need to E-file on the next business day.
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