1099-C Cancellation Of Debt Questions – An Exhaustive Guide

Dealing with outstanding debt is often a distressing situation. It involves endless negotiations with your lender and impending anxiety about what will happen next.

The only light at the end of this tunnel is getting the debt canceled or forgiven. In this situation, you will need to prepare yourself to file for the 1099-C Cancellation of Debt form.

But what exactly is this for?

What Is A 1099-C Form?

Having a taxable debt of $600 or up canceled by your lender qualifies them to file an IRS 1099-C form. This form states that the debt has been forgiven, canceled, or never paid back from bankruptcy.

Filing this form is essential for the debtor in paying taxes unless you qualify as an exempted case. Hence, it is also obligatory for the lender to send you a copy of the annual tax filing form.

Unless you fall under the excluded tax filing categories, you will need to pay debt forgiveness or settlement tax for your canceled debt.

What Are The Exclusions In Paying Debt Forgiveness Taxes?

The IRS has a set of reasons why people may be exempted from paying debt forgiveness taxes. When you fall under any of these categories, you won’t have to file your debt as ordinary income on your tax return.

Here are some common exclusions to paying debt forgiveness taxes:

  • Canceled debts that qualify as a gift or inheritance
  • Deductible canceled debts upon payment
  • Qualified student loans
  • Qualified property price and mortgage modification
  • Debt cancellation in Title 11 bankruptcy and insolvency

When Do You Qualify For Paying Debt Forgiveness Taxes?

If your canceled debt doesn’t fall under the tax filing exemption cases, then you would have to report them as ordinary income on your tax return. Here, you will file your canceled debt on Form 1040 as “Other Income.”

Thus, it will become part of your taxable income (not as a separate tax) in your overall tax return. The tax you will need to pay in these cases will vary depending on factors such as your income, credits, deductions, and adjustments.

How To File Your 1099-C Form

Upon receiving your 1099-C form, you have to file it safely as a part of your tax filing preparation. It would help employ a qualified tax professional or CPA to ensure a seamless tax filing.

Furthermore, they will help guide you in case you’re unsure whether your canceled debt is taxable or not.

If you qualify under the exclusions of debt cancellation tax filing, you have to file Form 982 together with your tax return. This form would inform the IRS about the details of your exclusion on paying debt forgiveness taxes.

Here are some guidelines on filing the 1099-C form:

  • Not receiving a 1099-C form: In this case, you would still need to file your canceled debt on your tax return. While this may be a shortcoming of your lender, it’s your responsibility to report and include it on your Form 1040. If you’re not aware of the exact debt amount, you must contact your lender.
  • Forgetting to file your 1099-C on your tax return: If you weren’t able to include your canceled debt on your tax filing, you need to file an amendment. You will also need to pay for an unpaid tax that you weren’t able to file.
  • Canceled debt less than $600: You will need to report a canceled debt less than $600 as income on your tax return.
  • Losing your 1099-C Form: You can simply contact your creditor and request another copy of your 1099-C form.

Receiving A 1099-C Form For An Old Debt

Note that 1099-C forms don’t fall under the statute of limitations. Hence, you can still receive a 1099-C form for debts you have gotten ages ago.

In cases like this, it’s best to contact a tax professional or CPA to determine the necessary settlements. It’s also best to call your lender to clarify any mistakes or overlooked documents on their part.

Here are the common scenarios when you receive a 1099-C Form for an old debt:

  • You’ll qualify for an exemption;
  • You’ll amend an old tax return;
  • You’ll include your 1099-C on your present tax return.

Incorrect 1099-C form

Lenders and creditors can input mistakes on debt-related documents. Here are the most common errors in filing a 1099-C Form that you must take note of:

  • Receive a 1099-C Form for fully paid debt
  • Receiving a wrong debt amount in the 1099-C form
  • Wrong discharge date

If this is the case for you, the first thing you must do is reach out to your lender. Request for a copy of a corrected 1099-C Form. If they don’t comply, you can either ask a tax preparer to make adjustments or file a complaint directly at the IRS.

The IRS will step in then to resolve the mistake.

Consignment Cases

If you’re filing a joint return with your spouse, you’ll have no issue filing your 1099-C form on your return. However, in the case of separate filing or cosigning with other individuals, the tax report is up to the state law.

