Managing Debt

1099-C In the Mail? How to Avoid Taxes on Canceled Debt

Comments 525 Comments

How to Avoid Taxes on Canceled Debt (cont.)

Canceled Debt that Qualifies for Exception to Inclusion in Gross Income:

1. Amounts specifically excluded from income by law such as gifts or bequests

2. Cancellation of certain qualified student loans

3. Canceled debt that if paid by a cash basis taxpayer is otherwise deductible

4. A qualified purchase price reduction given by a seller

If you qualify for an exception or exclusion, you will have to fill out IRS Form 982. It may not be easy. The title of the form alone—Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)—is intimidating.

In fact, Olsen told Congress that “Form 982 is extremely complex, and very few taxpayers or preparers are familiar with it.”  Here’s a look at two of the most common exclusions that may apply:

1. Debt canceled in a Title 11 bankruptcy case

You do not have to pay tax on debt successfully discharged in bankruptcy. (Title 11 refers to the section of U.S. Code that is referred to as the Bankruptcy Code. It does not mean only debts wiped out in a Chapter 11 bankruptcy qualify for this exclusion).

However, if you settled a debt before you filed for bankruptcy, the creditor may still send you a 1099-C indicating the forgiven amount, and you will have to research whether there are other exceptions or exclusions you can use to avoid paying taxes on that amount.

“We are seeing where some taxpayers have received 1099-Cs and they subsequently filed for bankruptcy,” says Dennis. “Only debts discharged in bankruptcy are covered (by the bankruptcy exclusion). If you settled a debt in January and filed bankruptcy later in the year, chances are you probably were insolvent in January but that’s a separate calculation that needs to be done.”

2. Debt canceled due to insolvency

Along with bankruptcy, this is one of the most common exclusions taxpayers will use to avoid paying taxes on canceled debt. Here’s how it works:

You make a list of the value of all your assets and a list of all the debts you owe (including debts that may not be dischargeable in bankruptcy, such as student loans, for example.) You are insolvent to the extent that your liabilities (debts) exceed your assets. Here are a couple of examples provided by Elliott:

Example 1: Your assets are worth $35,000 and your debts total $45,000, so you are insolvent to the tune of $10,000. You settle a debt with a creditor who agrees to forgive $8,500. You do not have to report any of that money as income on your tax return.

Example 2: Your assets are worth $35,000 and your debts still total $45,000, but the creditor writes off a $14,000 debt. You don’t have to report $10,000 of the income, but you will have to report $4,000 on your tax return.

You will still have to fill out Form 982 to demonstrate to the IRS why you aren’t including the amount listed on the 1099-C in your taxable income.

“Timing is everything,” says Purdy. “Take a look at your finances right before the debts were forgiven. Include student loans, debts to family members, everything that you owe everyone on the planet.  List every single debt you have (on Form 982). On the other side you list the Fair Market Value of everything you have. For millions of people, their debts exceed the value of everything they have.”

All three advisors explained that taxpayers who erroneously paid taxes on forgiven debt may go back and amend prior year’s tax returns—for up to three years—and may actually get a refund.

Finally, if you’re worried about how your debt or other issues could be impacting your credit, you can check your credit each month using’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.

*Tax professionals may include Certified Public Accountants (CPAs), Enrolled Agents (EAs) or Tax Attorneys.

In my next post, I’ll discuss the exclusion for the cancellation of qualified principal residence indebtedness, which may be valuable if you lost your home to foreclosure or sold it in a short sale.

Have you received a 1099-C? We’d like to hear about your experience. What kinds of problems, or successes, did you encounter? Share your thoughts in the comments section below.

Pages: 1 2

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Patricia A. Andrasko

    I participated in a Debt Settlement program and on November 9, 2007 a Credit card debt was settled. It is now 2010 and I have received a 1099-C for $983.83 for cancellation of debt. Can the bank do this?

    • Gerri

      They can send a 1099-C for the canceled debt. However, the IRS says a creditor must issue a 1099-c the year the debt was forgiven. It seems that it should have been issued in 2007. If you qualify for the insolvency exclusion now it might make sense to go ahead and just fill out Form 982 and be done with it. However, if you don’t, but you qualified in 2007, then you need to get them to issue a corrected 1099-C. You may have to get help from a tax professional on this.

      • Shrina

        Hi there,

        My husband and I went through bankruptcy in 2010. We recently got a 1099 form from a creditor stating that we needed to claim almost $5,000.00 as extra income on our 2011 taxes.
        We do our own taxes and want to make sure we do the right thing. We live in California.
        If we do claim this our refund is going to be $800.00 less.
        Do we have to claim this if bankruptcy was filed in 2010 on this debt? And if not, then what do we do to make sure we are covered with the IRS?

        Thanks for any help!

        • Gerri Detweiler


          You can fill out Form 982 and indicate that you discharged that debt in bankruptcy. Debts discharged in bankruptcy are excluded from taxable income.

  • Gerri Detweiler


    As I explain in the article, if a creditor forgives more than $600 in debt, they are generally required to file a 1099-C. (There are exceptions, like bankruptcy, where no 1099-C is required.) The instructions for filing 1099-Cs (the instructions creditors would follow) state: “Generally, file Form 1099-C for the year in which an identifiable event occurs.”

    However, keep in mind that for purposes of determining whether you are eligible for an exclusion so that you don’t have to pay taxes on that debt, you are trying to determine whether you were insolvent at the time you settled, not at the time they sent the 1099.

    I understand that the more time that passes, the more difficult it is get the information together to calculate whether you were insolvent when the debt was settled. That’s why I try to warn taxpayers that they need to figure this out when they settle, not when they get a 1099-C. I know it’s easier said than done!

    I am not a tax professional, so please don’t rely on this as tax advice. I recommend you talk with a tax professional. If you settled other debts, make sure you discuss that with them as well.

  • marie

    can you deduct the fees paid to a company who settled the credit card debts for you?

  • Gerri Detweiler

    Marie, I checked with our tax experts and they concurred on the answer:

    “For personal credit card debt or personal assets of any kind, any fee paid in conjunction would not be income tax deductible.

    Business expense YES if there was a valid business, including someone self employed (Schedule C); rental activity (Schedule E) as well as a Corporation or Partnership deduction if business was established in that format.”

    Steven J. Elliott, CPA, MST
    Tax Director

    “The debt settlement fees for personal consumer debt are not tax deductible. If the fees were associated with business debt which is tied to the pursuit of income, then yes these fees are deductible.”

    Karla Dennis

  • Sherry Glassman

    I entered into a settlement agreement in a dissolution action. My ex assumed all liabilities arising out of a joint airplane lane. The airplane was repossessed because the ex didn’t pay. The bank cancelled $30,000 in debt and filed 1099-C forms for both of us. The settlement agreement between me and my ex is clear: I am not liable for this. But Form 982 does not have any provisions that remotely resemble this factual scenario, which must be common. What do you think, oh wise one?

    • Steven J. Elliott

      Dear Sherry – I agree with Gerri that you should seek out a CPA close by your home or work location to help you with this issue.

      I recommend at least that you disclose the 1099-C with all pertinent information written out and disclosed.

      This would help you now AND down the road with any possible questions by IRS and your home state.

      Best, Steve

  • Gerri Detweiler


    You’ll need to get help from a tax professional with expertise in this form. Sorry I can’t help further!


  • Charlotte

    I have received three 1099-C’s from a debt collector (Asset Acceptance). I do not recall getting any mail from this company and they are not on my credit reports. I have read a lot of conflicting advice about whether or not this is even a legitimate 1099-C since they are a junk debt buyer. If it is legitimate, would it be for the entire amount of the original debt or only what Asset Acceptance paid for it? Also, my income is so low that I do not have to file a tax return, so I am hoping that it will not be for the amount they have claimed.

  • Gerri Detweiler


    You raise excellent questions but I don’t have any easy answers for you. First of all, the 1099-C is based on the amount of debt forgiven, not the amount the debt buyer paid for it.

    Secondly, the IRS has received copies of these 1099-Cs and expects you to include them in your taxable income.

    So that means you must address these, either by demonstrating to the IRS that you are insolvent or qualify for another exception or exclusion, or by getting the collection agency to issue a corrected 1099-C if the amount is not correct. That’s a lot easier said than done, as you can imagine, and it may require the assistance of an attorney with expertise in tax matters.

    • Peg

      I know this one is old post but they are still at it (Asset Acceptance) and this thing is even worse than posted above. I got one (1099-c) in the mail today from them for a debt that is not valid at all per my win of it as well in a court case in 2006 with a different zombie collector. My issue with this is I totally believe they are sending out fraudulent 1099-c forms to people. I have not received any other correspondence from them on this alleged debt except now for this – where was the letter claiming I owed them to begin with? (I of course would of fought that as well – it’s invalid, I do not owe it) Does the company that files these get some sort of tax credit against their own income filings??? If so, then I would say they are getting a whole bunch of tax credit that is totally bogus and invalid and they need to be fined by the IRS and FTC!

      • Me

        They sure are!!! And they are illegal if your state’s SOL has run out! I just got off phone with a live person at IRS and they agreed that I should call my State Attorney and FTC, regarding Asset and their doings… if I feel they are in the wrong. They said that it is fraudulent to file a 1099c if the SOL has run out. In my case, it ran out over three years ago, even going by their “date of identifiable event” on the 1099c. And, the debt is more than 7 years old. They also said that “collectors” do have the right to file 1099c. Come on….they are dirtbag debt buyers trying to be collectors… I think this makes IRS look desperate(allowing them to do 1099c’s) and just opens up another way for these slimy people to do more fraudulent things to others.

        I agree Peg, they should indeed be fined by IRS, FTC and State Attorneys…would be funny to see these fraudulent 1099c’s backfire on these dirtbags!

        Everyone that’s getting fraudulent 1099c’s should file a complaint with their State Attorney’s Office and the FTC!!! People shouldn’t take this lying down!

        PS- IRS rep did tell me to call, in this case, ASSest Acceptance and tell them that they are filing a fraudulent(in my case past the SOL) 1099c and to correct it. They said to keep a record of all calls made and to whom about the issue (for my records). That way when I do NOT claim the 1099c on my return AND if ASSet doesn’t zero out the 1099c, I can show it to IRS and explain why I didn’t claim 1099c on my 2012 tax return.

  • Pingback: 1099-C for Cancelled Debt | Law Offices of Brandon A. Block()

  • Dawn McDaniel

    I have already filed and owe the IRS which I plan to pay on the 8th of April. I recevied a 1099A on a Townhown ( not a personal residence) . I included this with my taxes. The fair market value was less than the amount owed. Just yesterday I recevied a corrected 1009C from the bank . What do I do ? Will I owe more taxs? Do I file an amened 2010 return . I am lost, I filed myself with H&R block .

    • Steven J. Elliott


      I agree with Gerri – seek out a tax professional and file an amended return which covers the Corrected 1099-C. Seek out the help of the State society of CPA’s where you live to help find someone close by.

      H & R Block is fine for simpler returns, but not for something like this.

      Good luck with your situation.

      Best, Steve

      • sara shannon

        I was just threatened by an attorney, over a debt he claimed my 84 year old disabled mother aquired he said in 2004 or he said it was discharged in 2004 bofa credit card. He is threatening to file a 1099c and said the irs will be suing my mother. She is on little social security only and has no property or belonging. She actually has nothing. She doesnt even file taxes due to the amount she recieves from social security. Is this something I need to worry about? She knows nothing about this.

        • Gerri

          Sara –

          Creditors or collectors must generally send out 1099-Cs within three years after substantial collection activity has ceased. This debt may be too old for that at this point. It sounds like the threat this collection firm is making may be illegal. (Don’t be intimidated by the fact that they claim to be “attorneys,” as law firms that regularly collect debts are covered by the Fair Debt Collection Practices Act like any other.)

          If I were in your shoes, I would talk with a consumer law attorney who specializes in helping consumers who are being harassed by debt collectors. This threat may be illegal.

          I would also recommend you read my article about 1099-Cs for very old debts here:

    • Dale

      Take you information to your closet H & R Block office. They are quite capable of doing an amended return involving your situation. I have done several 1099A and 1099C’s myself. You will need to do an insolvency worksheet. When did the lender actually cancel the debt?

  • Gerri Detweiler


    If you aren’t sure how to do this, I would really encourage you to find a tax professional with experience in these forms. (Not just a tax preparer.) The IRS has received the same forms you received and you have to figure out how to address them.

    I am planning on doing a follow up story about problems with these forms. It can get pretty ugly – and expensive – quickly.

    • Greg

      What is the impact to taxes owed if the FMV is greater than the amount owed?

  • Dawn McDaniel

    Thank You . I don’t know why the bank just didn’t sent the correct form to begin with . I will talk with a tax professional . I will be on the look out for your follow up story . We had purchased this townhome for our kids to live in while in college . It has been a nightmare, with lost of income, then having to have it go to foreclousre, now this .

    But thank you for your help .



    HI DAWN,
    You actually may not be in a bad position. The banks will issue both a 1099C and a 1099A if the property was foreclosed upon. the 1099C may be reportable but possibly not taxable depending on your unique situation. IRS will always assume it is taxable. See out a great tax professional to help you. Make sure they have expertise in this area of the tax law. Not knowing how to process these forms, can literally costs you hundreds if not thousands of dollars.

    Karla Dennis

  • David Hyland

    Currently, our LLC has no assets and is not in operation but owes the SBA $400K. My wife and I did an offer and compromise and no longer personally guarentee the loan. We are insolvent right now, and would like the SBA is issue the 1099c sooner rather than later. Should our LLC declare bankruptcy just to force the SBA to issue the 1099c while we are insolvent?

  • Gerri Detweiler


    Insolvency is supposed to be calculated as of the time the debt was settled, not when the 1099-C is issued. I would recommend you talk with a tax advisor with experience in cancelled debts now. He or she may recommend you calculate your insolvency as of the time the debt was settled so that when the creditor does issue a 1099-C you’ll have that ready. I don’t know of any way to “force” a lender to issue a 1099-C but perhaps the tax advisor will have some advice for you.

  • Pingback: Smart Money Cash » Blog Archive » Underwater? Negotiating a Settlement On a Second Mortgage()

  • Mary

    I am with a third party collection agency who bought my credit card -I am down to owing them $546- can I not pay them anymore-and I won’t be rceiving the 1099-C form?

    • Gerri Detweiler

      Mary – I am sorry I don’t understand your question. Can you elaborate?

    • Vee

      Mary at this point you can ask them to settle… they may ask you to pay maybe around $200 or $300 but you definitely cannot receive a 1099c form on this debt because whatever deal they strike with you the SAVINGS could not possibly be more that $600. 1099c forms are ONLY for $600 plus in savings on a debt when you negotiate a settlement.

      • Gerri Detweiler

        Good point Vee – creditors are only required to send 1099-Cs when the amount of cancelled debt is $600 or less.

        • John Gonzalez

          Gerri, I thought. Creditors will issue 1099c’s if the amount of the debt discharged was $600 or more.

          Is this true?

          • peg

            correct John its $600 or more.

  • leann

    I am in the process of a short sale, an offer was accepted..however, it is for a substantial amount less than what is owed on the house because we took cashout.
    the house was inherited, so there was cash/equity taken out over the years and now the house is under water. the loan was modified by the lender when we couldn’t make payment, however making those payments have been in possible due to a paralyzing auto accident whereby our income now will not cover our expenses.
    since cash was taken out, the outstanding balance is 520,000 and the offer price is $280,000. is the difference taxable? the lender is offering us $20,000 to move out and stated in a letter to us we will not owe anything more on the loan. Does that qualify for a exclusion because it’s a cancellation of debt?
    we’re now worrying that we are going to receive a 1099-c from the lender for that cash out since it wasn’t a acquistion loan. Is this true? we are now thinking we better file for bankruptcy before the house sells so we don’t have to pay taxes. thanks for any input of guidance

    • Gerri Detweiler


      Given the amount of money involved (the difference of $240K plus the $20,000), it would be wise for you to talk with a CPA with experience in this issue asap. You may have to include that amount in your income if you don’t qualify for an exception or exclusion.

      If it does turn out that you could have to pay taxes on forgiven debt, then foreclosure and bankruptcy might be the appropriate route to go. (Debts discharged in bankruptcy are not taxable.) Timing is absolutely critical, so make an appointment to talk with both a CPA and bankruptcy attorney before you proceed.

  • Jed

    I am counseling a friend who will be receiving a 1099c for a credit card settlement his ex-wife apparently created at the time of their divorce. Four years later he is just learning about this from a collection agency. The divorce cleaned him out then and into the future and he is living with a relative, without real estate or other assets. He is cleaning out his pension to settle. It seems that he qualifies for the label: insolvent. How can he be sure that he has this done properly before he files his taxes? The debt was $4,000 at the time the ex-wife used a credit card that he believed was closed. In the four years since, it rose to $11,000. The settlement is about half the original debt she created.

    • Gerri Detweiler

      It’s great that you are trying to help your friend, but please urge him to see a bankruptcy attorney before he cleans out his pension to pay this debt. The debt may be outside the statute of limitations, and his pension funds are likely safe from creditors. He may not even have to file bankruptcy to get rid of it – he may be what’s called judgement proof.

      In addition, timing is crucial with regard to the 1099-C issue so I would urge him to talk with the attorney before he settles.

      Finally, that settlement amount seems high to me given what you are describing.

      Please help your friend get legal advice before he makes any decisions here.

  • Renee

    We live in Georgia and last year in 2010, we rented out our primary home because we were unable to sell in due to being underwater and we had to move closer to my husbands job. We purchased a new home closer to his job. We also have another investment property that we purchased in 2005 that we intended to flip as soon as we fixed it up, but then the real estate market took a dive and we were not able to sell and stuck with another underwater property which we had to rent as well. We have tenants in both rentals and every time the leases come up for renewal, we have to spend thousands in repairs and have also had tenants not pay their rent and has caused us stress to keep these rentals afloat for the sake of saving our credit. For the past 25 years, we have never defaulted on anything and always pay our bills. Now we are forced to foreclose on the two rental properties because they are costing us too much to maintain and are dead investments because we owe more than they are worth and the areas are declining according to market analysis from our realtor. The market continues to decline in both areas and renters are not consistent in making their rent, forcing us to get them out of the house and get new renters which costs us a lot of money to fix up the rentals each time. The houses cause us stress and is draining us financially.

    With our primary home we are doing fine and we are doing fine with our other debts. Its just the rental properties that don’t make sense to keep anymore. We hesitated to let them go because we have such good credit and didn’t want to lose our good credit standing. Now for the first time in our lives, we are forced to let the houses go.

    For both houses, we have a first and second mortgage. If we foreclose on both rentals at the same time, what is the potential impact for us as far as it affecting our primary home and potential taxes we may have to pay if issued a 1099? Can the 1st and 2nd mortgages come after our equity in our primary or savings account? Can they take our cars or retirement? What else should be expect should we foreclose? This is new territory for us. Thanks.

    • Gerri Detweiler


      I understand this must have been a very difficult decision for you and very stressful as well. Given the amount of money involved, I would really encourage you to meet with a tax professional who has experience in dealing with these kinds of situations, as well as a bankruptcy attorney who can help you understand whether you might be at risk of owing a deficiency, and if you will, what other property you own may be at risk. The attorney will be able to tell you what is safe from creditors and what may not be.

      After talking with these professionals, you may decide to try to pursue short sales on the properties, or you may decide it’s better to file Chapter 13. That’s something the attorney can help you figure out. (You should also meet with a tax professional before you make any decisions either way, to determine whether you may owe taxes on “forgiven” debt.)

      Often these kinds of decisions involve making some tough choices. In other words, there may not be one option that is clearly superior to the rest. But I would encourage you to try to make your focus on the financial decisions involved and less on the credit decisions since all of the options you may be considering – foreclosure, bankruptcy, and possibly a short sale – will affect your credit.

      Hang in there.

  • Eva

    We are attempting to settle our second mortgage for 10% of the original loan amount. We have successfully modified our first mortgage, so we will be keeping the house. We are also in the process of filing chapter 7 banktruptcy. Will we have to pay taxes on the settled amount of the second loan?

    • Gerri Detweiler


      It’s essential that you talk with a tax professional about this asap. Timing could be everything here. See a CPA or Enrolled Agent who has a lot of experience with this issue.

  • Jim

    I had a surgical procedure performed for which I thought I was covered through Medicaid. The procedure’s anesthesia provider began dunning me after trying to bill Medicaid and being denied (due to the mistake of the state’s public welfare department). I attempted to resolve the problem and get the state to pay, but could not. I ended up settling with the provider, paying 75% of an $885 bill, and hoping that would be the end of it.

