What is a 1099-C Form and Why Did I Get It?

Were any of your debts fully forgiven? Did you negotiate any debts this year? You may get a 1099-C Form.

A 1099-C Form, also known as a Cancellation of Debt Form, is usually filed when the lender whom you’ve made a negotiation agreement with has cancelled $600 or more of your owed debt. The lender will file a copy with the IRS and you will also receive a copy as it is required to be sent to the tax payer as well.

The unpaid negotiated amount was money that you initially incurred, but never had to pay back as it was cancelled. Due to this, the IRS now considers this debt as income you earned. You must report this amount on your return. If you haven’t negotiated any debts in the past year you could also be receiving the form for the some of the following reasons:

  • 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.
  • No payments were made on a debt for at least three years and no significant collection activity was made for the past 12 months.

Are there exemptions for a 1099-C?

There are some circumstances that may exclude this cancelled debt from your income such as:

  • Certain qualified student loan debts
  • Debts excluded from income by law such as inheritances and gifts.

There are some exclusions that require you to apply for exemptions such as:

  • Debt canceled in a chapter 11 bankruptcy
  • Debt canceled due to insolvency

What if none of the circumstances above apply to me?

If none of the above apply to you, and you are unsure of the reason why you have received a cancellation form, it may be in your best interest to reach out to your creditor/lender for more information. Due to different individual factors, we strongly urge that you seek professional advice of an attorney or tax professional to assist you with your options.


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.

*The information in this article has been provided strictly for educational purposes.

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