While some states assign income tax according to each of your loans, some only include the ownership percentage.

Since it can get more complicated when other factors are involved, it’s best to always reach out to a tax professional.

Tips On Resolving Canceled Debts

With all that said, many issues may arise when you’re not aware of how to resolve canceled debts. It’s also alarming that many people have no idea about the 1099-C form.

Hence, as a preparation, take note of these tips on how you can resolve canceled debts correctly:

  • Make sure to keep your 1099-C form upon receiving it.
  • Talk to your lender or creditor about the exact amount declared on the 1099-C form. Clarify any disputes on the amount or date written on the form.
  • Make sure to employ a tax professional with expertise in 1099-C in finalizing your debt settlement.


  1. Chad Van Horn. “The 1099-C: Tax Consequences of Debt Settlement.” South Florida Reporter, 28 Jan. 2020, southfloridareporter.com/the-1099-c-tax-consequences-of-debt-settlement/.
  2. “1099-C Cancellation of Debt Form And Tax Consequences.” National Debt Relief, 21 Aug. 2018, www.nationaldebtrelief.com/1099-c-cancellation-of-debt-form-and-tax-consequences/.
  3. “1099-C Surprise: Canceled Debt Often Taxable as Income.” CreditCards.com, 3 Nov. 2020, www.creditcards.com/credit-card-news/forgiven-debt-1099c-income-tax-3513/.
  4. 2013, Jun 5. “The King of Zombie Debt: The 1099-C. What to Do When Collection Continues After Receiving a 1099-C.” Fitzgerald & Campbell, APLC, 2 June 2017, debtorprotectors.com/blog/2013/06/05/king-zombie-debt-1099-c-collection-continues-receiving-1099-c/.
  5. “About Form 1099-C, Cancellation of Debt.” Internal Revenue Service, www.irs.gov/forms-pubs/about-form-1099-c.
  6. Anthony Scuotto III, CPA. “Who Can or Must File a Form 1099-C?” The Tax Adviser, The Tax Adviser, 1 Dec. 2012, www.thetaxadviser.com/issues/2012/dec/clinic-story-11.html.
  7. Associates, Robert J. Adams and. “1099-C: Tax Consequences of Forgiven or Settled Debts.” Robert J. Adams & Associates Inc., 22 July 2020, www.robertadamslaw.com/blog/1099-c-tax-consequences-forgiven-or-settled-debts/.
  8. Baer, Katie. “Is Canceled Debt Taxable?” Brinker Simpson & Company, www.brinkersimpson.com/blog/is-canceled-debt-taxable.
  9. Brenda Long, Michigan State University Extension. “Is the Schedule 1099-C a Blessing or a Curse?” MI Money Health, 11 Dec. 2020, www.canr.msu.edu/news/is_the_schedule_1099_c_a_blessing_or_a_curse.
  10. Camacho, Ramon|Herron-Hinds. “Forgiven PPP Loans Are Not Reportable on Form 1099C.” RSM, rsmus.com/what-we-do/services/tax/international-tax-planning/global-information-reporting/forgiven-ppp-loans-are-not-reportable-on-form-1099c.html.
  11. Credit.com. “1099-C In the Mail? How to Avoid Taxes on Cancelled Debt.” Business Insider, Business Insider, 7 Mar. 2011, www.businessinsider.com/1099-c-in-the-mail-how-to-avoid-taxes-on-cancelled-debt-2012-9.
  12. Csiszar, John. “The Tax Rate When Filing Form 1099C.” Pocketsense, 10 Jan. 2019, pocketsense.com/tax-rate-filing-form-1099c-7914001.html.
  13. Design, programming. “TSCPA News.” IRS Announces Lenders Should Not File Form 1099-C for Forgiven PPP Loans | News | Tennessee Society of CPAs, www.tscpa.com/news/466-irs-announces-lenders-should-not-file-form-1099-c-for-forgiven-ppp-loans.