    When other providers (i.e. the surgeon) started billing for thousands of dollars, I realized this problem wasn’t going away. I retained a lawyer who was able to get the state to admit its mistake and cover the procedure — because the procedure is covered, any debts associated with it are invalid. The surgeon was able to bill Medicaid in full, but the anesthesiologist has been intransigent and thus far has refused to respond to the Public Welfare Department’s request for him (the anesthesiologist) to rebill Medicaid.

    I know the anesthesiologist or the Public Welfare Department (one or the other) owes me the money back that I paid in settlement of the debt. My lawyer’s helping take care of that.

    My question is this though: given that the debt to the anesthesiologist was invalidated, what do I do if and when he submits a 1099-C? Given that only about $200 was forgiven, will a 1099-C even be submitted? If so, what do I tell the IRS? It’s simply inconceivable I should be made to pay taxes on a partially-cancelled debt that I never should have had to pay in the first place. Ideas?

    • Gerri


      I am not a CPA or accountant, so I don’t know exactly how you would deal with that if it came up. But quite honestly, I wouldn’t worry about it. 1099-Cs are only required when a forgiven debt totals $600 or more, so I doubt they will even send it. If they do, then you’ll have to either include it in your taxable income, or get some professional advice on other options.

      What a mess! Have you checked whether this is listed on your credit reports?

  • Terry


    Hi, thanks for all your support on this site. I have an uncle that passed in August and I am trying to clean up a trail of credit card debt. Long story short I will be $33,000 short on paying off his debt, and I know the credit card companies will be sending the 1099-C in this amount. I estimate the Fed tax will be around $6500 for the additional 1099-C liability. If I hold back this amount ($6500) for tax the the short increases to $39,500. If I do not settle the debt and file Fed Tax in 2011 for my uncle. Then the remaining funds would be used to pay the credit card debt, they will still file a 1099-C in 201, but would I be obligated to file a 2012 tax return for my uncle who passed in 2011 ? Is this a strategy the could work ????

    • Gerri Detweiler

      Terry – So sorry to hear about your uncle’s passing. Question: why are you responsible for paying off his debt? Are you personally liable?

  • Margy

    Are auto loan companies required to file a 1099c if they say its charged off on your credit report? If you receive a 1099c and you have to pay taxes or are exempt,does that clear up the debt or do you still owe the debt? I ask because my home was foreclosed on and my car was repoed, and the creditors say it was charged off and another collection agency has the debt.

    • Gerri Detweiler

      Margy – Sometimes you’ll get a 1099-C right away. In other cases, they send the account to collections and don’t consider it forgiven debt until the collection agency has tried to collect. Sometimes you don’t get a 1099-C unless you negotiate a settlement. It all depends on the creditor and its policies.

      If you do get a 1099-c then re-read my article for information on your options. You may be able to avoid paying taxes on that canceled debt if you qualify for an exception or exclusion. If you receive a 1099-c and/or 1099-A, I recommend you consult with a tax professional (CPA or enrolled agent) as soon as possible.

  • mark barbella

    I recently paid off my two plus year old credit card debt at a slightly lower than amount owed which included in some cases years of added interest and fees. For example,I owed approximately $7,500. at time of default.At time of settlement $10,550. I negotiated a settlement and paid $7,000. Is the total sum of $3,500 considered income(1099c) or just the $500. of the principle balance not paid? The $3,000 was all fees,extremely high interest and penalties accrued after default. For the record this was with H.S.B.C. beneficial finance.My other creditors had stopped attaching these fees after about 6 months in default. I feel it would not be right for me to pay tax on this imaginary money.Please assist me as best as possible with my liability.
    thank you for consideration,Mark

    • Gerri Detweiler


      I have been told by tax professionals that 1099-C’s generally can include fees and interest that was “forgiven.” If you have a legitimate dispute over the fees or interest that was charged you may be able to dispute it but it’s not an easy task.

      Do you qualify for an exclusion or exception?

  • Jack Beasley

    The (Bank) foreclosed on my house last year and my attorney worked out a waiver of deficiency for my consent to foreclose.
    The servicer added a boatload of charges at the end and the (bank)bought the property back at the foreclosure sale for about 1/3 of what i owed.
    The differance would be a whopping $200,000. I’m covered because It was my primary residence 2 out of the 5 years. The problem is the (bank) or servicer hasn’t sent me a 1099.
    How long should i wait and what should i do if they don’t send it?
    Is it possible they won’t send one? I

    • Gerri

      Jack – It is possible they won’t send one, or it’s possible they will send one in a couple of years. Given the amount of money involved, I’d suggest you talk with a tax advisor (CPA or enrolled agent) experienced in this issue now. If you wait, it could be harder to recreate the documentation you may need to show you qualify for an exemption.

  • Amber

    I received a 1099-C from a bank credit card, it states the debt cancelled was in the amount of 10342.02. My father loaned me the money to pay off the settlement PFS got for me to clear out my debt. I have no assets and still owe on my car, the only money I had at that time was that given to pay it off the debt. Would this qualify me as insolvent? Will i be able to file taxes as usual on turbo tax or will it require additional help?

    • Gerri


      Find out if Turbo Tax supports Form 982. (I’ve read online that most versions do, but haven’t confirmed that.) If it does then, theoretically at least, you could do this yourself. You can go to the IRS website now and look at Form 982 to see if you understand how to fill it out.

      If you aren’t sure you can do it yourself, then talk to a tax professional now. They will be very busy soon!


  • Cheryl

    I have just received a 1099-C for a deed in lieu on my primary residence that I owned in Florida in the amount of $49,238.70. I willingly did the deed in lieu versus the foreclosure as I wished to minimize the negative impact to my credit. My question is, does my deed in lieu qualify under the Save Our Homes program? I had been trying to sell the home (on market for six months) and had been six months in arrears when the deed in lieu went through. My home was $100K underwater, but since I had gone in with a large downpayment the difference was the amount above. I have since relocated to California where I am slowing putting my life back together, but can’t even afford to pay tax on the $49K at this point in my life. Your advice is greatly appreciated.

    • Gerri Detweiler


      I don’t know what you mean by qualifying for the Save Our Homes program. My understanding is that is the name for some state foreclosure prevention programs.

      Are you asking whether you can avoid paying taxes on the forgiven debt of almost $50,000? If that’s the case, then you need to either go through Form 982 to find out if you qualify for an exception or exclusion, or hire a tax professional to help you through that form. Since there is quite a bit of money involved, I’d recommend you get help if you can’t fill out the form yourself.

      • Cheryl

        What I am looking at is the Mortgage Forgiveness Debt Relief Act and Debt Cancellation. Sorry, just realized that it is different than the Save Our Homes that I mentioned. I have a call into a tax attorney, but everything I read indicates I should be covered for a deed in lieu of foreclosure on my principal residence.

        • Cheryl

          As a follow up. I spoke with a tax attorney, and my $49K 1099-C is covered under the Mortgage Forgiveness Debt Relief Act and Debt Cancellation as it was my principal residence. Thank goodness I never rented the house as it would have voided the coverage and I would have been on the hook for taxes on the $49K. He provided me with the info and the forms that need to be completed to zero it out on my taxes.

          • Debra

            Hi Cheryl,

            I am in your exact same situation :( Can you tell me what forms your tax attorney said to complete. I know form 982 needs to be completed but are there any other specific forms for that issue and did he give you any tips on what NOT to do? Any help you could provide would be most helpful. I live in North Dakota in the middle of nowhere and there are no CPAs.

          • Gerri Detweiler

            Excellent! Thanks for sharing that Cheryl.

          • Courtenay

            I too did a deed in lieu…Knowing what forms to file would be a great help. Thanks.

  • Laura R.

    We live in Texas (in case state laws apply) – My husband had a car repo in 2002 from Toyota. Last year (7 to 8 years later) we got a 1099 from Toyota saying they settled out dept for 3498.00. It was a weird looking letter and statement so I thought it was a sales gimick and disregarded it. Now I have a letter from the IRS saying we own $480.00 from this dept cancellation. Can this be done? We have had no contact with Toyota in the last 5 years I have lived with my husband and never agreeded to any settlement. Just seems odd that a company can make up a number 8 years later and write it off leaving us with a dept to the IRS. Any suggestions?

    • Gerri Detweiler


      I am sorry I don’t have a simple answer to your question. Your situation is not completely unusual – sometimes these 1099’s pop up years later. If you want to avoid the tax on that cancelled debt you’ll need to try to wade through Form 982 or get help from a tax advisor to do so. It might be worth at least talking to a tax advisor about it – it’s an awfully old debt and perhaps some kind of statute of limitations applies.

      • Laura R.

        Thank you Gerri – I asked the IRS about a statute and they just said this is a federal issue because a 1099 was issued. If I look up Texas Statutes it states that depts older than 4 years can not be collected on. Also – If it was settled 8 years later then there would need to be documentation for any dollars Toyota received when they sold the car. I have a call into Toyota asking for their documentation…

  • Kaye L.

    I live in California. My loan servicer agreed to do a deed in lieu while the 2nd charged off the amount owing them. This property was my primary residence and underwater by $200,000. While I have to pay taxes on the 2nd? I do qualify under the Mortgage Loan Forgiveness Act of 2007. I have not received a 1099-C from either. Can I file my 2012 taxes without the 1009-C?

    • Gerri Detweiler

      I am not a tax professional, but my understanding is that the 1099 is what triggers the need to file Form 982 to demonstrate that you qualify for an exclusion or exception. It’s possible the lender is still hoping to collect on the debt if possible.

  • Nancy A

    I’m glad I found this article! I received a 1099c today for an old credit card debt which dates back to 2001. This date is way past my states statue of limitation which until last year (4/11) was 3 years but was changed to 6 years.The debt is uncollectable and unreportable so how can they forgive something they have no right to collect?The debt only exist if I choose to pay it. How would I go about handling this with the IRS?We don’t have any funds to pay for an attorney since my husband is on disability and I run a small home based business that helps supplement his disability and we are just making ends meet, barely. This same company also sent my mother a 1099c but she passed away in 4/09 and her estate was insolvent. I’m sure the amount they forgave on hers is not enough to even have to file a 1040. Do I still have to file one for her?Thanks!

  • Jim Miller

    Hi Gerri,
    I just received a 1099-C for a relatively small amount, from Capitol One. My credit has been excellent for years, so I called them to find out where this came from. It turns out it was from a credit card I had in 1986, and which was charged off in 1989. But the official debt forgiveness date is 12/31/2011. I haven’t had contact with Capitol One, of any kind, in decades.

    My question is: isn’t there a statute of limitations on these “forgiveness” shenanigans? I suspect that the bank has found another way to profit somehow by reporting this ancient amount, after all this time. I can’t afford to have this “income” added to my AGI this particular tax year, for several reasons.

    Is there a process to dispute this with the IRS?

    • Dave Braga

      jim, i am in the exact same type of situation with capital one. it seems from reading here and online capital one acquired chevy chase bank and paid over 500 million for it. it looks like they are trying to write off cancelled debt chase has had sitting around for decades. i never got a 1099 a or c from cap one but did get a letter from irs and sure enough cap one says 10,000 $ cancelled on 12/31/2011 so i talked to cap one and they said its valid and from chevy chase bank in 2000. the forms they are sending probably millions of people and the irs are complete lies. i told cap one ur talking about something in 2000 this is 2012 she said they bought chase in 2008 which i replied who cares this is 2012 and she said to talk to cap one collections. they are trying to reopen these old accounts in an attempt to collect on them and be able to re report. they are lieing to the irs of all things and the irs doesnt care because they can collect extra tax this is an outrage at least.

  • Nancy A

    Gerri, Thanks for getting back to me. I’m in Arizona and the CC on both mine and my mother’s is Capital One. I see that another one here has the same experience with them. My cancellation of debt date is the same as Jim’s, 12/31/11 but my mother’s is 1/31/11. They both arrived he same day.. I don’t know if Jim has had what I have. After not hearing from Capital one for years, last year they started sending me statements with new interest added each month. I laughed at it cause I figured it was a feable attempt at re-ageing the account. I kept the statements in case I needed them and watched my credit report to make sure they didn’t try to report it.I didn’t receive any statements like that on my mom’s account. Nancy

    • Clara M

      Wow! Me too. My Capital One debt was discharged in Chapter 7 in 1996. I got a call about 6 months ago and gave them my discharge information and didn’t hear back. Now they send a 1099-C for December 31 2011.

      I hope they can get fined for willfully ignoring the law. Has anyone spoken to the IRS?


    • Michelle C

      I am looking for the response to Nancy A and Jim Miller’s questions. Very similar situation, except with Discover. I settled with them in 2008 and just today received a 1099-C with cancellation of debt date of 12/31/2011. If I hadn’t settled with them, the debt would have been past the statute of limitations in July of 2011. Advice, Please!

      • Gerri Detweiler

        Michelle – I am still looking into this issue, but generally what I’ve been told is that the statute of limitations is a separate issue from the issuance of a 1099-C. The IRS guidance to creditors says they must issue a 1099-C in the year the debt is forgiven. But there is no specific guidance in terms of when that must happen. If the statute of limitations has expired, it seems to make sense that would trigger a 1099-C, but on the other hand, a collection agency may still try to collect (as happened in your case). My best advice is to find out whether you qualify for an exception or exclusion, and get help from a tax professional if necessary.

        • Nola

          I would like to know the exact same thing. Can a debt from 1995 be cancelled and taxed in 2010 without any notice or contact from Capital One…not to mention no account with them?

        • carrie

          I am in a similar situation. We had a settlement company working on negotiating our debt. Two cards from Chase ended up going to arbitration and one ended up settling for less than owed (but with $2000 added for legal fees) so we still ended up paying quite a bit of what we originally owed. On the settled account, we never received a 1099c and I didn’t know we had to file even if we didn’t get one. This settlement was from 2008 and now we received a 1099c saying that the cancellation of debt was from december 2011. We have a letter stating that the settlement was back in 2008. What should we do with this? Should we file or do they need to send a revised for 2008? The other account was for a large sum that Chase wrote off as bad debt and sent a 1099c for the entire amount. Can they still collect on this down the road even though they sent a 1099 stating that it was cancelled? Hopefully you can help soo, I do have letters and faxes in to Chase as this is very time sensitive now with taxes due in one month. Thank you!

          • Gerri Detweiler

            Carrie – If you read the instructions for Form 982 (which you will find in IRS publication 4681) you will see that you are supposed to calculate your insolvency at the time the debt was settled. It sounds like you know when it was settled so now the challenge will be trying to recreate your finances at that time so you can figure out if you qualify for the exclusion.

            As for whether Chase can try to collect a debt for which you received a 1099-C, the answer is maybe. The 1099-C is a tax form required by the IRS in certain cases, but my understanding is that it doesn’t alleviate you from still owing a debt that is legally collectible. However, I have spoken with at least one attorney who said the1099-c means the debt has been cancelled. I’m going to have to suggest you talk with an attorney to clarify that matter.

      • Peg

        I think we all need to send complaints to the FTC and Consumer Protection Bureau and Attorney Generals and Congressmen/women on this issue – this is utterly ridiculous and fraudulent and another sneaky underhanded and I think illegal way of trying to collect on old sol expired, reporting period expired, invalid settlement or forgiveness dates, etc. I assume they get a tax credit against their own filings and again fraudulent issue they should be audited for.

  • Johnny


    I included my automobile with my bankruptcy in 2010, it was a Chapter 7. However I received a 1099 for the car that I included in the bankruptcy. What do I do now? Must I pay the taxes on this large amount even though it was included in my bankruptcy?

    Please help.
    P.S I live in California

    Thank you.


    • Gerri Detweiler


      You do not have to pay taxes on debts discharged in bankruptcy. File Form 982 with your return and let the IRS know it was included in your bankruptcy.


      • Sandra Ochoa

        Geri, it is my understanding that it is only for Chapter 11, you still have to pay taxes for debts relieved on Chapter 7, though I’m not 100% sure. Does anyone know?

        • Gerri Detweiler

          Great question Sandra – the IRS sure makes it confusing, don’t they? Title 11 refers to the chapter of US Commercial Code under which the bankruptcy laws appear. However, debts discharged in any type of bankruptcy – Chapter 13 or 7 being the most common – are covered. So if you discharged a debt in a Chapter 7 bankruptcy you don’t have to pay taxes on the debt that was wiped out.

  • Mike

    I live in Missouri and had a property foreclosed on 3 months ago….on my first, I owe 330,000 but the pmi co. is paying the debt down to 250,000…the lender currently has the propery for sale and I would assume if they net 250,000 I would get no 1099C since the lender took no loss…can the PMI company issue a 1099C for their payout?..or does it have to be from the lender?…I did receive the 1099a which my understanding is to be treated on my tax returns like I took a loss on the sale of my addition, I had a HELO on the propery of 60,000 to start a business..the second lender continued to send me statements even though I haven’t paid them a payment for 10 months and just recently, I received my 1098 from the second lien holder and it says “Paid off loan mortgage interest statement” and on the back it says principal balance owed $0.00…does this mean they have already written off the debt and going to send me a 1099C for this?..or a mistake?…befuddles me because I can’t think of any instance this loan could have been paid off by 1st lien holder and / or pmi since pmi was for my first only..any thoughts on my situation?

    • Mike

      …Just wanted to mention in the scenario I desribed above, the property was my primary residence.

    • Gerri Detweiler

      Mike – as much as I’d like to be able to help, you have a complicated situation and really need to get the advice of a tax professional.

  • Jann

    I was released from liability of a BOA line of credit in 2008, because I had disputed the amount owed, and felt I had overpaid ($1800 LOC that cost over $12k in the end). Received a letter from BOA releasing me from all liability, and that all would be removed from my credit report – this was never a “debt settlement” nor was I told that I would be liable for any amount whatsoever. Just received a 1099-C in the mail for over $5800. Filed a complaint with FTC – now BOA tells me they are amending 1099-C to $1800??!! Now what?

    • Gerri Detweiler


      Do I understand you correctly that you did get a line of credit for $1800 but did not pay it back? I can understand that the interest and penalties are disputed, but if you took out an $1800 loan and then did not repay it, that counts as income according to the guidelines. (I know it stinks, but conversely, if you think about it – if forgiven debt didn’t count as income it could easily be exploited as a loophole to avoid paying taxes.)

      The lender is required to report forgiven debts totaling $600 or more to the IRS on Form 1099-C. Have you looked at whether you quality for an exclusion or exception as I described in my article?

  • Cheryl

    I received a 1099C today for a debt of my deceased spouse. My name was not on credit card and he never lived at this address. What do I need to do?

    • Gerri Detweiler

      Did you file a final tax return for your spouse? I am not a tax professional, but my guess is you may need to amend it.

    • Gerri Detweiler

      Was the 1099-c in your name or just in your spouse’s name? If it is just in your spouse’s name, then I would ignore it. If it was in your name, then I’d contact the creditor and insist they correct it.

  • Christi

    After going through a divorce in 2007 and trying to sell our home in this housing mess,
    I was unable to reach an agreement of payment on my debts that was in the realm of my financial reality at the time so I closed all accounts and stopped payment on credit accounts immediately.
    (when I received the 1099 c ‘s in the mail last year I thought they were some kind of elaborate debt collection scheme cooked up by the debt collectors as I’d never heard of forgiven debt and so I foolishly ignored them)
    I am working on the publication form 4681 insolvency sheet and on line one of liabilities it states “credit card debt” . My forgiven debt has a forgiven date of 12/15/2010 –
    My credit card accounts were closed long before said date but the debt plus interest was still there – still is. My question is: Do I enter the amount of the debt from the credit card accounts even though they are no longer active or is that form requiring only credit card account balances that are still open and being used?
    (I am not seeking advise from a tax person in these parts as the last two I had used turbo tax and charged me hundreds of dollars to do and there were errors in each one. So now I do my own).
    Thanks for any answers you may be able to offer regarding my question.

    • Christi

      just a P.S. to my above post:
      There are no credit cards that are open and being used – I just want to know if the credit card debt they are looking for on that line of the form is open/closed or both and also with or without interest included in the balance…
      Once again, thanks in advance.

    • Gerri Detweiler


      I am not a tax professional so you can’t rely on my information as advice. But remember you are trying to demonstrate whether you are insolvent, and so the IRS is asking you to list all your liabilities and assets. Even though an account is closed, you still owe it so my view is that it should be a legitimate liability.

      • Christi

        That is my way of thinking as well and until the debt is forgiven and even when it is not, it is still classified as a debt so thanks for the input/opinion, I appreciate your time.

  • Sara

    I also received a 1099-c that I am certain includes interest and penalties. My original credit limit on the card was something like $500 and the 1099-c is for more than $1700. I most definitely did NOT charge that much on the card. Why would they even let me? I never paid the debt due to their shady finance charge practices in the first place. I would like to know if it’s true they can’t claim interest charges.

