What is a 1099-C?
A 1099-C is used to report Cancellation of Debt Income. The lender is supposed to file the 1099-C when it cancels $600 or more of debt. A copy is filed with the IRS and another copy is required to be mailed to the taxpayer as well.
What do I do with this form?
Many taxpayers may be asking themselves this question as they start to receive all the necessary tax forms to file this year. Whatever you do, do not ignore this form! Be sure to present your 1099-C form to your tax professional.
So what could have led to this 1099-C?
- No payments were made on a debt for at least three years and no significant collection activity was made for the past 12 months.
- A settlement was negotiated to pay a debt for less than the owing amount owed and the lender forgave the remainder.
- A home was in a short sale where the lender agreed to accept less than the full balance owed.
- A home went into foreclosure and a deficiency balance remained that was either forgiven or unpaid.
You may have to pay taxes on the amount that has been canceled or forgiven because it is considered as a form of earned income. The main question that may be asked is do I still owe the debt. We strongly advise to seek the professional advice of an attorney or your tax professional. Due to the facts and circumstances of each case there is no definitive answer for all cases.
MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.