  14. Detweiler, Gerri. “1099-C Cancellation of Debt: Will You Owe Taxes?” Credit.com, 22 Dec. 2020, www.credit.com/blog/1099-c-cancellation-of-debt/.
  15. Dieker, Nicole. “What Is a 1099-C Cancellation of Debt Form?” Bankrate, www.bankrate.com/finance/credit-cards/1099-c-cancellation-of-debt-form/.
  16. “Don’t Fear IRS Form 1099-C Cancellation of Debt.” Optima Tax Relief, www.optimataxrelief.com/dont-fear-irs-form-1099-c-cancellation-debt/.
  17. eTax.com. “Form 1099-C and How to Avoid Taxes on Cancelled Debt.” ETax.com® Blog, 4 Feb. 2020, www.etax.com/blog/2020/02/04/form-1099-c-and-how-to-avoid-taxes-on-cancelled-debt/.
  18. Facenda, Lori. “1099-Cs: Meeting IRS Requirements.” HBK CPAs & Consultants, 29 Jan. 2019, hbkcpa.com/1099-cs-meeting-irs-requirements/.
  19. Folger, Jean. “Form 1099-C-Understanding Your 1099-C Form.” Investopedia, Investopedia, 29 Aug. 2020, www.investopedia.com/form-1099-c-understanding-your-1099-c-form-4782275.
  20. “Form 1099-C – Cancellation of Debt / Form 982 – Reduction of Tax Attributes.” Support, support.taxslayerpro.com/hc/en-us/articles/360009177794-Form-1099-C-Cancellation-of-Debt-Form-982-Reduction-of-Tax-Attributes.
  21. “Form 1099-C: Cancellation of Debt.” LORMAN Education Services, www.lorman.com/resources/form-1099-c-cancellation-of-debt-17120.
  22. “Form 1099.” Krekeler Strother SC Q Can a Collection Company File Tax Form 1099 C on Debts They Do Not Have Settlement Offers or Judgements for Comments, ks-lawfirm.com/q-can-a-collection-company-file-tax-form-1099-c-on-debts-they-do-not-have-settlement-offers-or-judgements-for/.
  23. Goldenberg, Law Office of Simon. “Cancellation of Debt From A 1099-C.” Law Office of Simon Goldenberg, PLLC, 18 Aug. 2016, www.goldenbergfirm.com/debt-relief-blog/2016/august/cancellation-of-debt-from-a-1099-c/.
  24. Haring, Bob. “Entering a 1099C on Your Tax Return.” Small Business – Chron.com, Chron.com, 26 Oct. 2016, smallbusiness.chron.com/entering-1099c-tax-return-56254.html.
  25. “How Do I Report Form 1099-C?” Support, support.taxslayer.com/hc/en-us/articles/360015900491-How-do-I-report-Form-1099-C-.
  26. “IRS Announces Form 1099-C Not Required for PPP Loan Forgiveness.” McGlinchey Stafford PLLC, 23 Sept. 2020, www.mcglinchey.com/insights/irs-announces-form-1099-c-not-required-for-ppp-loan-forgiveness/.
  27. “LeavenLaw.” Florida Lawyers, www.leavenlaw.com/Foreclosure/Forgiveness-of-Debt-Income-1099-C.
  28. Luthi, Ben. “What Happens With Canceled Debt?” Experian, Experian, 30 Apr. 2019, www.experian.com/blogs/ask-experian/what-happens-with-canceled-debt/.
  29. Ma, Myles. “Help! I Just Got a 1099-C – But I Filed My Taxes Already.” USA Today, Gannett Satellite Information Network, 26 Mar. 2017, www.usatoday.com/story/money/personalfinance/2017/03/26/help-just-got-1099-c-but-filed-my-taxes-already/99327206/.
  30. Marquit, Miranda. “Form 1099-C – Cancellation of Debt: What It Means and What to Do.” Student Loan Hero, 8 Apr. 2020, studentloanhero.com/featured/form-1099c-cancellation-of-debt/.
  31. Niemeyer, Brooke. “1099-C Cancellation of Debt-The Most Hated Tax Form.” Credit.com, 22 Dec. 2020, www.credit.com/blog/what-you-need-to-know-about-1099-c/.
  32. Nolo. “The Tax Consequences of Forgiven Debt: The 1099-C.” Www.lawfirms.com, Nolo, 18 Sept. 2014, www.lawfirms.com/resources/tax/tax-debt/the-tax-consequences-forgiven-debt-the-1099-c.