  • Sandie

    HELP PLEASE! I received a 1099-c from capital one (dated 12/31/2011 for over $3200. Never had an credit card with capital one. I filed bankruptcy in 1991 – yes 1991 – 20 years ago. I did some research on the internet and found that the account they are sending the 1099-c on was for Signet Bank (which was (included in my bankruptcy (20 years ago) Capital One bought Signet Bank around 1995. Capital one claims they have no record of my bankruptcy in 1991 – course not – it’s with the Signet Bank records from their acquisition of Signet Bank (I provided this information to the person at Capital One, and she said she had no knowledge of that event and wasn’t sure those records would be available anyway. duh. Then how did Capital One find me and issue this 1099-c in the first place? My concern is that this 1099-c was dated 12/31/2011, potentially makes it a CURRENT DEBT NOTICE – does this get reported to the credit bureau? How do I convince the IRS I should not have received this 1099-c? I can’t find my bankruptcy papers, but interestingly Capital One provided me with a number that I think “might” be my bankruptcy record number as it begins with 91-xxxxx.”, which is the year I filed bankruptcy. I didn’t have this number anywhere in my personal records because I cannot find my bankruptcy papers, but they had that number on my file, yet they claim no record of my bankruptcy so sent the 1099-c to me with bankruptcy unchecked. THIS DEBT OCCURRED AND WAS DISCHARGED CHAPTER 7 20 YEARS AGO!! Who keeps records for 20 years? Not even the court has them available – they’re stored somewhere – not even accessible at this point! How do I resolve this issue and get Capital one to issue a 1099-A? and forget about me? I’m nearly 70 year old cancer survivor and don’t need this aggravation at this point in my life because the PACR record system doesn’t go that far back! I’m so aggravated by this. I’d like to sue Capital One for mental and emotional anguish if I could – but right now I just want to resolve this problem – Any suggestions? I can’t really afford an attorney and tax time is coming up soon – Help please!

    • Gerri Detweiler


      I am looking into why Capital One is sending out these very old 1099-cs now. But don’t panic about your situation. Have you looked at Form 982 yet? If not, go the IRS website now to get the form. You’ll see in the first part where you can check box 1 a. Discharge of indebtedness in a title 11 case (title 11 refers to the Bankruptcy Code and applies to whichever type of bankruptcy you filed). Then put the amount (for that debt and any others that send you a 1099c) discharged in your bankruptcy on line 2. That amount will be excluded from your income.

      I don’t see anything in the instructions that requires you to provide proof from your bankruptcy filing. I am not a tax professional, however, so it would be a good idea for you to talk to the IRS or a tax professional to find out if you need to include proof with your return.

      This old debt should not be on your credit reports. You can check them at

  • Jeannie

    My husband and I did not have any income for the entire year of 2011. We didn’t get any federal’s aid such as unemployment wage or food stamp. A few days ago, my husband received a form 1099-C from BOA stating that $18698 was forgiven and was reported to the IRS. Do I now have to start filing fax because of this form or can I just ignore it?

    • Gerri Detweiler

      Jeannie – You don’t want to ignore it. The IRS has a copy and will count it as income. But that doesn’t mean you will owe taxes. You may qualify for an exclusion or exception if your liabilities (what you owe) are greater than your assets (what you own). I am not a tax advisor, though, so you’ll need to visit the IRS website and either contact them for more information, or work with a tax professional.

  • Pam

    My mom is on Social Security Disability. She received a 1099C today for a cancellation of Debt of 10,593 on a auto loan. She has tried for several years to get this account placed over into my nephews name like the dealership promised they would to no avail. The vehicle was repoed about 4 years ago and we have sent them letters to contact the responsible party . How will this affect her Social Security Benefits? Is she required to pay taxes on this amout

  • Kyle

    Gerri – my wife has received a dischrage of her student loan due to total disability because of a brain tumor. Now we have just received a 1099C for this debt. Will this be considered income. I don’t see it anywhere as an exception, but I cannot believe that it wouldn’t be.

    • Gerri


      So sorry to hear about your wife’s health problems. I answered a related question in a follow up article and hopefully it will be helpful to you:

      You may want to contact your elected officials in Washington about this. It seems there should be an exclusion or exception for cases where student loan debt is cancelled due to total disability.

  • Patricia taitague

    Is there a statue of limitations on a cancellation of debt 1099?
    Toyota financial services just sent us a

  • Kim

    My student loans were discharged I am on social security do I have to file the 1099c I received for $62,000. My student loans were discharged due to total disability and I don’t file taxes because Social Security is non-taxable….HELP!!!!

  • Christina Walczak

    Just received a 1099 for a credit card debt that the original creditor had sold to a collection agency. The debt was paid to the collection agency and a satisfaction letter was recieved. How do I handle this on our taxes?

    • Gerri Detweiler


      I would urge you to contact the creditor and insist they correct the 1099-C since you paid the collection agency.


  • Cynthia Scott

    I also received a 1099c from Capital One in my previously married name and my Ex’s name underneath for $885. When I called the #, they stated it was for a credit card opened in 1999 and charged off in 2000. The 1099c is dated 12/31/11. I do not know anything about this as we were separated at that time and divorced in 2004. Not sure what I need to do as I have not had any communication with them and out of the blue, a 1099c is sent to the IRS 11 years later. Any suggestions? How can they say debt forgiven when I know nothing about it?

    • Gerri


      I am researching this issue and hope to have information for you in the near future.

  • Cynthia

    Please HELP!! I also received a 1099c from Capital One in my previously married name and my Ex’s name underneath for $885. When I called the #, they stated it was for a credit card opened in 1999 and charged off in 2000. The 1099c is dated 12/31/11. I do not know anything about this as we were separated at that time and divorced in 2004. Not sure what I need to do as I have not had any communication with them and out of the blue, a 1099c is sent to the IRS 11 years later. Any suggestions? How can they say debt forgiven when I know nothing about it?

  • R Trip

    I have two loan. Trying to do a short sale and offer is pending with the first bank.I am trying to do a debt settlement with the 2nd. So my question is if the house get Foreclosed or short sale by the first do I need to pay taxes on the amount I saved through debt settlement. The property is in California and I refi the 2nd loan to get a better rate.Please advice.thanks

    • Gerri Detweiler

      I’d recommend you talk with a tax professional. The answer to this question could be important in terms of your decision as to how to proceed. Alternatively you can read Form 982 and the instructions and try to figure out yourself whether you qualify for an exception or exclusion. As I explained it my articles, forgiven debt is generally considered taxable unless you qualify for an exception or exclusion.

  • KarenKam

    I took out a Parent Plus loan for my child’s college tuition, so the U.S. Dept. of Education is the creditor. They cancelled this debt when I became disabled. Now I got a 1099-c from them. Is disability one exclusion where I wouldn’t have to report this cancelled loan amount as income?

  • Linda

    Just got a 1099-C today on online credit (bill me later). They had sent me a letter in the mail on March 21, 2011 offering to settle the amount for 25% of the balance or gave an amount to resolve the debt… I chose the amount and then got a letter from them stating the debt was settled in full… Beings it was settled in FULL, can this be excluded? What do I need to do? Thanks in advance!

    • Gerri Detweiler


      They agreed to settle the debt for less than you originally borrowed. The IRS considers forgiven debt income. The next step is to read my article and see if you think you qualify for one of the exclusions or exceptions. If you do, you’ll fill out Form 982 to demonstrate to the IRS why you do not have to include this amount in your taxable income. Hope that helps!

  • kenshin

    Hi I just got a 1099-c and not sure if Im qualified for insolvency. I owed over 15000 in separate creditcards. This one is for the amount of 1555. I dont think I have any assets. If I can have a better understanding on assets and if im qualified. Would make things simpler.

  • Sky

    Do you have to include your income as part of your assets if you are attempting to show insolvency?

    • Sky

      As in I make a decent yearly salary, however I owe 35,000 in student loans but I’m only worth about 15k, with car and bank account included.

    • Gerri Detweiler

      Take a look at the insolvency worksheet on the IRS website -it’s pretty straightforward.

  • jace

    Hi Gerri,

    I did a deed in lieu on my primary residense last year. I just got a 1099c from the mortgage company. The amount in box 2 (amount of cancelled debt) is $42900. The fair market amount in box 7 is $44100. I am assuming correctly that I am only responsible for taxes on the difference ($1200)? or none at all? I sure hope it is one of the above and not the entire amount or I will be heading for bankruptcy ;0(….Thanks>

  • Kelly

    I just received a 1099C for 2011 that is for debt that was canceled in December of 2010. I called the creditor to dispute it because it is issued for the wrong year. I was told by an agent that it is a “good thing” that I received the 1099C one year after the fact. She indicated that I could claim it as a Loss of Income and that I might not have to pay any taxes on it at all. It sounds too good to be true and I’m thoroughly confused by the information. How would I claim it as a Loss of Income?

    • Gerri Detweiler

      Kelly – what kind of an “agent” were you talking with? I have no idea what she means by loss of income. Perhaps she was referring to the insolvency exclusion that I described in my article. At any rate, start with Form 982 on the IRS website.

  • Jennifer

    Hi Gerri,
    Two questions:
    (1) I was married this past September. Prior to that date, my husband settled a credit card debt and we just received the 1099-C. He did not own a house and was unemployed at the time he settled the debt, so his liabilities would have certainly outweighed his assets. However, I do own a house and have significant investments. For the purpose of determining whether any of the discharged debt can be excluded from income, would it the basis for the calculation be his assets/liabilities at the time the debt was discharged, or our now combined assets/liabilities as a married couple? We will have a tax specialist complete our taxes this year, so just wondering what to expect.

    (2) In performing the above calculation, do you include IRAs as assets – ? If yes, would you include at the value of the IRA minus any penalties for withdrawal, or at full value?

    Thank you in advance!

    • Gerri Detweiler


      I am glad you are working with a tax professional. I am a credit expert, not a tax expert, so I can’t give you specific advice regarding the timing issue. (I will note that this seems to be a problem, though, with creditors sending out 1099-c’s years after debt was forgiven.) As for your second question, you can read the Insolvency Worksheet to get an idea of how this works. Hope it all works out OK!

  • Keely

    I have filed my taxes and been accepted by the IRS. Then my husbands receives a 1099-c in the mail. We have filed married jointly. What do I do now???? Please help!!

    • Gerri Detweiler

      Keely – Read Form 982 and instructions to see if you qualify for an exclusion or exception. I am assuming you did your taxes on your own? If so, then call the IRS and find out if you need to file an amended return.

  • Keely

    If you don’t mind can I ask a second question? Ok the past 5 years the IRS has been offsetting our taxes due to default student loans. I have recently set up a settlement with the people holding the student loan. Now I have filed my taxes and it is saying I am getting back more then the agreed settlement, but my husbands name is still flagged for offset. My question is, will they keep all my taxes and make me pay the last two pmts on settlement, or will they just take remainder settlement and give me the remainder>? I have made 1/3 payments of the settlement already. thanks a billion for your time. Who knows what will happen now that I got 1099-c

  • Alvena Farrar

    Hi Gerri,

    I (and my ex-husband) previously owned three rental properties. 2 out of 3 of them have foreclosed. I received a 1099-A on one that foreclosed in 2010 and had a huge tax bill as a result of the “unseen” income. I received another 1099-A on the one that foreclosed in 2011 so am bracing myself for another huge tax bill this year. My filing bankruptcy does not protect me from this? I asked this question of many people last year and no one could tell me I was not responsible for this. The bankruptcy attorney was the only that said they sent the 1099-A in error.


    • Gerri Detweiler

      Alvena –

      You do not have to pay taxes on debts discharged in bankruptcy. If the debts in question were included – and discharged in – your bankruptcy, then you can file Form 982 and exclude that amount from your taxable income.

  • Albert

    Hi Gerri,
    I owned a timehsare completed a DIL to deed the timeshare back to the timeshare company. I received a 1099c for the Cancellation of Debt, however The FMV is more than the amount of debt canceled. do i report this as a sale ofthe porperty or do i have to pay taxes on the Debt canceled.

  • scott

    i received a1099c for forgiveness of my wife’s school loan due to her disabiltiy will i have to include this in taxable income

  • angel

    I receive 1099c they say we didnt pay our car loan but its been paid off in full and i proof to show i just dont know to to tell them and how to resolve it what should i do..

  • Gayle

    I did a short sale on my house last year and about $52K was the amount of the debt forgiveness. I also received $3000 for the HAFA/RASS relocation assistance program. But I have not received a 1099C for this $3K and am not quite sure who to ask for it. Is this an amount that will be fully taxed?

  • Lauren

    My question is if the PMI company protected The bank from part or all of the
    deficiency shouldn’t the amount on my 1099-C be the deficiency less the amount
    this insurance covered? How is it fair that the bank can claim it as a loss if they were paid back?

  • kevin

    Can a 1099c be issued now for a debt that was forgiven in 2001?

    • Gerri Detweiler


      According to my research, you probably should have gotten a 1099-C long ago for this debt. I’d suggest you read my article about 1099-Cs for old debts.

  • Judy

    I received a 1099C for a CC debt. That CC debt is also showing as a judgement at the court house. when it (1099) states cancellation of debt, does that mean cancellation of same monies on the judgment?, or can they forgive debt, and still collect on same monies for judgement?
    if it is cancellation of judgement debt (which is the same as debt) how do I notify court house of 1099 or is the CC company suppose to do that?


    • Gerri Detweiler


      The IRS specifically says that a 1099-C does not mean that there will be no more collection activity on a debt. So no, the issuance of a 1099-C doesn’t cancel out the judgment.

      Have you looked at IRS Form 982 and Publication 4681 to determine if you are able to qualify for the insolvency exclusion? That may be the easiest way for you to deal with this.

  • Kelly M.

    I received 2 1099-C Cancellation of Debt’s for the same account, original creditor & the same exact amounts but from 2 different collection agencies. One is on my credit report reporting a credit limit but not the amount on the 1099-C. The other collection agency is not on any of my credit reports.

    Can I really get 2 1099-C’s from 2 different agencies for the same debt or is one illegal and the other is valid? Who would I contact to figure out which one is right or wrong?

    • Gerri Detweiler

      Kelly –

      Your email is a great example of what a mess these 1099-cs are turning out to be for so many people. You should not get duplicated 1099-cs. But trying to get it fixed is probably not going to be easy.

      I am not a tax professional so I cannot give you individual advice. However, in the interviews I’ve done with other tax professionals, the advice they’ve given me is to first go to the source – the companies sending the 1099-cs and ask them for a correction. If you can’t get a 1099-c then file a statement with your tax return explaining the problem. It would be a good idea for you to get professional advice from a CPA or Enrolled Agent on this.

      Let me know what happens!


  • http://1099-cinthemail? linda w.

    my husband and i have a gross income of 8,576.00. we received 3 1099-c this is also included in the gross income.. do we have to file income taxes we are both under 65…

    • Gerri Detweiler


      I can’t give you tax advice as I am not a tax professional. The IRS website says: You must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age and the type of income you receive.

      Check the Individuals section of the IRS website at or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website to determine if you need to file a tax return. Visit”

      Hope that helps!

  • Christi

    Hi Gerri,

    first, thanks kindly for giving your time like you do.

    I am nearly finished with my insolvency sheet, I wonder if you know –
    when they ask for credit card debt on line 1, when I provide my documentation
    along with the insolvency form, I intend to just send a piece of paper with the following itemized by line:
    creditor name, last 4 digits of acct number and then balance due.
    Do you think the last 4 digits of the account numbers will suffice?


    • Gerri Detweiler

      To be honest, I have no idea. However, I would imagine they are more interested in the amount than in a specific account number. I would guess that if you listed it something like xxxxxxx-1234 it would be fine. But I am speculating.

      • Christi

        well I’m going to give it a whirl as the gentleman on the phone from the IRS was did not indicate nor imply that it was needed.
        Thanks very much once again.

  • Bayron James

    I received the form 1099C from the Mortgage Lender. They wrote my current address on the form 1099C in the column of Debtor’s address. There is no property address written on that form. Now in the debtor’s column of the form, which address should appear? The Debtor’s Current address or the address of the property was mortgaged?

    • Gerri Detweiler

      The instructions for the 1099-C, which give the guidelines that lenders must follow, state:

      Box 6
      Enter a general description of the property. For real property, generally you must enter the address of the property, or, if the address does not sufficiently identify the property, enter the section, lot, and block.

  • Teresa Carlos

    Gerri, thank you for taking the time to respond to these posts. I recently received a 1099-C. I was the victim of an extensive identity theft perpetrated by a family member while I was living abroad. I successfully disputed the 10 credit cards opened fraudulently in my name and was able to have all records removed from my credit report. However, one company refused to accept my dispute, but they never attempted to collect the debt once I disputed and once the credit bureaus blocked them from reporting to my credit history. Now, three years later, I have received a 1099 C cancellation of debt from this company.
    I’m at a bit of a loss as to what I should do. Do I send the reams of paper documenting my dispute to the IRS along with my tax return? Do I need to engage an attorney or tax advisor? I would have to do a cost-benefit analysis in this case.

    Thanks for your help.

    • Gerri Detweiler

      In his book How to Eliminate Debt on Tax Forgiveness, Daniel J. Pilla recommends you dispute the 1099-C in writing with the company that issued it first. If they do not correct it, then file Form 8275 with your tax return along with documentation that the debt was disputed. Mr. Pilla’s book goes into greater detail on this and I find it quite helpful so you may want to check that out.

      Another option would be to ask the Taxpayer Advocate for assistance. I would also recommend you file a complaint with the Consumer Financial Protection Bureau against this creditor.

      Hope this helps, Please let us know how it turns out!

  • wanda

    We recieved a 1099c for a cancellation of debt for a car that was repo and sold at auction.My husband sign for my son to get a car and he did not pay the loan. it was repo and sold at auction. I now got a 1099 c and I am not sure what to do with it . I recieve two . one is a corrected revise 1099c. where do I put it and do I have to complaim it. we are retired and dont have much money.

    • Gerri Detweiler

      When was the car repossessed? What is the difference between the two 1099-C’s you received (the original and the corrected one)?

    • Gerri Detweiler


      If your husband cosigned the loan, then he is equally responsible for it as a co-borrower. You didn’t indicate what the difference it between the two 1099-Cs but if the amount looks correct, then the next thing to do is to go through Form 982 and try to see if you can avoid paying taxes on that debt because you are insolvent. There is a worksheet in Publication 4681 that you can use to figure out if you are insolvent. In addition, it would be a good idea for you to talk with a tax advisor as soon as possible if you are unsure about how to do this yourself.

  • shelley

    Hello, here’s an interesting story. My mother received mail coming to me in an old married name from the early 1990s. Right there I knew something was up. She forwarded me the envelope and it turned out to be a 1099c from Capital One cancelling over $6000 from a credit card. I haven’t had a Capital One card in many many years and certainly not that kind of balance due. In fact, I did have a bankruptcy way back in 1992 which this card would have been included in and all debts were discharged. That was almost 20 years ago. I called the 800 number and wasn’t even able to type in my account number since I don’t have any idea what it is, but they did take my social and were able to track down the account. They said yes, that the account had been sitting around unpaid for all these years and they finally gave up waiting for me to pay it. I informed them that it was discharged in a bankruptcy a long time ago. I come from the mortgage industry and have access to a tri-merge credit report on a regular basis. There has not been an open account in my name with Capital One since the BK, and certainly not one with 18 years full of late payments and penalties! They have sent it through their investigation/dispute department and I’m hoping for an answer. Clearly something slipped through the cracks, but I am determined to NOT pay income tax on something that was handled years ago. My question is this, even if they can’t find the bankruptcy records ( I don’t know how long the county keeps those) isn’t there some kind of statute of limitations on how far into the future they can send out a 1099c to someone? I just wonder if this bank is up to something? Some kind of creative accounting? how many people did they do this to? Are they just trying to get tons more write-offs for themselves? This is truly crazy.

    • Gerri Detweiler


      I am not sure why this is happening now. I have contacted Capital One but only received a general reply.

      You don’t have to pay taxes on debts discharged in bankruptcy. They should correct it, but even if they don’t, my understanding is that you should still be able to claim the bankruptcy exclusion by filing Form 982. (I don’t see any requirement that you include proof that you discharged the debt.)

      However, I would urge you to also file a complaint with your elected officials. You are not the only one complaining about this problem.

  • JO

    My husband and I filed Chapter 11 in 2008 when my husband and I were employed. We lost our jobs in 2009. We were unable to make our bankruptcy payments and stopped paying. My husband has been unemployed since 2009. He is advanced in years, as am I. We received a 1099-C from “ECAST SETTLEMENT CORPORATION” this week in the amount of $36, 431.91. We do not know which financial institution is represented by ECAST SETTLEMENT CORPORATION”. I went to work in April, 2011 making minimum wage. My job is our only source of income. My husband draws Social Security. Our assets clearly do NOT come close to the debt that was cancelled. What should we do? Thank you

    • Gerri Detweiler


      I recommend you try to fill out Form 982. If you are insolvent by IRS standards, you will be able to avoid paying taxes on part or all of this cancelled debt.

      If you have trouble filling out the form, I would encourage you to get professional tax assistance.

  • Katherine

    Hi Gerri,

    I settled a debt October 19, 2011 with a Citi credit card account. Today I called them and confirmed that it had been settled and to find out why I had not gotten a 1099c. They said they have 3 years to file a 1099c with the IRS and send me a copy. I was shocked since the IRS 1099c form instructions say to furnish Copy B to the Debtor by January 31,2011.
    #1 Is this true that they have 3 years to file?
    #2 Does this mean the debt is not considered cancelled until they file?
    #3 What date do I use for doing my Insolvency worksheet?
    #4 Can I file it on 2011 without the 1099c?

    Hope you can help me understand this.
    Thank You

    • Gerri Detweiler


      I am not a tax advisor so I can’t advise you specifically. One of the tax advisors I consulted said that taxpayers should go ahead and report the forgiven amount on a settled debt to the IRS even if they didn’t get a 1099-C.

      There is no question that creditors are making mistakes on these forms, and while I can’t say that happened in your case, the IRS instructions for Form 1099-C states that creditors must send a 1099-C when an identifiable event occurred and one identifiable event is:

      A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration.

      I’d recommend you also file a complaint with your elected officials in Washington.

  • Oguz

    I have not earned ANY income ($0.00) in the US since September 2009 and I live outside the U.S since that date.

    However, in November 2011, I have settled my US credit cards (cancelled amount totals to $20650.00) and received 1099-C forms in the mail. As far as I know, a W-2 was not issued on my name for the years 2010 and 2011. (I actually don’t even how to check whether it was. I asked my last employer and they said they would not have that information.)

    What should I do? Should I file taxes and how?

    Thank you.

    • Gerri Detweiler


      Just because you didn’t receive W-2 income that doesn’t mean you don’t have to file a tax return. I’d suggest you look at the IRS information or use a tax preparation software program to walk you through the process to figure out if you need to file.

  • Louren

    My daughter worked for a company that paid for her to take CPA courses. When my daughter left the company before getting her CPA, her employer kept her last paycheck which paid back about 1/2 the CPA course. They informed her that the other 1/2 (over $600) should be claimed as debt forgiveness on her tax return. They did not send a 1099 to her. In this case, is it really debt forgiveness that needs to be claimed? She could write it off as a business expense too then. If she needs to report it, where on the tax return do you report it as income? And then she would also write it off as a business expense correct? Or something else?

    • Gerri Detweiler

      Louren –

      I am not a tax advisor. As much as I would like to help on this one, I suggest you talk with a tax professional.

    • Curious Lady

      This is a strange scenario. If your daughter has the company policy that was used when she took the course, then make sure she provides that to the tax professional. I have seen things like this reported on a 1099 as misc income not as cancellation of debt. Did they say it would be a 1099 for misc income or COD?

  • John


    I had an investment property in Colorado foreclose in August of 2011. The balance on my loan was $241,000 and the property foreclosed for $144,000. This left a deficiency balance of about $96,000.

    I started receiving calls from a collection agency who claims that the are collecting for Freddie Mac. They are asking for a settlement on the deficiency balance.

    In January of 2012 Freddie Mac sent me a 1099-A. But I have not received a 1099-C.

    1) What is going on here? Are they going to send me a 1099-C and forgive the debt? Or are they trying to collect what they can on it with the intention of sending the 1099-C later?

    2) If I do a lump sum settlement of say $6000 on the $96000 deficiency balance, can they or will they then still send a 1099-C for the remaining $90,000?

    3) I am including the 1099-A in my taxes this year, but will the IRS be expecting a 1099-C even though I don’t have one? Does this increase my chances of an audit?

    Thanks so much for your help.

    • Gerri Detweiler


      Unfortunately the answer is, who knows? As I explained in my other article, 1099-A in the Mail?, lenders are very inconsistent in how they are handling these. You may get a 1099-C, you may not. The 1099-A may be correct, or it may not be. They may try to collect the balance, or they may not. There is just no consistency here in what’s happening.

      If you do a settlement, they are supposed to send a 1099-C for the amount cancelled. My guess is they will, but it’s anyone’s guess as to when they will do that. (According to the IRS Instructions for Form 1099-C, they are supposed to report it for the year it was cancelled). If you are insolvent, you may avoid paying taxes on that amount. If not, you could be looking at a hefty tax bill.

      Given the amount of money involved here, and the fact that this can increase your risk of an audit, I would encourage you to meet with a tax professional with experience in these issue.

  • Ruben vargas

    I received a 1099-c, the bank hasn’t yet foreclosed on me. This is for my principal residence in California. what do I do with this?

  • Donn

    I received a 1099C from a shady collection agency (Portfolio Recovery) that my lawyer went to a hearing with them to prove the debt, and they couldn’t. That was 2009.
    Two years later, 2011, I started getting calls again and I sent them a cease and desist letter. I never heard from them since, but in February 2012 I received the 1099C.
    How do I dispute this 1099C?
    Also if I do include this amount on my 1040, isn’t part of the amount supposed to be in box #2 and part in box #3?
    The cancelled amount according to them was $13740.00. they hyave the entire amount in box #2 and zero in box #3 for interest and penalty.


    • Gerri Detweiler


      The tax experts I consulted said you should first dispute it with the company issuing the 1099-C. Keep good records. If that doesn’t work you may need the help of a tax professional to dispute it. I wrote about what happens if a 1099-C is wrong on the blog.

  • Julie

    US Department of Education discharged a student loan for my husband as he is totally and permanently disabled and now receiving SS benefits. We received a 1099-C for this loan discharge and our accountant is stating that we have to add the over $7,000 to income (which causes us to owe money for taxes). I don’t see anything that addresses disability specifically but it seems crazy to me that this would not qualify for an exception.

    Thank you so much for your help.

    • Gerri Detweiler

      Julie –

      I agree – that doesn’t seem right but it’s the current policy. Have you asked your accountant specifically whether you qualify for the insolvency exclusion?

    • Anonymous Coward

      We have a similar problem but it’s much more money. The very idea of paying the taxes is out of the question — the tax would be more than our total net worth. Nobody so far even understands my question. I’m afraid to “talk to a tax professional” because I don’t know if they are obligated to confidentiality.

      • Curious Lady

        Please do talk to a professional. It is not as bad as it seems. There are certain ethical standards that apply to CPAs if that is who you decide to use. They can only advise a client of certain things, but of course they cannot knowingly or willingly file a fraudulent return. But you are only seeking advice at this point, so no harm in asking questions. If you post more information then you may get some good opinions and references here.

  • Patric

    In 2011 Litton Loan Servicing was bought by OCWEN. I am now on the hook for payments to OCWEN, but I received a 1099-C from Litton Loan saying they discharged $72,049. The phone number on the 1099-C form says the Creditor’s name is Litton Loan, but the phone number is for OCWEN. The numbers I had used previously for Litton now have a recording saying to call OCWEN. I called OCWEN and they don’t know what I’m talking about, probably because they are in India. I’m stuck in a circular loop! The amount was never discharged. Help.

    • Gerri Detweiler


      Have you read Form 982 and the instructions to see if you qualify for an exclusion under the Mortgage Debt Forgiveness Act? If not, the insolvency exclusion? That may be the easiest way to handle this. I am not a tax advisor, however, and I’d recommend you get help from a tax professional since this involves a large amount of money.

  • Anonymous Coward

    All was smooth sailing until I became aware of a 1099-C that my spouse has for a $30,000 student loan forgiveness. The debt was cancelled due to her disability. The problem is, the tax on this amount is far more than we could possibly pay. I’m not willing to pay it in the first place, because it was never my debt to begin with. This situation is probably going to cause us to divorce, and may cause my spouse to become suicidal. I cannot believe this is happening and all the information I can find is about people with mortgage “relief.” I cannot find one single mention of anyone else in a situation comparable to mine. Please help.

    • Gerri Detweiler

      We’ve actually gotten three or four comments from taxpayers who got very large tax bills after their student loans were forgiven due to total disability. They are all, like you, in shock. It’s a policy that sounds like it needs to be changed. I would encourage you to write to your elected officials in Washington and ask them for help with this. Reach out to the Taxpayer Advocate as well.

      In the meantime, before you panic or leave your spouse over this, go to the IRS website and get Form 986 and read the instructions as well as Publication 4681. You may be able to avoid taxes on part or all of that income by showing to the IRS that you are insolvent. If it doesn’t look like you qualify for the insolvency exclusion, please get advice from a tax professional if it looks like you will owe taxes on the forgiven debt. Perhaps the two of you can file individually and avoid the tax debt.

      Don’t be too hard on your spouse for this. This has caught a lot of people unaware.

  • David

    I received an IRS CP2000 form the other day listing a few items for which they are questioning / seeking a response to on my 2010 return. All of the items except one were non events and simply needed more documentation. However, my former CPA issued a 1099C to the IRS for my non payment of services becasue he not only overcharged me significantly for his services, but he screwed up my entire tax return in 2008 which cost me a lot of money in taxes and to have fixed. Becasue of his incompetnecy, I refused to pay the remainder of his invoice. So, unknown to me, he filed a 1099 c to the IRS for the amount he claims I owe him. I have read the 1099 C rules and regs andd it doesnt appear he can do this.
    Can he do this, and if so, what is my recourse with the IRS becasue they certainly want an answer. How should i handle this with the IRS ? Thank you

    • Gerri


      Ugh!! You can try to get the tax advisor to file a corrected 1099-C (you may need to get an attorney involved? Or file complaints all over the place…?) Otherwise you’ll need to get additional tax advice from another tax professional or talk with the IRS about how to dispute it. Sorry I can’t be more specific.

  • John Knill

    I am on disability and recieved 1099c for 17,000 on a 8 year old parent plus loan which was cancelled. I paid a 4 percent fee which 1 percent went into a insurance pool for bad debts. ,I should not have to show this as income due to fees paid. Help.

    • Gerri


      According to the research I have done on this issue, the fact that you received a cancellation for disability and the fact that you paid an insurance fee don’t make a difference in terms of whether you have to pay taxes on this cancelled debt. (I am not a tax professional, however, so please do not take this as tax advice.) You need to figure out whether you qualify for an exception or exclusion. You can use Form 982 to do so. You can read publication 4681 for more instructions. Given the amount of money involved, I would also recommend you talk with a tax advisor.

  • Jack

    We settled an SBA debt that had a personal guarantee.
    We did not receive a 1099-c form from the bank.
    Is there a way to find out if the bank reported the settlement without raising any flags.
    Thank You

    • Gerri Detweiler


      If the lender sent a 1099-C it was required to send a copy to you in addition to the IRS. Unless you moved and your copy didn’t reach you, you should have received a copy.

    • Curious Lady

      Based on the other comments here, it does look like it happens to where you sometimes don’t receive a copy. If you want to know for sure you would have to request a copy of your records from the IRS. I am not aware fo this raising a red flag for the IRS because you cannot control when you receive the 1099-C from the company and as you can see here as well just because you haven’t received it yet doesn’t mean that they won’t send it later.

  • Verchetta

    If my husband and I received a 1099-c cancelling our mortgage debt for 2011, do we have to file our taxes jointly or can we file separately?

    • Gerri


      I don’t see why it should prevent you from filing separately, but you’ll need to get professional tax advice on how to handle this. In Form 4681 the IRS gives this example:

      Example 3—joint debt and separate returns.

      In 2011, James and his wife Robin were released from their obligation to pay a debt of $10,000 for which they were jointly and severally liable. None of the exceptions to the general rule that canceled debt is included in income apply. They incurred the debt (originally $12,000) to finance James’ purchase of a $9,000 motorcycle and Robin’s purchase of a laptop computer and software for personal use for $3,000. They each received a 2011 Form 1099-C from the bank showing the entire canceled debt of $10,000 in box 2. Based on the use of the loan proceeds, they agreed that James was responsible for 75% of the debt and Robin was responsible for the remaining 25%. Therefore, James’ share of the debt is $7,500 (75% of $10,000), and Robin’s share is $2,500 (25% of $10,000). By completing the insolvency worksheet, James determines that, immediately before the cancellation of the debt, he was insolvent to the extent of $5,000 ($15,000 total liabilities minus $10,000 FMV of his total assets). He can exclude $5,000 of his $7,500 canceled debt. Robin completes a separate insolvency worksheet and determines she was insolvent to the extent of $4,000 ($9,000 total liabilities minus $5,000 FMV of her total assets). She can exclude her entire canceled debt of $2,500.

      When completing his separate tax return, James checks the box on line 1b of Form 982 and enters $5,000 on line 2. He completes Part II to reduce his tax attributes as explained under Reduction of Tax Attributes, later. He must include the remaining $2,500 ($7,500 − $5,000) of canceled debt on line 21 of his Form 1040 (unless another exclusion applies).

      When completing her return, Robin checks the box on line 1b of Form 982 and enters $2,500 on line 2. She completes Part II to reduce her tax attributes as explained under Reduction of Tax Attributes, later. She does not include any of the canceled debt on line 21 of her Form 1040. None of the canceled debt has to be included in her income.

  • KAT148

    Question – what if I have more than one 1099-c? They are both for discharged credit card debit. I am insolvent. One discharge is for 8/2011 and the other is for 10/2011. what date do I use to determine my insolvency at the date of the discharge if I have 2 discharge dates?

  • Will Lewis

    If i used my personal credit card to pay off a outstanding student and received a 1099-c, are their any exceptions for that since it isn’t income?

    Thank You

    • Gerri

      Will – Are you saying that you used your credit card to pay off student debt, then either defaulted or settled on the credit card balance? If so, the IRS would still consider the “forgiven” or “cancelled” debt as income, regardless of the fact that it was used to pay off other debt.

      At least that’s my understanding – I am not a tax professional so please don’t take this as professional advice.

  • Fran

    I settled a credit card balance of approx. $40,000 for 15,000. The credit card was in my ex-husband’s name and my name, a joint visa account. Now we both received a 1099c for $25,000 for 2011 with our own social security numbers. My accountant called the credit card company and said that only one of us should have received the 1099c as now the Irs has both of our SS# owing $25,000.00. Totaling $50,000. The man at the credit card company said we can either split the amount or only one of us has to pay it. My husband said he will claim it on his taxes, but what am I supposed to do with my 1099c form. Accoding to the IRS it will appear that i also owe these taxes. should the credit card reissue only one 1099c. and if so what is the procedure. If not, what is your adivce. Thank you

    • Gerri


      As much as I’d like to help, I am going to have to ask you to get your accountant’s advice on this one. You shouldn’t have to pay taxes twice on the same cancelled debt, but you will need your accountant’s advice on how to communicate what happened to the IRS.

  • Sonya

    I recently received notice from the IRS of debt cancellation $9000 from 2010. This debt cancellation was incurred because of a divorce. My ex was ordered to assume and payoff the debt. He did not pay it I was served paperwork to pay it. I paid the settlement. The Debt was in both of our names, but me the primary and as a result I received the 1099-C. I did not claim it on my taxes, as I recevied it after taxes we filed. What are my options here?

    • Gerri Detweiler

      Sonya, I assume you mean that your ex was ordered to pay the debt in the divorce decree? I doubt that will matter to the IRS if you were legally responsible for the debt to the creditor. I’d recommend you read IRS publication 4631 and try to figure out if you qualify for an exclusion or exception. I would also recommend you talk with a tax professional for help as soon as possible. It’s not a small amount of money and the tax bill could be rather steep.

  • David


    I am currently trying to do my taxes, and because I had some money in my savings, and owned my car I believe that I was not insolvent at the time so I am just going to pay what I owe on my cancelled debts. However, I did not receive a 1099 C from one of my old credit card companies, and I would like to file my taxes but i am not sure what to do? Do I include the forgiven debt even though I don’t have the 1099 C form, or should I just continue without it and if it were to even come up with the IRS just deal with it then and since I don’t have any proof of having the form I should be ok right? even called the third party company I settled the debt through and he said I was like the 20th person to ask the same thing about the same Credit Card company!! Did they perhaps just ignore it?!! I don’t know!!! Paying taxes on settled debt sucks!!!! Any help with this issue would be greatly appreciated as it means I am either going to pay 150 dollars or 892 dollars to the IRS! What should I do?!!


    • Gerri Detweiler

      This is a tough one David. I asked several tax professionals about this and received a couple of different responses. Only one said their opinion was that the taxpayer should report it anyway. The others said that the income wasn’t triggered until the 1099-C was sent. So I don’t have a definitive answer for you, and suggest you talk with a tax advisor.

      My personal thought is that if you are going to pay taxes on the settled amount, then it may not matter whether you pay it now or when they send you a 1099-C unless your tax bracket changes…? The big problem arises for consumers who are eligible for the insolvency exclusion but don’t get a 1099-C until years later and can’t recreate the financial information needed for the insolvency worksheet.

      I’ll add one more note: If you haven’t done so already use the worksheet in Publication 4681 to make sure you don’t qualify to exclude part or all of this debt from your taxable income. If you do qualify, and don’t include the 1099-C income on this year’s taxes, then at least fill out the worksheet and keep a copy for records in case they 1099 you next year or sometime in the future.

      And let your legislators in Washington know the problems this issue is causing!

  • lori dizon

    i just received a cancellation of debt for 2010, can the bank do that? and what do i do now with my 2010 tax returns? would i get penalty from IRS? the debt of cancellation was dated 4/28/10, my house shortsale date was 4/15/2010- i don’t know if i am going to get qualified for insolvency ….any comments?

    • Gerri Detweiler


      If I understand your question, you completed a short sale in 2010 but the lender just sent you a 1099-C for 2011. Is that correct? If so, then it sounds like you need to report it with your tax return this year. Read publication 4681 to find out if you may qualify for an exclusion either under the Mortgage Debt Relief Act or the insolvency exclusion. Although the instructions don’t answer a lot of questions, they can be helpful in basic situations.

      Also, I assume this is a large amount of money since a home loan is involved. For that reason, I’d really encourage you to talk with a tax professional for specific advice. You don’t want to get this wrong and discover you owe a big debt to the IRS!

  • Sherry

    Am attempting to fill out a Form 982 on my own, late filing tax year 2010. I have a total of $16,500 of cancelled credit card debt by two credit card debtors ($9,000 cancelled in May 2010 and $7500 cancelled in Aug 2010) per “box 2″ amts on the two 1099-Cs I received. I did two separate spreadsheets showing assets/liabilities for the two individual dates of cancellation. For May, I had insolvency of $14,000 so the $9,000 would be fully excluded. For Aug, I had insolvency of $4,000 so I would still need to report $3,500 as income (as opposed to $7500 from that 1099-C). After checking line 1b, I can’t figure out what number to put on line 2 of Part I (Form 982) and what to put on line 10a Part II (Form 982). I assume I put $3500 on line 21 of the 1040 as income. Do I put $13,000 on both Part I line 2 and Part II 10a? Very confused… THANK YOU for whatever help you can offer.

    • Gerri Detweiler


      As much as I would like to help, I am not a tax professional and I can’t answer specific questions like this. I am going to suggest you talk with a tax professional. I’d also suggest you contact your elected officials in Washington and let them know what a difficult time you are having with this form. They need to understand what taxpayers are dealing with here!

  • David


    When doing your taxes on your cancelled debt, if saying you were insolvent during the time your debt was settled is that a red flag for the IRS to audit you to see if your telling the truth about your insolvency? I almost feel like it is worth me just paying the taxes the I owe on the cancelled debt just so I don’t have to worry about the IRS auditing me.. but then at the same time I feel that soo many people will be in the same position and will the IRS actually go after such a small tax payer such as myself? I do not know what to do!!

    David BIanca

    • Gerri Detweiler


      I haven’t seen any statistics on whether claiming the 1099-C insolvency exclusion increases your risk of audit. Keep in mind though that 6.3 million of these forms went out to taxpayers this year, so I am not sure whether the IRS has the resources to significantly increase the number of audits due to these forms. But that’s just my speculation. Before you give up a legitimate tax deduction, I’d recommend you at least talk with a tax advisor.