  33. P.C., Author: Aguero Law, and Author: “Do I Still Owe a Debt If I Receive a 1099-C?” Aguero Law, 12 Apr. 2018, www.aguerolawpc.com/2018/04/12/do-i-still-owe-a-debt-if-i-receive-a-1099-c/.
  34. Parres, Larry E. “Creditors Beware-Complying with IRS Rule May Cancel Underlying Indebtedness.” Lewis Rice LLC, 1 Aug. 2017, www.lewisrice.com/publications/creditors-beware-complying-with-irs-rule-may-cancel-underlying-indebtedness/.
  35. Pimplaskar, Evelyn. “IRS Form 1099-C and Canceled Debt: Credit Karma Tax®.” Credit Karma, 4 Dec. 2020, www.creditkarma.com/tax/i/1099c-tax-on-canceled-debt.
  36. Reilly, Peter J. “Bank Cannot Issue 1099-C And Subsequently Try To Collect.” Forbes, Forbes Magazine, 16 Dec. 2020, www.forbes.com/sites/peterjreilly/2013/05/20/bank-cannot-issue-1099-c-and-subsequently-try-to-collect/?sh=3e7b50bc9478.
  37. Robert FarringtonRobert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™. “Understanding a 1099-C for Your Student Loan Debt.” The College Investor, 3 Sept. 2020, thecollegeinvestor.com/20426/understanding-1099-c-student-loan-debt/.
  38. Song, Justin. “What Is a 1099-C Form?” ValuePenguin, ValuePenguin, 14 June 2020, www.valuepenguin.com/personal-loans/what-1099-c-form.
  39. “Tax Dictionary – Form 1099-C, Cancellation of Debt.” H&R Block, 1 May 2020, www.hrblock.com/tax-center/irs/audits-and-tax-notices/tax-dictionary-form-1099-c/.
  40. Tax1099.com. “File 1099-C Online: E-File 1099-C: How to File 1099-C Form 2020.” Tax1099, www.tax1099.com/1099-forms/efile-form-1099-c.
  41. TaxAct. “1099-C.” TaxAct, www.taxact.com/support/879/2020/form-1099-c-cancellation-of-debt.
  42. TurboTax – Taxes, Income Tax. “When to Use Tax Form 1099-C for Cancellation of Debt.” TurboTax Tax Tips & Videos, turbotax.intuit.com/tax-tips/debt/when-to-use-tax-form-1099-c-for-cancellation-of-debt/L24iT0a3S.
  43. Wathen, Jordan. “1099-C: What You Need to Know About This IRS Form.” The Motley Fool, The Motley Fool, 11 Oct. 2015, www.fool.com/investing/general/2015/10/11/1099-c-what-you-need-to-know-about-this-irs-form.aspx.
  44. “What Is a 1099-C Form and Why Did I Get It?” MSI Credit Solutions, 27 Mar. 2020, msicredit.com/credit-repair-services/what-is-a-1099-c-form-and-why-did-i-get-it/.
  45. “What Is Form 1099 C?” Nth Degree CPAs, 10 Aug. 2019, www.nthdegreecpas.com/resources/what-is-form-1099-c/.
  46. “What To Tell Your Accountant If You Get A 1099-C: Dezenberg & Smith, Attorneys At Law: Huntsville, Alabama.” Dezenberg & Smith, Attorneys At Law, www.dezlaw.com/articles/what-to-tell-your-accountant-if-you-get-a-1099-c/.
  47. “When Is a 1099-C Issued For Debt Settlement?” Credit Infocenter, www.creditinfocenter.com/debt/debt-settlement-1099-c.shtml.
  48. “When to Use Tax Form 1099-C for Cancellation of Debt.” ZipBooks, 4 Apr. 2019, zipbooks.com/blog/1099-c-cancellation-debt/.
  49. “Why Did I Receive a 1099-C Tax Form from My Credit Card Company?” Navicore, 19 Apr. 2016, navicoresolutions.org/why-did-i-receive-a-1099-c-tax-form-from-my-credit-card-company/.
  50. Woodman, Craig. “Can a Bank Send Me a 1099 C Cancellation of Debt?” Finance, 7 Feb. 2017, finance.zacks.com/can-bank-send-1099-c-cancellation-debt-4218.html.
  51. Zulovich, Nick. “Ignoring Form 1099-C Filing Can Become Costly.” Auto Remarketing, 27 Mar. 2014, www.autoremarketing.com/bhph/ignoring-form-1099-c-filing-can-become-costly.