  • Chloe

    Hi, I have a very complicated situation. A and B purchased a property under both of their name. And after few years later, A took out the home equity and A also borrowed another loan (which is i called it second loan) under both of their name. B didn’t even aware of when A has taken out the home equity and applied for second loan because all the time B was on deployment. Actually, A has forged B’s signature and B doesnt have intention of suing A. And after few years later, B found out this matter. Then, last year they did a short sale for the house and they receive form 1099C from the bank for the mortgage and also for the second loan. The total amount of the forgiveness debt is 392K. And all this time, B has been the one paid for both of the mortgage and loan interest every month so on these last couple years he has been claiming for tax deduction from the mortgage and also the second loan. From my knowledge, if a loan is used for home improvement then its not taxable but the problem is A used up all the money (392K) for his business. And B’s name was not on the business. And since receiving this 1099C, they have been arguing who should be the right person to file both loan in their tax? And if this time, we let A to file for both 1099C, will we get audit? If they some of the money (lets say 15%) use as home improvement and the rest report as insolvency in their tax, does it gonna help? And also A has been unemployed for couple years and if suddenly A filed for both of the loan, does B will get problem? Or may be B should file for both loan in his tax and claim for insolvency? Does this gonna help B? Sorry too complicated case. Hope u can give me some advice. Chloe

    • Gerri Detweiler

      Chloe – You really do need to talk with a tax professional with experience in 1099-C matters. This is a very large amount of money – and it could result in a very large tax bill. Getting professional advice on this is critical.

  • Lynn

    Hi, My husband received a 1099C from portfoilio recovery that reads Best Buy or S&H Master Card. The dollar amount is 933.00. We haven’t ever had a credit card from Best Buy or S&H Master Card. This CA has my husbands social security number on it but we are not sure what to do. tried calling but says it is his

    • Lynn

      I forgot when I spoke to the woman at portfoilo she said the account was actually HSBC and the intial amount was 600.00 and they took it over in 2009. My question is should I still dispute the 1099c for it reading Best buy and S&H Greenstamps Mastercard and 933.00 in box 2 and nothing in box 3

  • Cheryl

    I just checked this website again and realized that other had posed questions in regards to my Deed In Lieu 1099-C. I was told to only fill out the form 982 and only fill out part One of the form. Nothing else and to check the box E Discharge of qualified principal residence indebtedness. Fill in the amount discharged. Nothing else was to be filled out. Hope this helps and sorry I am so late in replying.

    • Gerri Detweiler

      Thanks Cheryl for following up!

  • Chloe

    Hi Gerry,
    Thanks for ur advice. I have some suggestion on the case I mentioned to u previously but i am not sure if my suggestion is a good idea or not so I will be glad if u can give me some more advice. Continue from my previous message…if let says, B only file for 1098 in his income tax this time (the reason is because B has high income so he need to claim tax deduction in order to avoid high amount of tax beside B was the one that pay for both of the mortgage all this time) and then let A files for both 1099C in his income (the reason is because B is unemployed and doesnt have any asset). Do u think this way is the best way for them to pay less tax? If lets, say A gets audit, may be due to his financial situation, will IRS consider him to pay less amount of tax? Meanwhile if B gets audit, he just need a letter written from A send to IRS states that A has agreed to be responsible on tax amount occured on the debt cancellation. And both A and B agreed to split 50-50 for the amount of tax owed.

  • Chloe

    Hi Gerry…in the case i mentioned previously, will insolvency help A or B in this case? Do u mind explain to me whats the rule in order to be insolvent? Does insolvent meant the amount of debt cancellation is more than the assets? B’s assets is only a car which is about 50K while the amount total of debt cancellation is over 300k, does it mean that B is insolvent ?

    • Gerri Detweiler


      I am going to emphasize again that you really should get professional advice about this – it’s complicated as I’ve learned from all the research I’ve done on this topic. (And I have talked with numerous tax professionals while researching this series.) As far at the insolvency calculation goes, there is a worksheet in IRS Publication 4681 you can use to calculate insolvency.

  • Steve


    Last year my father in law passed away. I contacted his credit card company and they said that they would look at the debt (over $5000.00) and possibly send a 1099-C. As of now I still havent received one for him. Can I complete his tax return without it?

  • Shannon

    Gerri, I recently took my taxes to a retail tax service, with my 1099-C included, my1099-C box 2 amount is $71279, box 3 is $11329…they told me that I could use box 3 as the canceled debt amount because It’s Interest. Is this true? Line 2 of Form 982 is the difference. I want to make sure they are filing this accurately, but maybe I need to go to a CPA.

    • Gerri Detweiler


      Are you sure they said you could use the amount on line 3? I am not a tax professional, but that doesn’t make sense to me. That’s cancelled interest, not cancelled debt. If anything, the issue of whether you have to include cancelled interest is the controversial one. Given the amount of money involved, I’d definitely suggest you consult a CPA, enrolled agent, or similar professional. But you may also want to read Publication 4681 yourself. It sounds like you are trying to stay on top of things and that might help you understand how to proceed.

  • Shannon

    It was an enrolled agent that I saw, that’s why I’m so confused, but he said he asked several others and they said that’s what they have done in the past. On my tentative 1040 he gave, line 21 is $11329 and it says cancelled debt, so I think i def need to consult elsewhere. Thanks Gerri appreciate it.

    • Gerri

      I am not a tax pro so not trying to overstep any bounds here, but it might be worth getting a second opinion on. I will say it’s a confusing issue. I’ve gotten conflicting information from the expert sources I’ve spoken with too!

  • Karl

    I started filing for bankruptcy in December 2011, taking the pre-bankruptcy course based on a full credit report of that month. My attorney finally filed early February 2012, and the debts listed were all discharged earlier this month (March). However, in the middle there, I received a 1099C for one of the credit card debts included in the bankruptcy, that stated the debt was forgiven on Dec 31, 2011.

    So, this debt was included in the bankruptcy case, but technically, I guess, it had already been forgiven. When you file the form 982, does this qualify for the bankruptcy exception?

    At any rate, I’m disabled and most definitely insolvent. Can one file a Form 982 and claim BOTH bankruptcy AND insolvency, just to be on the safe side?

    Also, I realize the earlier questions about student loans discharged dealt with married couples filing joint taxes, so their case MAY be different from mine since I’m single. My bankruptcy attorney is in the process of getting the student loans discharged–isn’t this then included as part of a bankruptcy exception in Form 982? Or since it’s a separate hearing, is it technically NOT part of bankruptcy in the eyes of the IRS? Clearly, I’ll have to deal with this next year. (Again, I could just claim insolvency, since the amounts are so astronomical, but if I could use the bankruptcy exception, I wouldn’t have to do any calculations.)

    I’m also wondering, if I file a Form 982, that means I do NOT include the income in my 1040A, correct? I just put my Supplemental Security Income figures in, and just include the Form 982 as an additional document that is not otherwise referenced by mjy 1040A?

    Thank you for all your help!

    • Gerri Detweiler


      As much as I would like to help, I am not a tax professional and can’t answer your questions in detail. I don’t see any reason to file for both exclusions for the same debt, but it may be that you have to claim a different exclusion for the student loan debt than for the debts discharged in bankruptcy. So I’d suggest you talk with a tax professional who can help you figure out which exclusion(s) to claim.

      It is good, by the way, that you are thinking about this now, even though you may not have to deal with it officially next year!

  • Hernando Rojas

    Hi I owned a house in Florida with 2 other people, we owe more on the house than it was
    worth we owe $132000. we sold the house in a short sale for $42000 now the bank send the other 2 owners a 1099-c for $95000. I live in NY and have not received a 1099-c is there a way to go around this 1099-c and avoid paying taxes

    • Gerri Detweiler


      I would encourage you to talk with a tax professional about this. I am concerned that the lender may have filed a 1099-C in your name as well, but that a copy did not make it to you.

    • Hernando Rojas

      hi i contacted the bank and they filed a 1099-c in my name also
      my question is how do i file this in my taxes in order to avoid paying the taxes if any.

  • pk

    As suspected, there have been tax cases against the IRS about 1099C reporting, so the Tax Court has sorted through some of these 1099C issues. There is hope on old debt 1099C debt and inaccurate reporting on 1099C. The two cases below have to do with timing of the reporting, and the consumer won against the IRS. These are recent cases and hold some weight. Take a look:
    Gaffney v. Commissioner, TC Summary Opinion 2010-128, 8/30/10
    Kleber v. Commissioner, TC Memo 2011-233, 9/28/11

    Source: (

  • Deb

    I settled a credit card debt six YEARS ago, and they JUST sent me and my husband a 1099 for the FULL amount of the debt, NOT the delta between the settlement and the debt. I have two questions. Is there a statute of limitations on how LONG a credit card company has to send you the 1099? What if the 1099 they send you is for MORE than the debt was? I have a mess on my hands. Can someone please give me some advice?

    • Gerri


      There is no simple answer to this question. It sounds like the credit card company has it wrong, and you are stuck trying to clear it up. I wrote some additional articles about this problem. You’ll find them in my post: A Slew of Tax Tips to Clean Up Your 1099-C Mess

  • jean

    Would i need to claim my student loan. It was discharged due to the fact that I was working and my lungs were damaged and I went on total disability from my job. I was told I would lead to death.

    • Gerri Detweiler

      By discharged, do you mean discharged in bankruptcy? Debts discharged in bankruptcy do not create taxable income. On the other hand, student loans that are cancelled (outside of bankruptcy) due to total disability do create taxable income. However, you may be able to exclude that income from your taxable income if you can show the IRS you were insolvent at the time.

    • jean

      I should of said students loans were forgiven due to my disability from being injured on the job.

  • Peter

    Can you tell me if life insurance policies under my name count as assets if they have cash value?

    • Gerri Detweiler

      Yes, Peter, if you look at the insolvency worksheet on page 6 of Publication 4681, cash value of life insurance is listed as an asset there.

  • Deborah

    I recieved a bill from the IRS showing a 1099 for forgiven debt that is more than 15 years old. I called the company listed on the form and I am sure they purchased the debt but they could find no record of it. They sent the form to the IRS so they must have had a record of it at some point. I never recieved anything from them, no phonecalls, no 1099 no awareness that they were seeking payment. How do I find out when the debt was forgiven? No one seems to be able to give me the answers I need because at the time of a vehicle accident, that caused the debt, I was unemployed with no assets.

    • Gerri Detweiler


      I would urge you to push hard to get the company that issued it to correct it or change it to zero. They shouldn’t be sending you a 1099-C if they don’t have the documentation to back it up. You may want to tell them that if they don’t you’ll get an attorney involved. In the meantime, make sure you talk with a tax advisor about how to handle it on your tax return.

      • Deborah

        Thank you very much for the advise. I will continue to push and follow up with what happens. Thanks again.

  • Jennifer

    My chapter 7 bankruptcy was discharged in November 2010. The rental property I owned was included in the discharge. I has been in foreclosure for over a year so I decided to do a short sale. Will I need to pay taxes/1099 C on the first and second loan since the entire debt was discharged in the bankruptcy?

    • Gerri Detweiler

      Debts discharged in bankruptcy can be excluded from your income. See publication 4681 for more information.

  • http://askgeeves Terry Laube

    I had a car loan with a company 11 years ago and voluntaily gave back the vehical. I have only received 1 notice from the company that the car was sold at acution and i still owed a little over $2000.00. ( this was 11 years ago). I never received any notice from the company again. This year I received a letter from the IRS saying I owed taxes for this debt because the company filed a 1099. My question is Is the a staue of limitations for a company to file a 1099 on a person? Can the IRS still tax me after 11years?

  • Josh

    I have a small business loan ($3k), but business has been slow the past couple of years and I simply could not make my payments. It was through an alternative lender and I recieved a 1099 -C this year showing they had cancelled the remaining principal balance ($1,500). I know it will show as income to the IRS, but what happens if I can come up with $1,500 to pay back the lender? How will the IRS find out that I have made the lender whole?

  • greg

    The question i have is that my wife and I divorced 2 years ago i took over the rental properities one of the properties with her name on it we have tried to sell splitting the proceeds, but never could sell it now a year later my wife files for bankruptcy and i recieved a 1099C of over $50,000 of cancellation of debt which was the amount of the loan i thought it was odd considering i have been making payments to the loan this whole time i never filed a bankruptcy so why is it im recieving this from the bank when she was the one filing and i continue to make the payment this does not make sense to me what so ever i tried calling them about it several times and they said because my name was on the loan as well even though im still paying on the loan and she did not recieve a 1099C just me and she was the one that filed not me..i am confused

    • Gerri


      Your ex will not be responsible for the debt or for the 1099-C income since she discharged her responsibility for the debt. But since you did not file, that leaves you on the hook for the debt. However, as you point out, you are still making the payments so that should not trigger a taxable event for you.

      Given the amount of money involved you need to talk with a tax professional to make sure you fill out your tax return correctly. It sounds like the lender isn’t going to fix the 1099-C so that means you’ll have to include information with your return explaining that you have not stopped paying the debt and that the 1099-C you received is not valid. Lucky for you, that could increase your risk of an audit.


    the ending of 2008 my house went into foreclosure , first I was with Worldwide then with WACHOVIA . In 2011 I got a claim form from the state of california DEPARTMENT OF JUSTICE to fill this claim form to get $2000.00 but this is only a notice of proposed class action settlement and the checks will be mail around the second quarter by Wells fargo because they took over WACHOVIA. And today is 5/8/2012 but no 1099-c . Do I need to call the bank or the IRS? Please advice

    • Gerri Detweiler

      I am not sure I understand your question. Are you concerned about the fact that you did not get a 1099-C for the foreclosure that occurred in 2008? If so, then I would recommend you meet with a tax professional who can help you determine how to proceed. It’s complicated, unfortunately, and not always straightforward in situations like yours where it may not be clear exactly when the “cancellation of debt” took place.

      As for the settlement, that may not create taxable income, but you’ll have to ask a tax professional whether it will.

      I doubt the IRS is going to provide the guidance you need. Given that this is probably a large amount of money involved. I’d suggest you get professional tax help.

  • Christine


    I filed my taxes in 2010 and thought everything was fine, than yesterday I received a letter from the IRS stating that I received a 1099-C for 2010 on a house that I lived in that was foreclosed on. What forms to I fill out to send to the IRS to show that I was foreclosed on.

    • Gerri Detweiler


      The fact that you were foreclosed upon doesn’t mean you automatically don’t have to pay taxes on the cancelled debt. Instead, you have to demonstrate that you qualify for an exclusion or exception. I talk about what those are in this article (read page two) and the companion article I wrote about what to do when you get a 1099-A in the mail.

      Your next step is to either talk with a tax professional (which I do recommend since it’s a large dollar amount) or read IRS Publication 4681 (available at to figure out for yourself whether you qualify for the Mortgage Forgiveness Debt Relief Act and/or the insolvency exclusion. Either way, you need to fill out IRS Form 982 to claim those exclusions.

      Hope this works out for you!

  • Jeanette Lynch

    I closed on a Short Sale on a 3-unit building in Jan. 2012, it was my primary residence for 13 years, until March 2011. The bank charged off $140,000. of the debt, and will issue me a 1099-C for 2012. Will I have to pay taxes on the amount that was charged off? I am retired and can not pay the taxes on the additional $140,000. Should I file bankruptcy, now? What should I do? I live in Illinois.

    • Gerri Detweiler


      It sounds like you are panicked but don’t be – at least not yet! As I said to Christine in the comment before yours, you need to figure out if you qualify for an exclusion so you can avoid paying taxes on some or all of that debt. Publication 4681 is the place to familiarize yourself with these exclusions, but if it’s too complicated to navigate on your own, get help from a qualified tax advisor with experience in these matters.

  • Dannie

    Hi Gerri,
    I understand that a creditor will submit a 1099-c if they have forgiven $600 or more in debt but this is my question…. If I settle 3 different accounts all under the the 600 limit each, will I still receive a 1099-c? I.e. settle a $1300 debt for $750 with $550 of forgiven debts for with asset acceptance. then with a Different acct settled $1300 for $750 with $550 of forgiven debt to chase, and same thing to a third creditor same amount…… In reality I have saved $1650 by settling 3 accounts under 600 each will I recieve a 1099-c?

    • Gerri

      Hi Dannie –

      It’s hard to say. My guess is probably not. Most lenders don’t want to be bothered with the additional reporting though it could happen. (They are only required to send 1099-C’s when $600 or more is cancelled but they could send them for any amount of debt that is cancelled.)

  • Tony

    I received form 1099-C in the amount of $194,323. This is for my investment property.
    I filled up the insolvency worksheet and my fair market value of total assets is less
    than my total liabilities. Do I have to pay taxes on this scenario when my fmv is less than
    the amount owed? Do you have any advice on how to fill up Form 982 base on my situation?

    Thank you!

    • Gerri


      We can’t give you tax advice as we’re not tax professionals. Generally, though, I can tell you that the insolvency worksheet is used to calculate the extent of your insolvency. If your assets are say $100,000 and your debts are $150,000 then that $50,000 difference could be used to “offset” $50,000 in cancellation of debt income. In other words, if you are insolvent by $1 that doesn’t mean you don’t have to pay taxes on an unlimited amount of CODI. Make sense?

      Given the amount of money you are talking about here, I’d really encourage you to hire a tax professional to make sure you get this right.

  • pm

    i just received a phone call today july 9th 2012 from a company stating that i had a credit card in 1998 (umm i was 18 years old ) i did not pay it and it was charged for 1980 dollars …..i do not recall ever getting a credit card for that much at 18 because if i did i would have went shopping. but to make a long story short he is telling me that i will have to file a 1099 or something….this is not even the original owner of the debt he is only a collection agency. Also i dont even think that credit card is even on my credit report

    • Gerri

      pm –

      Threats to send 1099-C forms for very old debts seems to be the threat du jour from debt buyers.

      But it doesn’t sound like he has any basis for sending you a 1099-C at this late date and as a result, that may be an illegal threat under the Fair Debt Collection Practices Act.

      You can tell him that he is welcome to do that, and you will be sharing it with a consumer law attorney. In the meantime, feel free to a. Report the collection agencies threats to the FTC and Consumer Financial Protection Bureau and b. consider talking with a consumer law attorney.

      You may also want to read my article about 1099-Cs for very old debts.

  • Pingback: Financial Nightmare Doesn’t End With Foreclosure: There’s the IRS |

  • Pingback: Financial Nightmare Doesn’t End With Foreclosure: There’s the IRS |

  • Jon

    Gerri, I settled a credit card debt in 2009 that resulted in me receiving a 1099C for about $50k in January 2010. I filed my taxes and included the near $50k in my income that resulted in me getting hit with the AMT and owing about $6500 in taxes. I paid the taxes over the next 12 months or so. Subsequently, I got a CS2000 letter from the IRS stating that they were adjusting the near $50k to zero and I’m now due a refund of about $6k. Confused, I called the number and they indicated that the bank never submitted any information to them with regard to the debt. Now, I have the option to agree with it and get the money, but not sure why the bank would not submit the info to the IRS. Have you ever heard of this?

  • Kelly

    Hi Gerri~
    I just received a notice from the IRS for my 2010 taxes. They are claiming that I need to pay interest on Student Loan (even though I submitted the 1098 and was not in the highest income bracket) and then on a Cancelled Debt (1099-C) of $2750 OF WHICH I HAVE NO IDEA WHAT IT IS- I never received a 1099 from the credit agency it is claiming to be from. If I never received a 1099, how do I go about resolving this?
    Also, why am I being told I owe on Student Loan Interest even though it was originally deducted through a 1098 AND counted in my income?
    Thank you

    • Gerri Detweiler

      Kelly – For the 1099-C question, you can call the IRS and request a wage and income transcript for the year in question. It should list the 1099-C that was filed by a lender. You can call them at 800-829-1040. As for the student loan question, I am sorry but I am not a tax professional and don’t know how to advise you. I’d recommend you talk with the IRS and a tax professional such as a CPA or EA to help you straighten this out.

      • Kelly

        Thanks for your response, Gerri, I appreciate the help!

        • Gerri

          You’re welcome! If you learn anything helpful to other readers, please come back and share it. A lot of people are confused by these forms.

  • Jon

    Gerri, in 2009 I settled a credit card debt and received a 1099C in Jan 2010 for nearly $30k. I filed my taxes and included the amount which ended up subjecting me to AMT and paying about $5k in taxes for 2009. I recently received a CS2000 from the IRS that indicated the nearly $30k is adjusted to $0 and I am now due a refund of taxes paid. Confused, I called the IRS and they indicated that the bank never submitted any information to them with regard to what I had claimed as other income on my taxes and therefore it is $0. Have you ever herard of this?

    • Gerri Detweiler

      Jon –

      I haven’t heard of this type of problem before. I am going to have to suggest you talk with a tax professional for this one…

  • Megan


    I had a credit card that the total amount on it was about $8,400. I lost my job and then had some medical problems and could not afford to pay on this card. I made my last payment in 2008 and was working with a settlement company to get this card paid off. A few months ago I received a 1099-C for the amount of $6,700 even though I have not paid a dime to them or offered them a settlement. Does this mean that I am not liable for that amount and that I do not have to pay it and that I only owe them $1,700?

  • Venus

    I received a 1099-C for an account that was opened with my X-Husband for a down payment on a house that he owned. I was not ever on the house. We divorced in 2009 and he was awarded the house and this loan for $20,000.00. In March 2009 he filed bankruptcy and included all debt except the house and car. In August 2011 he lost the house to the bank. I received the 1099 – C in February 2012. I had already filed my taxes and received my refund when I received it. Am I liable for the taxes on this since it was awarded to him in the divorce? It also states in my decree that I will held harmless of his debt.

    • Gerri Detweiler


      If I understand correctly, you both borrowed money to put a downpayment on the house. Is that correct? If that is the case then the debt was a joint debt and the IRS generally says that 1099-C’s should be issued to both parties if two or more people are jointly responsible for the debt. You can read that on page three of the 1099-C instructions.

      However, that doesn’t mean that you are responsible for taxes on the amount on the 1099-C. There may be something that will get you off the hook, including an exception that you qualify for. Given how much money is involved here, I’d encourage you to consult a tax advisor with lots of experience with these forms as soon as possible.

  • Mandar


    I’m currently in talks with a Debt collector who is representing my lender (Flagstar), to settle my $125K 2nd mortgage debt for about $22K.
    This was my primary residence home until I permanently relocated to India due to US Visa issues. I currently have no US income and a small Indian income (< $20K annually), no assets in USA or in India.

    I'm aware the my lender will issue me a 1099-C. But I should qualify under the Mortgage Debt Forgiveness program, and hence I would need to file a form 982 right?
    Is it as simple as that? Or I need to take professional advice?



    • Gerri Detweiler

      Mandar –

      You can get Form 982 on the IRS website. Read the instructions and Publication 4681 if you need more information. If you feel you can fill it out yourself, there is no need to hire a tax advisor.

      • Mandat

        Ok, thanks. Do i automatically qualify for the tax exemption?
        It seems as if idi, but with the IRS, I really want to make sure.

        Thanks so much for your help!


  • Mandar


    Thanks for your reply. So do I automatically qualify for the tax exemption, because this was my primary residence. I’m not sure, and wanted to make sure since this is the IRS.


    • Gerri Detweiler

      I am not sure what you mean by automatically qualify. If you meet the requirements spelled out by the IRS then you will likely qualify. But it’s not just a matter of it being your principal residence. For example, the loan must have been used to purchase or improve the property. If you took out a home equity loan and used it to consolidate credit cards, for example, that wouldn’t qualify. Since I am not a tax professional, I’d recommend you read the instructions and, if you aren’t sure you qualify, talk with a tax professional.

  • Charlotte

    I am handling my deceased brother’s affairs. He had taken out several PLUS student loans with him the borrower to pay for his children’s college expenses. I know that they will all be discharged due to his death. This 1099-C problem just got on my radar yesterday. I have no idea what the total amount of discharged loans will come to because his paperwork is a mess. I just know it will be at least $10,000 and probably more.

    Is this one of the situations where his discharged student loans, for his kids, will become taxable income?


    • Gerri Detweiler

      Charlotte –

      I am so sorry to hear of your brother’s death. I am not aware of a specific exclusion for the death of a borrower, though there may be one I am not aware of. I’d recommend you do two things: 1. Read publication 4681 to see if you can find an exception or exclusion that applies and 2. Talk with a tax professional with experience in these matters. There’s quite a bit of money at stake here so it makes sense to get professional advice to see whether you can help avoid or minimize taxes for his children and/or the estate.

  • Bob

    I received a 1099-c for half 50% my SBA loan but the crazy SBA still wants payment in full even though they bought the loan for 50%. They are attempting to collect 100%.

    Is that legal with me having a 1099-C in hand for half the debt? I called them and even spoke to an attorney with the SBA. She hung up on me when I asked her if she was really an attorney!

    • Gerri Detweiler

      Bob –

      I would suggest you talk with a tax professional. As I’ve learned from all the research I have done on this topic, there are many unanswered questions about these forms! And since you’re talking about a government insured loan (which the government has an interest in collecting) and tax debt (which the government also has an interest in collecting) you have your work cut out for you. I presume it’s a substantial amount of money and you need good advice to help you minimize the taxes you’ll pay.

      • Bob

        A tax professional would be helpful for my tax return but not for the legal ramifications of debt forgiveness. My analogy here is if the bank sold the loan to a collection company they would never issued a 1099-C, because if they took me to court to get a judgement against me I would simply show that the bank had forgiven the loan. The loan was for $34,500 so the half in question is $17,250. I don’t think the SBA would have a leg to stand on in fact I would think this might be a good class action case. BOA surely had many SBA loans in a similiar state.

        • Gerri Detweiler

          Bob – you raise a good point. If I understand what you are saying, you are asking how they can say they have cancelled the debt by sending a 1099-C and then turn around and try to collect that amount, correct?

          It’s a great question. I believe it has been litigated at least once in the consumer’s favor. But the IRS stays out of it and basically says it doesn’t mean the creditor may try to collect the debt later.

  • Matt

    I would like to know if their are any exclusions to paying on a 1099c for rental property where I completed a short sale. My basis was $168,000, and the amount of cancelled debt is $154,509. Fair market value on the property was reported at $150,000.


    • Gerri Detweiler

      I am not a tax professional and can’t give you advice about your specific situation. Generally, though, most taxpayers use the insolvency exclusion if they don’t qualify for something else. You can use the worksheet in publication 4681 to see if you may qualify. And if you aren’t sure, it’s well worth talking with a tax advisor given the amount of money you’re talking about here.

  • Pingback: Underwater? Negotiating a Settlement On a Second Mortgage | News + Advice()

  • Nan

    I just recieved a phone call (on my cellphone no less) from a debt collector who kept referencing the 1099C form. She was clearly reading from a script and could provide very little useful information. What little info I was able to glean from the 10 minute conversation was that her company (I never caught the name) had recently acquired this debt and was offering me a settlement. The intial debt (Shell gas card) was well over 10 years old and has either been settled or written off many moons ago….I honestly can’t recall which. Supposedly the current debt is now $1,100, however, as a gas card I can’t imagine the actual charges ever exceeded $300.00. There have been no attempts to collect this debt in 10+ years and it does not appear on my current credit report. What do I need to do to resolve this issue.

  • dean gamache

    i received a 1099c for a previous year on a car that was repocessed do i need to file an amended return and additionally my wife was on the loan also and they did not send her a 1099c can they still go after her???

    • Gerri Detweiler

      Dean – If your wife cosigned the loan then she was legally responsible for it and the lender (or a collection agency) may try to collect from her. In addition, it’s possible a 1099-C was filed under her name as well. I recommend you read my series of articles on handling 1099-C forms and then consult a tax advisor if you don’t feel you can handle it yourself.

  • Pingback: The Other Cliff We're Heading Toward | News + Advice()

  • Bryan H


    My wife has 300,000.00 in student loans. Of that 300,000.00 she had two 25,000.00 loans with a certain bank. She couldnt make the min payments due so they turned them to collections. She made an arrangement with the collection agency to pay 50% owed and forgive the other 50%. So she had 50,000.00 total and paid 25,000.00 and is now getting two 1099c for 12,500.00 each. She couldnt afford her min and that is why they sent them to collections. So would it be safe to assume that she would qualify for insolvency and not have to pay taxes on the forgiven $25k?

  • Deborah

    My home was foreclosed on and ‘purchased’ back by CitiMortgage at the courthouse auction held in September 2012. It was my primary residence with no 2nd or LOC or any other holder. The 1099C I received today shows line 2 as $93K, which was the mortgage balance. That would be correct. However in line 4, they have listed the the FMV as $112K (they amount they ‘paid’.) The actual FMV is closer to $57K. Even the 2012 valuation by the city/county shows a value of only $77K. The home was listed for sale 12 out of 24 months prior to foreclosure with no offers and comps were in the $50-$60K range. Should I dispute this discrepancy? Is this a trip-me-up manuveur by CitiMortgage? What are the ramifications of this misinformation to the IRS?

  • Lynne

    Yes, I’m working on my 982 “Work Sheet” for insolvency! LOL My immediate question is, do I need to send in “back up” documentation, bank statements, mortgage statements, ect. to prove the debt? And how about the assets… ? Thanks!

    • Gerri Detweiler

      Well, Lynne, it sounds like you still have a sense of humor about it!

      My understanding is that you don’t need to send in that documentation unless they ask you for it. However, I think you are wise to gather it all together and keep it just in case. I am not a tax professional, though, so if you aren’t sure you can ask the IRS or a tax pro.

  • jill

    Our home was foreclosed in October 2000, we had a first mortgage of $149,400 with one lender in March 1998 and a second mortgage of $20,000 with another lender. I get a letter in the mail in the form of a 1099c for the forgiveness of the $20,000. This was over 10 years ago, is this legal? Do I need to claim this as income?

    • Gerri Detweiler

      Jill –

      The lender probably sent it out later than it was supposed to, but how to deal with that type of situation is not clear. I wrote about this in more detail in this article: What to Do If You Get a 1099-C for an Old Debt.

      I suggest you read that article, and since this is a fairly large amount of money, meet with a tax professional with expertise in 1099-C issues. The IRS will assume that the 1099-c is correct and that you do owe taxes on that money unless you demonstrate otherwise.

  • jim

    If I settle and pay the amount on this 1099-c form with my taxes. Will I be done. Or will I have to pay it again next year till I pay off the 5k I owe

    • Gerri

      I am sorry Jim but I don’t understand your question. Can you elaborate?

  • Tim


    We’ve received several 1099-C’s for settled debt in 2012 and plan on filing Form 982 for insolvency – The question I have is: ,All of the settled debts happened on different dates throughout the year so how do we file only one Form 982?- the instructions say that you must fill out your assets and liabilities immediately before the debt was settled, but how is this done with different settlement dates?- all of the tax programs I’ve looked at only support a single Form 982.

    Also, last question- is a mortgage escrow account (used for property taxes) considered an asset?


  • Pingback: Just Received a 1099-C? Don’t Freak Out! | News + Advice()

  • http://Credit.comNews&advice Rich

    Me & my wife file for chapter 7 bankruptcy in 2012. We had 5 personal credit cards & 4 business cards. one of the business credit cards in the bankruptcy was capital one, they sent me a 1099-C on line 2 with a amount of $16,332 line 5 was check and line 6 event code was (A). I do not know what this means is capital one saying I am responable for that amount since it was a personal bankruptcy not a business.
    I am a Sole Proprietor carpentar in NJ. My other business credit cards were discharge why did’nt capital one discharge it……….Please help me.

    • Gerri Detweiler

      Rich –

      I am not sure I fully understand your question. Are you asking why your credit card was not discharged in your bankruptcy? If that’s your question, I’ll have to suggest you talk with the attorney who helped you file your bankruptcy case to find out why that was the case.

      If your question is why you are receiving a 1099-C for one of your cards and not the others, then it sounds like Capital One is claiming this is a business debt and not a personal debt and therefore they believe they are required to file a 1099-C. You can read this on page three of the instructions for 1099-cs. (The instructions are for entities that are required to file 1099-c’s. Instructions for taxpayers who receive these forms can be found in IRS Publication 4681.) Based on what you are telling me, it sounds like they are simply trying to follow IRS instructions.

      Just because you get a 1099-C does not mean you will have to pay taxes on that amount. The fact that this was a business debt, however, may complicate things. I would strongly encourage you to meet with a tax professional with experience in these forms to help you figure out whether you can avoid paying taxes on some or all of that amount.

      • http://Credit.comNews&Adivce Rich

        HI Gerri.
        My 1099-C from capital one was a chapter 7 bankruptcy discharged, All are credit cards were Discharged, Our mortgage was not we are sill paying the loan, My Question is on from 982 do I check box 1a and put that amount on line 2.
        (what about line 10a.. leave it blank)………….Thank you for your response….

  • Bill

    My wife, who receives a small disability income from Social Security, received a 1099-C for cancellation of her student loans due to her disability. The debt was in her name only, and we will file MFJ. I’m fairly certain that we can exclude this as income due to insolvency, but I have two questions. First, when figuring assets and liabilities on form 982, do I need to exclude those assets and liabilities that are in my name and not my wife’s? Second, when figuring liabilities, do I include the cancelled debt itself as a liability?

    thanks, Bill

    • Terry

      Bill: I’m dealing with the very same situation right now in the amount of 96K. My understanding is that the insolvency worksheet takes into accounts all liabilities immediately prior to the discharge which would then include the full student loan amount. I’m not sure the IRS even understands what they’re doing with the 1099C question, as a matter of fact, I know they don’t. If you read through the worksheet it would also seem to indicate that any amount included in the discharge that could be deducted as an expense ie:loan interest, should not be included as income. I can’t seem to get a straight answer on the interest end of this. I can understand how the IRS considers the principal loan proceeds as income but I’m not sure how or why they could possibly consider the interest as income. It’s amazing to me that a loan that was discharged because of a total disability is taxable at all.

      • Gerri Detweiler

        Bill – I have a story on the first question (about spouses and joint liabilities/assets) going up on the site in the next few days. As for your second question, my understanding is the same as Terry’s – that you calculate insolvency right before the debt was cancelled. Check out Publication 4681. It may not answer every one of your questions but hopefully will help with some of them.

  • Ron

    I just received 1099-C from credit card company, it shows “cancellation on debt” . I didn’t settle with them and i don’t know if this means that i am no longer responsible for the debt or they can sell it to Junk buyers after issuing 1099-C Cancellation of Debt.

    • Gerri

      Unfortunately, Ron, the fact that a 1099-C was sent does not necessarily mean you are no long responsible for the debt. Though I’ve heard a few consumer law attorneys who sue debt collectors take that position, as far as the form itself is concerned, creditors may be required to send it when there have been no payments for three years/collection activity in past twelve months. You’ll see more about that in this article: What To Do If You Get a 1099-C For an Old Debt.

  • Lance

    Dear Gerri
    I have credit cards debt with 6 different creditors. I’ve received 2 forms 1099-C from citi bank and capitalone. What if I didn’t receive from the other ones but they already sent to IRS. Is any way I can check?
    Thank you!

    • Gerri Detweiler

      Yes, you can contact the IRS and request a Wage and Income Transcript for the year(s) in question. Even if you don’t get a 1099-C, the IRS expects you to report cancelled debt. They specifically mention that in Publication 4681.

      • Lee

        Similar issue – six cancelled debts but only three 1099Cs. Those three received work out to be less than what I thought would be reported as discharged. For example, I thought $2K balance versus $1K settlement = $1K discharged but 1099C says $500 in box 2. So a) how do I know for sure the correct amount to claim as income and b) what if I receive a 1099C down the road?

        • Gerri Detweiler

          The IRS says you are supposed to report cancelled debt even if you don’t get a 1099-C. Lenders are only required to send 1099-Cs for cancelled debt of $600 or more, so perhaps for the ones that weren’t sent the amounts were smaller?

          I am afraid I don’t know what to tell you as far as estimating the others though. If you have correspondence that spells out the settlement deal then you could go on that and if they change the amount later try to get a corrected 1099-C.

  • Keith G

    I just received 2 1099C’s for 2 different credit cards in my name and my wife received the same for the same cards. we have a total of 4 1099C’s 2 of them for the same dollar amount and the other 2 have the same dollar amount. do I have to file all 4 1099C’c ? the total for both cards is 30K and if I have to file all 4 it would be 60K when the original amount is 30K.

    • Gerri Detweiler

      My understanding is that you don’t have to count the same debt twice. The creditor is required to send a 1099-C to both spouses if they are jointly and severally liable for the debt. My understanding is that you can just use one of them when calculating insolvency and/or adding to your gross income.

      • Keith G

        Just wanted to let you know I did some moor checking and filed my taxed using just the 1099C for me only and they were approved, Now i will get a refund of 1400. instead of owing 12000.
        Thank you for the advice!

        • Gerri Detweiler

          Great to know! Thank you for updating us.

  • Pingback: What is a 1099-C? Your Top 11 Questions Answered | ComparePlastic()

  • Pingback: What is a 1099-C? Your Top 11 Questions Answered | News + Advice()

  • S. Jamal


    I received a 1099-C the other day from Bank of America. It was debt forgiven in the amount of 31,900.00

    The debt was for a second loan on a 1 bedroom condo that I paid 160K for and was upside down on the condo by more than 100K. The condo was purchased in late 2006.
    Bank of America sent me a letter earlier in the year via FedEx congratulating me about the debt forgiveness and stated it was due to the “Department of Justice” agreement with them.

    Will I have to pay taxes on this 31,900.00?

    • Gerri Detweiler

      S, Jamal –

      The IRS has no doubt received a copy of that 1099-C and assumes it is part of your taxable income unless you can demonstrate you qualify for an exception or exclusion as I described in this article. You may be able to avoid paying taxes on part or all of that amount either through the Mortgage Debt Forgiveness Tax Relief Act or the insolvency exclusion. If so you will need to file Form 982 with your tax return.

      IRS Publication 4681 explains these options. Given that this is a substantial amount of money, I would suggest you consult a tax professional if you aren’t sure how to handle this.

  • Rick Edge

    My mortgage lender just sent a 1099-c to report debt that was forgiven as part of the 25B federal government bailout on my primary residence . Will I need to pay taxes on this amount or will this qualify for an exclusion?

    • Gerri Detweiler

      Rick – My understanding is that if you received a 1099-C for debts discharged in a personal bankruptcy then you fill out Part I of the form. It doesn’t sound like Part II would come into play. Publication 4681 offers detailed instructions, and if in doubt., I would suggest you contact the IRS or a tax professional.

  • Stacy

    Hi Gerri,

    I have been divorced for 5 years and in that divorce my ex-husband was “awarded” a bank loan that we had gotten to cover some bills that he incurred. He couldn’t solely qualify for the loan due to his credit. I had great credit so he needed me in order to qualify credit wise. Today I received a 1099 from that bank for $3620.22 because HE did a settlement with them in May 2012. I don’t even know who to call or what to do. My ex-husband states he will take responsibility for it and claim it on his taxes, but how does that work since it is attached to MY name and SSN? Since we are in agreement that technically HE is the one (per divorce decree) who gained this income, is there any way to have a 1099 transferred, if you will, to another party? Ugh!!!

    • Gerri Detweiler

      Stacy – I don’t have a simple answer for you but if you read publication 4681 on page 6 you will see example 3 that talks about this kind of scenario. So follow those instructions to the best of your ability and if you can’t figure it out I am going to suggest you consult a tax professional.

  • katrina edwards

    I just received a 1099-c from wells fargo for cancellation of debt. My house is on intent to foreclosed. But im trying to get help. But does this means they are trying to take my taxes?

    • Chris H

      Your best bet is to call Wells Fargo and ask why you got the 1099. I did this and at first the foreign customer support worker with a heavy accent did not really answer my question. I let it go and hung up after a few question and answer sessions with him. I gave up on it and figured I would have to find a way of talking to someone that spoke without an accent to make sure that I was being understood. He literally called me back about 2 minutes later and apologized for not understanding my question and gave me the answer I wanted. That is what brought me to this site to see the best way to deal with this 1099-C. But I would say that they forgave some of your debt at some point in the year and are required by law to report what they forgave and you have to go through the paperwork to show that you don’t owe taxes on that amount on the 1099-C. This is one of those things that the government really did not think through when they put this together. I would say most people that get a 1099-C don’t owe taxes on it but for the sake of IRS red tape we have to jump through the hoops to show we don’t owe the taxes. But I would definitely call Wells Fargo if you are not sure what the 1099-C is about.

      • Sal

        So on your 1099-C is the little check mark there that the debtor owes this balance?

    • Gerri Detweiler


      I know this can be stressful and hard to understand. Please start with my article: What is a 1099-C? Your Top 11 Questions Answered. Hopefully once you read that it will make a little more sense to you. It doesn’t mean that anyone is taking your taxes. But it does mean that amount is being reported as income and you either need to include it in your gross income when you file your tax return or show to the IRS why you qualify for an exclusion.

  • Pingback: 1099-A In the Mail? How to Avoid Taxes on Cancelled Debt | News + Advice()

  • Pingback: 1099-C: The Worst Tax Mess of the Year? | News + Advice()

  • Kristy Smith

    Good afternoon –

    We did a short sell through Wells Fargo (our loan servicer) and settled on 9/6/2012. After talking with four representatives from the short sale dept., they said that it is noted on my account that we would not receive a 1099 c because our loan was PMI backed. She said that FHA and PMI backed loans do not get one and it was not sent to the irs. Wells Fargo did forgive our debt of about $66,000. They mentioned in the approval letter that they waive all rights to come after us for the deficiency. My question is, I thought they were required to send that form to the irs if the debt forgiven is $600 or more. Have you ever heard of this? They would not elaborate on why PMI backed loans do not get a 1099 c. I plan on calling the IRS to ask for our income transcripts, but I didn’t know if you or someone else have heard of this. Thanks. Kristy

    • Kristy

      I did call the IRS and they said I can’t get our income transcripts until June 2013. We have an appt. with a tax advisor next week. I called WF again today and another representative said that WF got paid by our mortgage insurance so they cannot claim it as a loss, therefore it is not reported. Can the MI company send us a 1099 c? I tried contacting them and no one is giving me an answer.


      • Gerri Detweiler

        Kristy – What a mess for you! I am not sure I would trust the advice you got from the lender. I’d still consult a tax professional. I haven’t heard of MI companies sending out 1099-Cs but at this point nothing would surprise me. I wrote this article about MI problems: Mortgage Insurance Shocker: Collections After Default

  • Chris H

    I received a 1099-C for part of our mortgage that was forgiven by our mortgage lender. The amount was about 3400 dollars. Our payments were lowered and we were able to keep the house. The reason for the debt being forgiven was part of an agreement that our house was no longer worth the amount we originally paid for the house. So our payments were lowered by about 225 dollars a month. We are very grateful and this was done in house by the mortgage lender after we did not qualify for the Making Home Affordable Act. My question is, will we still be able to avoid the tax on this amount because our primary residence is no longer worth the amount we paid for it? I will have to file an amended return because I did not get the 1099-C until yesterday in the mail and I had e-filed the day before. One of those things that gets you in the end when you think you had a pretty good tax year. But either way we are truly grateful to everyone for the second chance at keeping our home. Thanks for any help you may be able to give us.

  • Pingback: Slew Of Tax Tips To Clean Your 1099-C Mess | News + Advice()

  • JR

    I settled a charged off Bank of America account from 2009 in 2012 with Asset Acceptance. I settled for 20% of the balance. I just got a 1099-C for $6,000 from Asset which they sent to the IRS.
    I highly doubt that Asset paid BOA full price for the debt and probably made a profit off this debt. I would like to dispute this asap as I am expecting a refund from the IRS. I would be grateful for advice on how to proceed. Thank you

    • Gerri Detweiler

      Unfortunately, JR, it doesn’t matter how much they paid for the debt. The amount that was cancelled or forgiven is what they are required to report. (It is optional for them to include interest and fees.)

      Have you taken a shot at the insolvency worksheet in Publication 4681 to see if you qualify?

  • Sal

    Nov 2007 – Condo purchased as primary residence under just me
    Dec 2009 – Home purchased under ‘us’ as a couple as primary residence

    Rented out the condo in the meantime….but it didnt cover the rent so I kept putting my savings in to make the difference and not miss a single payment. But guess what? the savings account emptied after all that and then I didnt have any more to put in.

    Jan 2010 – Put the condo on the market for short sale
    June 2010 – Condo sold.

    Amount owed = 291000
    Sale Price = 159000
    Difference = 132000

    The sale even tho processed as Short Sale (or so I was told) is listed as a foreclosure on my credit report.

    I just rec’d a 1099-C in the mail for the 132K amount. Its marked as the amount owed by the debtor, and there is no FMV listed in the form. Should I call the lending company and find that value out? Do I qualify for Form 982? If I put it in as is and include it as income, I will owe $38000+ (yes three zeros) in taxes… How can I get out of this?

    • Gerri Detweiler


      I can understand why you’re stressed out. As I tried to explain in the article (I know this topic is confusing!) the IRS considers that amount reported as taxable income unless you can show that you qualify for an exclusion or exception. I suspect the fact that you rented it out means you didn’t qualify for the Mortgage Debt Relief Tax Forgiveness Act, but you’ll want to confirm that either in Publication 4681 or with a tax professional. So the second question is whether you qualified for the insolvency exclusion right before the debt was cancelled. That means you are going to have to recreate your financials for that time and it sounds like that was in 2010. The worksheet is on page 8 in IRS publication 4681. That document also has a section on repossessions and foreclosures, and examples. If it doesn’t answer your questions I’d suggest you spring for professional help since this is a hefty tax bill you could be facing.

      I’ll note that I have no idea why, if the lender agreed to the short sale in 2010, they are sending it out now. They should have filed it in 2010 for that tax year from what you are telling me.

      • Sal

        Actually, thats my bad! The latter dates are for 2011.

        Jan 2011 – Put the condo on the market for short sale
        June 2011 – Condo sold.

        The unit was rented coz I wasnt able to sell it in that market so I was going to hold off on it to be able to make a complete/normal sale. But the market went down and never came up and I ran out of options. I couldnt do a short sale while making payments or put it on the market while the tenants were in there. So I had to vacate the place which means, whatever rent money I was getting was gone. Thus I stopped paying the mortgage and they agreed to doing a short sale after putting on the market. It was a horrible experience though as they called for the mortgage payment several times a day including my work phone. But that was what I settled for and they agreed on the price.

        I will look into the page 8 spreadsheet. Hopefully I can justify it! I did send out a letter of hardship to them explaining why I cant compete with the payments. what is considered assets at the time? My current home mortgage? my car? savings account?….

        • Gerri Detweiler

          Sal – The insolvency worksheet in Publication 4681 should help you figure out what assets and liabilities you need to list. Remember, you are completing it with information right before the debt was cancelled, not your assets and liabilities right now.

          • Sal

            Absolutely. Maybe the following will help.

            So I made the appointment with H&R Block and they went thru all my papers and documents. What they determined was that I should fill out the insolvency sheet. They listed the 132K as debt plus my current mortgage balance. And in the assets the most expensive thing I had was my car. But my assets didnt come even close to the debt including both mortgages. So they said I was insolvent and I dont have to claim that as an income.

            Having said that, the agent who did my taxes wasnt 100% sure about the filling of the sheet so she was going to seek expertise from a co-worker and give me a call back. I havent rec’d the phone call yet to see if how she filled it out was correct or not. I will keep you posted.

            Gerri: Thank you for the GREAT job you are doing on here!

  • JR

    I settled a charged off Bank of America account from 2009 in 2012 with Asset Acceptance. I settled for 20% of the balance. I just got a 1099-C for $6,000 from Asset which they sent to the IRS. I doubt that Asset paid BOA full price for the debt and probably made a profit off this debt. I would like to dispute this asap as I am expecting a refund from the IRS. I would be grateful for advice on how to proceed. Thank you

  • Chris

    My home foreclosed in 2012. My name was the only name on the loan and my wife was not included. I will claim insolvency but my question is all our assets I have added in the calculations because it was acquired after we got married but her life insurance she got before we were married. do I have to add this asset in the calculations due to california is a community property state. Any help would be helpful

    • Gerri Detweiler

      Hi Chris – I tried to address that issue in this column: Form 982: The Way to Battle a 1099-C. However, there doesn’t seem to be a simple answer so I suspect this is one where you will need to get a tax professional involved. The IRS isn’t making it easy by any stretch!

  • Nidia

    Hello, I received a 1099-c from Bank of America the amount I owed was $3,108.06 and they settled for $790.00 now that I received the 1099-c tax return it says $2,318.06. I normally do my taxes on my own through turbo tax is this a matter I should take to a tax professional to do my taxes, am worried that am going to pay taxes on this!!

    • Gerri Detweiler

      My guess is that TurboTax will support this kind of situation – it sounds fairly simple as far as cancelled debt goes. Before you go through that process, you may want to try filling out the insolvency worksheet on page 8 of IRS publication 4681. That will help you understand whether you qualify for the insolvency exclusion which would allow you to take this “income” out of your gross income when your file your return.

  • KMac

    Ok so I short saled my house in 2012. The debt forgiven was under $74,000. This was the house I was living in. My only residence till I signed on the line to sale of it.
    So that means it’s not taxable income right?

    Next question is I also got divorced last year. The 1099-c I got has just my name and the whole debt on it. When I do my paperwork do I only claim half of it or what? There is nothing in the divorce about the house since it was sold before we even filed for divorce.

    Help please

  • karen connors

    I just received 1099-c. I have been on Social Security as my only income since 2005. Prior to that I was on Disability. My mom always paid my credit card payments I could not make. When she passed in 2004 she left everything in trust to me in her will. This was supposed to continue to pay for any expenses I could not pay. Unfortunately my brother was Executor of the Will and refused to give me any of the money and disappeared with all of it after I had an attorney write him saying he legally had to pay or they would take him to court. (in 2011 I discovered he died in 1/09). As a result I paid all my expenses from my savings until it was depleted. I was then on social security only when I turned 65 and called legal services for help in filing bankruptcy. They told me since SS was my only source of income no creditor could attach any of my income from it so there was really no need to pay the expense of filing Bankruptcy for relief from collectors. Since I did not have money to pay an attorney to help me with bankruptcy I did as they said and just advised collectors of my situation. Now I have received a 1099-c. Usually I don’t file tax forms at all since my SS income is not great enough to have to pay any taxes and I have no other income. As it is I don’t have enough to pay for rent and medical, so my son helps me each month, so there is no way I have money to pay any tax on the 1099-c. I would hate for him to have to pay this in addition to what he already does for me. What do I do at this point?

  • jean

    I received a 1099-C on my HAFA short sale. I was told going into the short sale that I would not have to pay taxes on it. However, when I received the 1099-C I was confused. Could you shed some light on this for me pls? Would I need to fill out a 982 form? I usually do my own taxes, but I am contemplating on whether I should see a financial advisor. Thanks.

  • matt

    Iam trying to negotiate a payoff on a second mortgage from gmac. The original balance was $81,000. The loan originated in 2006. The home was foreclosed on in 2008 by the first mortgage indymac now one west. I’ve been out of the house over 4 years. I asked gmac to settle on the 2nd their first offer was $16,000 lump sum. Which I don’t have. That offer was back in august 2012. I just recently sent a letter with a counter of $4,080 lump sum, Which is around 5% of original balance. I am waiting for a response. However, I don’t have a consistent contact at gmac but I sent the letter to their Dallas Texas loss mitigation / recovery department. Is there a specific process I can follow to make sure this letter and offer gets to the right people that makes the decisions?

  • matt

    You can disregard my last question, I’ve established contact with someone at gmac in regards to negotiating a payoff on a 2nd mortgage on a property that has been foreclosed on by the first over 5 years ago. Gmac wants me to give my financial info. Bank accounts , pay stubs . How do I get around that, if I give that info they could also be setting me up for a lien. Even though iam insolvent, I will not give my financial info. I offered to pay 5 % of the original loan off in one lump sum. Now they are saying submit a financial packet first . So how can I negotiate a payoff without Submitting financials? Like I said iam totally insolvent financially, my wife has been on disability and out of work for almost 1 year and half. I paying rent and two kids in private school.

  • http://n/a Vincent DiGiulio

    I receive SSDI and my wife earns on average 13,000 per year. In the state In which I live for me to qualify for SSDI I had to liquidate all my assets which I did 6 years ago. My student loans were forgiven and in December 2012 I received notice that they are now considered income. I have a family of 2 adults and 1 child. On my wife’s income how do I pay what a local tax preparer said exceeds $26,000. Having no assets what do I do?

    • http://n/a Vincent DiGiulio

      by leave a comment what do you mean. I am at a loss as to who to call or talk to in the situation I find myself.

  • ben bandar

    Hi Gerri:
    I am filing 2011 , had my rental unit foreclosed on me, in 2011 my total debt would have been higher than my assets (loans on my properties was higher that sold market value at same time), does this mean insolvency at the time, and how would I document that for IRS, (I have my mortgage statements and MLS report on comparable sold properties)
    Thanks, Ben

    • Gerri Detweiler


      To calculate insolvency you use the worksheet in IRS Publication 4681. Then use Form 982 to report an exclusion. I have to warn you, though, it can get more complicated with rental properties so you may find you need to work with a tax professional if you can’t complete it on your own.

  • Dee

    Gerri i had a loan modification done (HARP) my debt was ajusted to the house market value. am stilling in that house,

    So i got a 1099-c ………..

    my question is i want to elect principal residence exclusion, do I use the 982 and not add the amount that was canceled with my income?

  • lea

    Hi Gerri,

    Thank you for creating your site its very informative. Here’s my question:
    My friend has a praud credit card bill that they never paid for 5 years. they tried to settle it with the credit card company but failed and exhausted to do so. Last year in order for them to re-finance their house they paid the full amount of the praud credit card. However, they still received 1099-C. is that 1099 -C they received is consider taxable income? Please advice and what do we need to do? I will do appreciate all the information I can get.

    Aloha from Hawaii,


  • Candie

    Hello there!

    Last year I settled about four debts. One creditor was medical debt for about 4,000k but I paid somewhere around 1,500.00 or so and the others were most likely under 500.00 so I’m not worried about them.

    When I paid off the debts I had been employed for about 2 to 5 months and had previously been unemployed for a full year, but I’m sure that doesn’t count as insolvency.

    I pulled my credit reports from all three bureaus and none of them show any of these debts! I thought for sure it would remain on my credit for a few years as some of these debts were at least 2 years old. I don’t know how much I paid so I don’t know what balance of the debts I should report as forgiven. I haven’t received a single 1099c form from anyone ever and I don’t want to end up paying more than I should.

    So 1. Do I give my tax professional a ballpark figure?
    And 2. If I report the ball park estimate and the creditor doesn’t file with the IRS will I be in the clear?

    Thanks for your help!!!!!!!!


    • Gerri Detweiler

      Candie –

      I am not a tax professional but I’ll answer as best as I can based on my research.

      “One creditor was medical debt for about 4,000k but I paid somewhere around 1,500.00 or so and the others were most likely under 500.00 so I’m not worried about them.”

      Can you call the provider and ask them for the details? Or do you have anything that documents your agreements with these collectors/creditors? I never recommend consumers settle without a settlement letter. Do you have anything along those lines you can dig up?

      “When I paid off the debts I had been employed for about 2 to 5 months and had previously been unemployed for a full year, but I’m sure that doesn’t count as insolvency.”

      Insolvency is based on your debts compared to your assets right before you settle. You’ll find the worksheet in IRS publication 4681.

      “So 1. Do I give my tax professional a ballpark figure?” I would recommend you ask your tax professional for advice. The IRS says you must report cancelled debt for the tax year in which the debt was cancelled, even if you did not get a 1099-C.

      “And 2. If I report the ball park estimate and the creditor doesn’t file with the IRS will I be in the clear?” My understanding is that if the amount reported by the lender is larger and you don’t dispute it, then you will have to either qualify for the insolvency exclusion for the total amount or include the additional amount in your income.

  • Pingback: 7 Tax Moves You Should Never Hide From Your Tax Preparer | TechKudos()

  • Pingback: 7 Tax Moves You Should Never Hide From Your Tax Preparer | Xtax()

  • shelley

    I got a Shared Appreciation Loan Modification in 2012 on a rental property. The document and the mortgage company rep told me that the forgiven amount would be taxable in 1/3 each year starting in 2013. If I default on payments none is forgiven.
    I was told I’d get my first tax form in 2014 for 2013 for 1/3 of the forgiven amount.

    I recently received a 1099C for the entire forgiven amount for 2012. They now tell me I get this form for the whole amount this year, then I still get the tax forms in future years for 1/3 each year. I ahve been arguing with the mortage company since the day I received the tax form. The just keep giving me the same old song and dance and could care less that thier rep gave me incorrect information.

    I have someone that does my taxes, but I dont think he knows about SAMS and 1099Cs…..I am running this by an attorney and guess I could get a tax attorney. Can you offer any advice??

    • Gerri Detweiler

      I wish I could help but it’s more technical an issue than anything I have researched. If your tax pro doesn’t know how to handle it, you may want to reach out to one of the experts I have quoted in my articles. They are all knowledgeable about 1099-C issues.

  • Eric

    I had a motorhome repo with a balance of $44k in June of 2006. I know the motorhome was sold( probably at auction in 2006) because I saw it recently on the road (2012). I just received a 1099-C from the IRS for 44k. I went to the DMV to see if they had any record of it being sold, but they didnt. Is there any way I can get out of this?

  • Phil D

    I received a 1099 C for cancelled student loan debt granted due to total and permanent disability. I cannot find an exclusion for this reason to not include the forgiven amount on my tax return. The forgiven amount will increase my tax burden by over 10K. I can’t pay this. I have a terminal illness and was granted relief due to medical reasons. What sense does it make to burden me with additional taxes when if I could work, I would have paid off the loan? Is there some obscure but helpful provision that I can use to exempt the forgiven debt from my income? Really need your help. Thanks in advance.

  • Lori Schaffer

    I received a 1099C after filing a chapter 7 bankruptcy.We had full intended on keeping out income property and my Husbands childhood home. We had previously spent $3000.00 to get a loan modification through an attorney and paid the 1099c from the previous year for the amount they wrote off on the loan for the loan modification. Neither I nor the BK attorney or my tax person understand why we are receiving a 1099C for the full amount of the property and why it was discharged. if discharged I am still paying the loan payment they are writing it off as a loss and asking me to add the full amount to my income. I have called several times and have written the president of Wells Fargo and I get a letter saying thats its correct! WE are very stressed out and were wondering if there was any insight on this you could give? WE fully intended on keeping and paying the property we have renters and we went through 3 years of hassle trying to obtain a loan modification. That amount will ruin us after just getting on our feet some!

    Thank you
    Lori S

    • Gerri Detweiler

      Lori – If I understand you correctly, your loan was previously modified and you already received and handled a 1099-C for the amount forgiven. But you are now in a Chapter 7 bankruptcy and you are continuing to pay the full payment on the property in question. Is that correct? If so, then I can’t imagine what kind of “identifiable event” the lender believes is triggering the 1099-C. Have you talked with the IRS to see what they suggest? That’s the first step I would suggest you take. (The second would be to ask your attorney and tax person if they are willing to write a letter you can send to the president of Wells Fargo refuting the claim that it is correct. I would let the bank know you are sending a copy the Consumer Financial Protection Bureau and your state attorney general – and I would do that. Something has got to be done about these erroneous 1099-Cs!

  • Bryan Tomaino


    I purchased lake property under my name and my wife has the house under her name only. We both lost our jobs and we were able to pay for the house but the land went bankrupt in 2011. We filled 2012 incomtaxes to find out they are deducting money from our 2012 return because of the taxes not paid on the land. We never received notification vie mail or email. Can this happen with out notice? Can we do any thing about it

    Thank you in advance

    • Gerri Detweiler

      Bryan, I am sorry but I don’t fully understand the situation. Were you held responsible for 1099-C cancellation of indebtedness income? Or was it some other kind of taxes that went unpaid?

  • Anna

    We just filed out taxes and a few days later, received a corrected1099-C from BOA. (Initially we received the usual form (can’t think of the #) with the amt of interest paid for the year.) We didn’t know anything about a 1099-c. We reviewed the form, reading the back and trying to figure out what to do with it.There was nothing in box 6. Our mortgage was modified in 2011 and we are living in the home, still paying a slightly lower monthly payment. I am confused as the amt of canceled debt, doesn’t make sense: after our ARM adjusted we were paying 800 more per month which we couldn’t handle and couldn’t sell the house as it was upside down, so we applied for a modicification which took 2 years! The box (10, maybe) has the value of the home at 0.0. So I guess they wrote off 94k but what do I do with this? I’m confused by the instructions, I thought I was a fairly intelligent person but this one stumps me. So my original mortgage was 461k and they added the late payments (occured in 2009 when my husband was out of work) to the mortgage, making it now about 500k, payments were 4600 and are now 4396. (this was a bad loan from countrywide). Can you explain in layman’s terms what this form is about and how its filled out? I guess I have to submit a new form for this. Thank you!!!!! Anna

    • Gerri Detweiler

      Anna – I am not sure what to tell you. It sounds like, based on what you are saying, the form you received is incorrect. As you’ll note from looking at the many comments we’ve received on this topic from taxpayers, that’s not an unusual situation. The 1099-C is supposed to report cancelled debt. This form also must be sent when there is what the IRS calls an “identifiable event” which includes no payment on a debt for three years and no collection activity for the past year.

      You mention you had a loan modification. Besides changing your monthly payment (which is irrelevant to the 1099-c), did the bank forgive any principal? If so, then the amount they forgave would be reported as cancelled debt. But it doesn’t sound as though that amount should equal your entire mortgage which you are continuing to pay.

      I am not a tax professional so I can’t give you tax advice, but in order to offer any suggestions, I need more details from you in terms of exactly what happened and what the form says. What amount is listed is in Box 2: Amount of discharged debt? Is there anything in Box 6: identifiable event code?

      Please be also sure to read the following stories: What is a 1099-C? Your Top 11 Questions Answered and 1099-A In the Mail? How to Avoid Taxes on Cancelled Debt. The latter article is not directly applicable because you did not receive a 1099-A but it describes the problem with some of these forms that are wrong.

    • Gerri Detweiler

      Anna – You’re not alone. These forms are very confusing and the amounts the lender filled out in the form may be wrong. Did you see my companion piece to this one: The tax professional I quoted on that said that there are lots of mistakes being made on these forms.

      If you qualify for the Mortgage Forgiveness Debt Relief Act exclusion, that may be the easiest way to deal with this form. But if you are not sure, or still aren’t sure how to fill it out, I will have to recommend you talk with a tax professional. And let your elected officials in Washington know the problems you’re having as well!

  • Tony Pontecorvo

    Hi Gerri,

    I just found your site. Keep up the great work! Got a question. I just received a 1009c from BofA on 3/4/13 (3 days ago) for 2012 taxes on a permanent modification that went into effect 1/1/13 although it states the qualifying event was 12/27/12. I also thought that this would hit for tax year 2013, not 2012.
    I am a bit perplexed that I received this at the 11th hour.
    1. Isn’t there a deadline on when a taxpaper should receive these?
    2. I live in CT and need some direction on who I need to talk to – Can you provide any recommendations as April 15 is 5 weeks away?

    Thanks and God Bless,
    Tony Pontecorvo

    • Gerri Detweiler

      Glad you are finding it helpful Tony. The lender is supposed to mail the 1099-C to the taxpayer by January 31s and to the IRS by February 28th. I would definitely try to complain to the IRS about the fact that they sent it so late.

      But it in the meantime, I know it can be difficult to find a tax professional who can assist you with one of these forms. I’d suggest you first read IRS publication 4681. If you qualify for the Mortgage Debt Forgiveness Tax Relief Act exclusion then you may be able to fill out Form 982 yourself, claim the exclusion and be done with it. If not you’ll have to try for the insolvency exclusion. And if you have trouble with either of those you’ll have to find someone to help. I wrote about getting tax help in this article: The Complete Guide to Finding Tax Help.

      • Tony Pontecorvo


        Thank you for that information. I am going to talk to the IRS and I’ve reached out to an attorney also.
        I very much appreciate your help and expertise.

        Thanks and God Bless,

  • Clayton Brown

    I am social security disability. I am not required to file taxes and I received a 1099-C for student loan debt that was forgiven. Do I need to file taxes? Or what must I do? I am not clear on what being insolvent is but if it means being broke, THAT’S ME. I only have SSD as an income and can barely make ends meet. Will the IRS try and take my house and what little belongings I do have? How will I know if they will consider the amount on the 1099-C income? I don’t want to ignore the form but at the same time, I do not have to file taxes. I’m lost and don’t know what to do. Can you please help me.

    • Gerri Detweiler


      The IRS will assume that the amount listed on the 1099-C is taxable income unless you demonstrate otherwise. Unless the amount is small enough, you must file a 1040. It sounds like you may qualify for the insolvency exclusion. To claim it you must fill out the insolvency worksheet in IRS Publication 4681 then file Form 982 if your insolvency is greater than the amount on the 1099-C. If you are still confused after reading that publication, I suggest you try to seek out free or low-cost tax help. You’ll learn more in this article: The Complete Guide to Finding Tax Help

      • Clayton Brown

        Thanks for responding but now I’m a little confused on whether the amount on the form is more than my insolvency? There are 2 figures on the 1099-C one for the amount of the discharged loan amount and the other is the interest (I believe)? I will try and seek help from a tax preparer and let you know how it worked out..

        Again, Huge Thanks and I found your blogs very helpful and informative


        Clayton M. Brown

        • Gerri Detweiler

          Clayton – Thanks for the kind words. I am terribly frustrated, like many of my readers, with the problems these forms are creating. Do let us know what happens. And be sure to file a complaint with the Taxpayer Advocate!

  • Pingback: 1099-C Saga Continues: Form 982 Trips Up Taxpayers | News + Advice()

  • Tank

    I received a 1099c form resulting from a short sale on a rental home.

    My question is: I used to money to improve the home when it was my primary residence. I moved 5 years ago. I have never claimed any of the improvement expenses on my taxes.

    What now?

    Claim the expenses from when I lived there or claim them as a rental business expense?

    Does the date on the improvement receipt matter?

  • Michael Biehn

    A short-sale on our rental property closed on 28DEC12. We live in California and there was both a first & second mortgage on the property. We have received the 1099-C on the first, but not the second. That note was sold to Green Tree Mortgage at some point prior to the closing. We called them asking about the 1099-C, and they informed us that they had “up to 7 years” to file the 1099-C. I see no reason for that, and doubt that it really can take that long, but my question is really whether or not we should claim the loan balance on the 2nd as forgiven debt income on our 2012 return, even though we don’t have the 1099-C? If so, should there be some extra explanatory letter or other documentation attached?

    • Gerri Detweiler

      Michael – The lender is wrong. A short sale is an identifiable event and they are required to file a 1099-C for the year in which the identifiable event took place. You can include it in your taxes for 2012 and then if they send it later explain you already reported the income. But I always recommend with rental properties that you work with a tax professional who really understands these issues. Part II of Form 982 gets tricky when it comes to rental properties.

      I would also suggest you complain about the lender’s inaccurate response to the Taxpayer Advocate and CFPB.

  • Katie


    I am sorry if someone already addressed this question on the site- I received a 1099 from Chase for an amount of about 1700. I have never made a settlement agreement with them and my credit report shows that I owe them 2300, charged off.

    When I called they just kept repeating to me that 1700 is just the principal and that the interest and fees were not cancelled. ok, understand this but not why my credit report shows that I still owe them the full 2300. They then offered to make a settlement of the full 2300. I don’t understand why this would happen if the debt was actually cancelled. I also don’t want to file the 1099 (which would lower my return a few hundred dollars) and then still owe the full amount of the debt. I am unemployed and can not afford a tax advisor. Can Chase still report this on my credit report as an active 2300 debt even though I am filing a 1099 for the principal amount of the debt?? Is it custom for credit cards to forgive a debt like this without any contact to the debtor? Thanks.

    • Gerri Detweiler

      Katie – It’s a great question. Chase is not necessarily forgiving your debt. They are reporting cancelled debt as required by IRS guidelines, which is a different matter. The IRS explicitly says that the fact that a 1099-C has been issued does not mean the balance is forgiven (go figure). I talk about that in point #2 of this article: What is a 1099-C? Your Top 11 Questions Answered

      However, there is a recent court case that could perhaps work in your favor if they tried to collect: Bank Cannot Issue 1099-C And Subsequently Try To Collect. (Keep in mind this is only one case that interprets the law; it’s not a specific law that says they can’t collect after issuing one of these forms.)

  • Merrilee

    We just received a 1099c form in December 2012 from a foreclosure from 12 years ago. Isn’t there some kind of time limit for chase to file this form. Do I have to prove insolvency for the time the home was foreclosed on or from the year of 2012.

    • Gerri Detweiler

      Merrilee –

      I see no reason why they should send you a 1099-C 12 years later. They should have sent it no later than 3 years after there was no collection activity. Unfortunately, the IRS does not provide any kind of form or instructions for handling this kind of dispute, at least that I have been able to find.

      Normally my suggestion would be to figure out if you qualify for the Mortgage Debt Forgiveness Relief Act, and be done with it, but that law was passed in 2007. I am not sure if it applies to a foreclosure that happened that long ago.

      You can approach this several ways:

      1. You should first try to get the lender who sent the 1099-C to correct it. They should have provided a phone number for questions on the form. Call them, and explain the situation and ask for a corrected 1099-C that shows zero. You can even try reading them the instructions for an identifiable event from the IRS instructions for Form 1099-C. They are on page 3. (These are instructions for lenders who file these forms.) Take notes of who you talked with – you may need those for your records.

      My guess is you will not get anywhere but you should try.

      2. Then you may want to try calling the IRS and explaining the situation. Tell them the identifiable event was at least nine years ago and ask them what to do. Some of our readers have had success going this route, others have not received any helpful advice.

      3. Include it on the tax return, then back it out with an explanation. That approach is described in this article: Tax Help: How to Dispute A 1099-C Form

      3. File without it and let it go to Tax Court where you can fight it. One of our readers explained how he did that here: Taxpayer v. IRS: 3 Real-Life Stories When Taxpayers Won

      Please note I am not a tax professional and I would encourage you to get professional advice from a tax pro who really understands these forms. I would also suggest you file a complaint against the lender with the Consumer Financial Protection Bureau.

  • Dana

    My husband got a 1099c in the mail and he is on social security. I have a business. He had a business that went under in 2010 and he is in in the process of filing bankruptsy but it hasn’t been completed yet . So my question is do l have to include the 1099 c on our tax return when it will be in the bankruptsy .

    • Gerri Detweiler

      Dana – Timing may be crucial here. My understanding is that if the cancelled debt was triggered before the bankruptcy (not by the bankruptcy) then the bankruptcy exclusion does not apply. He may instead need to see if he qualifies for the insolvency exclusion. But I am not a tax professional, so it would be wise for both of you to consult someone with experience in these forms.

  • Daniel


    My dad received notice from the IRS that Capital One reported a 2011 1099C Debt Cancellation, for a credit card he stopped paying in 1995. There had been no collection attempts in 10 years. Could you please advise what our options are? Many thanks for your assistance.

  • ATurner

    I just received a letter from the IRS in the mail today that says I had income in the form of a 1099-C on 12/31/2011 and that, since I did not claim that income, I am now liable for the taxes on it. The problem I have with this is that I had no idea such a thing happened in the first place. I do not recognize the account number or name of the company that the form was received from, and have no clue what’s going on other than I now owe over $1400 to the IRS. What can I do to get this sorted out?

    • Gerri Detweiler

      Contact the IRS and explain the situation. You may need to request a wage and income transcript for 2011 to find out details about who is reporting that “income” on the 1099-C. If it turns out to be a legitimate debt then you’ll have to use the strategies in this article to figure out how to reduce the tax you owe. If it turns out the debt that was reported as cancelled was very old, you’ll want to read this article: What To Do If You Get A 1099-C For An Old Debt

  • Jimmy

    Hi Gerri,

    I got two 1099-C forms this year for corporate debt that was not personally guaranteed by me. The companies changed the debt to my name and sent me the 1099-C personally. The company was insolvent. How do I find a professional that understands this topic? My current attorney and accountant have no experience dealing with 1099-C

    • Gerri Detweiler

      Hi Jimmy – I have interviewed several tax experts for this series who may be able to help. One in particular, Edward Zollars, a CPA and partner with the tax practice of Thomas, Zollars and Lynch in Arizona, trains other CPAs on this topic. And Joanne Koontz from Koontz & Associates also consults with accountants who need help with this issue for their clients.

      I hope that helps!

  • jacquie

    I received a 1099 for credit card debt that was charged off back in 2003. After many hours on hold with IRS, I finally found an option that will hopefully work for me (and some others). Here it is: if your liabilities exceeded your assets for the year the 1099 was filed (NOT the year your debt was charged off by your credit card, for example) by an amount equal to or more than the amount of that was canceled, then you can claim insolvency. For me, I am not a property owner and my student loans far exceed any assets that I have, so proving insolvency will be pretty straightforward. You need to file form 982 and fill out the insolvency worksheet on publication 4681. Hope this is helpful to someone!

    • Gerri Detweiler

      Thank you Jacquie. The insolvency exclusion you described is also described in this article and others we’ve published, and I am glad to hear it worked for you!

  • Troubles

    Does a lender on a car loan have a time limit in which to file a 1099-c? I gave back my car due to illness, could not pay for it, out of work, etc., and never received a notice or 1099C, but the IRS did. The car was given back in 2005 or 06 and they filed the 1099-C with the IRS in 2011. I was just wondering if the lender has a time limit to file the form with the IRS declaring a cancellation or forgiveness of debt?

  • Jen

    Gerri, are debt collectors required to DISCLOSE this to you? My situation is I settled a debt that was in single name, but that my ex-husband was legally responsible for 50% of stated in our divorce decree. I will never get a penny from him, so I settled it on my own. I would have never proceeded if I knew it would also effect my income. Do the debt collectors have any recourse for not notfying me that the remainder owed would be reported?

    • Gerri Detweiler

      Unfortunately, Jen, I am not aware of any requirement like that. But keep in mind that you were legally responsible for the entire debt (despite what the divorce decree said) so settling it may have been your best option. You may be able to avoid paying taxes on the CODI if you qualified for the insolvency exclusion at the time of the settlement.

  • Credit Experts

    We are so, so sorry for what you’re going through and cannot fathom how hard something like this would be for both you and your spouse. Considering your situation, we’d urge you to definitely apply for disability forgiveness on your student loans.

    If for some reason you do not qualify for student loan forgiveness due to disability, whether or not your spouse will be liable for your student loans will depend greatly on the type of student loan (federal or private), whether or not you live in a community property state (spouses are typically responsible for debts incurred during the marriage in community property states, although there may be exclusions for educational debt depending on the state), and your individual state laws. For more information, has covers this topic in more detail here:

    • Help me

      Thank u for answer but need to know owe close to 300,000 if student loan discharged will owe tax (1066)will spouse have to file 982 with me can I do it without spouse will IRS come after spouse for tax?! Help please!!!!

      • Credit Experts

        As far as the IRS coming after you and/or your spouse, if you qualify for the insolvency exclusion, the cancelled debt can be excluded from your income and you’re safe.

        With that said, we encourage you to read through Gerri’s series of articles on how to handle 1099-C tax forms — they’re a great resource for anyone trying to file on their own and looking for help with 1099 tax issues. However, keep in mind that we are not tax professionals and in the end we always advise seeking the advice of an experienced tax professional to be sure. If you can’t afford professional tax help, your disability may qualify you for free or low-cost tax help through the Volunteer Income Tax Assistance Program. Definitely worth checking into for peace of mind.

  • PB

    Hi. I have a couple of questions if you don’t mind? I just read something I was not even aware of– something about a 2 year and 3 year “I insolvency?” Rule BEFORE the filing date of your Chapter 7 Bankruptcy? I believe it was saying if you could show that your credits exceeded your assets 2 and 3 years before the year you filed your Chapter 7, there was a chance you might be able to be excused from owing those back taxes and int and penalties? Did I read that correctly? I owe for 2010 and 2011 AND I have not filed for 2012 yet either! The reasons have all been the same: I knew I was going to owe them money and I couldn’t afford to prepare them. Unfortunately, stupidly I put off filing them in fear of how I was going to pay them!I filed Chapter 7 Bankruptcy officiallially on May 1, 2013. It was discharged on June 10, 2013, and closed on July 2, 2013. I was declared a “no asset” case. Do I qualify for the exception for the tax payback rule?

    • Gerri Detweiler

      I think you are confusing a couple of different things. Whether or not you can discharge your back taxes in bankruptcy was a matter that you needed to discuss with your bankruptcy attorney. Since you’ve received a discharge already I don’t think that is a possibility, but please do talk with your attorney to find out. If you can’t pay those taxes then you need to see whether you can work out an offer in compromise or some other relief. I’ve written about that here: and here:

      I think you are confusing this issue with that of 1099-Cs for cancelled debts, which include debts like credit cards that were charged off or mortgages that went into foreclosure. This article deals with how to avoid being taxed on cancelled debts, not how to avoid paying taxes that you owed. Make sense?

  • Minh

    Could businesses use this for former employees who owe their former employer money? For example, we will reimburse employees an approved amount for moving expenses if they sign a 2-year commitment. If for any reason the employee terminates (voluntarily or involuntarily) within the two years, they need to pay the funds back. We have employees who term after 6 months or so and are not willing to pay. Could we issue a 1099-C since we essentially gave them money they did not earn since we are not a lender?

    • Credit Experts

      Minh — It’s quite possible but it would probably depend on the contract your employees sign. However, this is really a question for a small business attorney and a tax advisor. To be sure, it would be best to consult with a professional for legal and tax advice on this one.

  • photog48

    I am a partner in an LLC that filed for bankruptcy in 2011. The bankruptcy was settled in March, 2012, before the LLC’s tax return was completed (Aug, 2012). Can the cancelled debt be recorded as income in 2011, or is it required to only be recorded in 2012 when the bankruptcy was finalized.

  • Patty

    They wanted to repo my car so I called them asked what the payoff amount for the loan was. I paid it kept my car went to file taxes $7500.00 for 1099 can they do that?

  • Credit Experts

    Unfortunately, this is a story we hear often in divorce cases. By law co-signers, regardless of what’s ordered in the divorce decree, are liable for the debt. Divorce decrees do not supersede the original contract with the lender, which is what happened in your case. covers this issue in the following resources:

    My Divorce Ruined My Credit
    Credit Tips While Going Through a Divorce
    Getting a Divorce? Here’s How to Protect Your Credit
    Q&A: Rebuilding a Credit Score After Divorce?

  • James Ryan

    I recently received a notice from the IRS stating that I owe charges from the 2011 filing due to a cancelled debt (1099-C). Surprise! I had no clue that this debt was written-off/canceled. Now, the IRS wants over $700 now.
    Can I get this reduced, get time to pay?
    It appears to be valid, though until now I knew nothing.

  • James Ryan

    I just received a notice from the IRS I owe over $700 (from 2011) because of a cancelled debt. I never received any notification of this being cancelled. IRS wants it paid within 30-days.
    Does this give me any leverage with the amount/time?

  • Pingback: 7 Money Moves You Should Tell Your Tax Preparer About | Lord of the Net()

  • Gerri Detweiler

    Ray – Have they sent you a 1099-C? If so, for what year? Is it the same year you settled the judgment?
    If so, what you need to do is to get IRS Publication 4681 and fill out the insolvency worksheet. Fill it out using your information right BEFORE this debt was cancelled. If you qualify for the insolvency exclusion you can fill out Form 982 and include it with your return.
    If they haven’t filed a 1099-C go ahead and fill out the insolvency worksheet out anyway so you have it handy if you need it.
    As for the “fairness” question, I don’t disagree with you – it seems unfair. However, if they didn’t count it, this it could be a loophole (“lend” someone money then cancel it and avoid income or gift taxes).

  • Gerri Detweiler

    Lena – What tax year is the 1099-C for? Did you just get it? Or did you just get a letter stating they are going to send you one?

    • lena

      I just got the letter today Jan.22,2014 saying they were going to send me one.For the 2013 tax year.

      • Gerri Detweiler

        So when you get it you’ll either a. need to include it in your taxable income – those are relatively small amounts so you may still not owe taxes depending on your other income or b. figure out whether you qualify for the insolvency exclusion I described in this article. If you do, you file Form 982 to explain to the IRS why you are not including it as taxable income. If you can’t figure this out yourself, yo may need to get help from a tax professional or volunteer.

        If these were your own debts and not joint debts with your son, then I see no reason why he would have to include them on his tax return.

        • lena

          but what if i am on disability and no longer file a tax return but my son puts me on as a dependent since i live with him.

          • Gerri Detweiler

            If adding these amounts to your income still puts you below the threshold for needing to file a return, then I believe the point is moot. My understanding is that you only have to deal with this if you must file a tax return.

          • lena

            awesome Gerri ,Thank you so much for your help.

    • lena

      Thank you Gerri for getting back to me.It was for 2013 tax year .And I just got the letter today Jan.21,2014.And they said that they would be sending the 1099-c to me in the mail. Have not gotten it yet.Just the two letters.

  • Gerri Detweiler

    John – You should be eligible for free tax assistance to help you deal with this form. Based on what you are saying you can probably avoid paying taxes on this amount by filing Form 982. Please take a look at the free resources mentioned in this article and reach out for help: The Complete Guide to Finding Tax Help

  • Gerri Detweiler

    Did the foreclosure happen in 2013? If so keep your eyes open for the form over the next couple of weeks. If you don’t get it, contact the lender. If you still don’t get it, let us know.

  • Scared

    Another HELP!!! We had to make a hard decision in about 2006. He became very ill and owned a used car dealership. I worked real estate and told him if we cut down a bit, I could support us but I did not want to be stuck with a auto dealership and to please sell it. We did for not very much. Then the real estate market began to slide. We too out a home improvement loan to get buy as who ever thought the real estate market would last so long? Then it became a decision of “health insurance” or “house payments”? We had to let the house go into foreclosure as I was not making near the money I had for years and my husband wasn’t making any money and was too proud to apply for disability at that time. We moved out of our home in 2009 and stayed with friends. Our son bought a condo for us to rent from him and during this time we found out my husband has a rare in incurable lung disease called “idiopathic pulmonary fibrosis”. This was devastating. He worked at this time as a Janitor at a shopping center just because he is the man that he is and didn’t want to not be working. He didn’t collect anything from the government and I have been working my rear off in real estate for now 28 years. In 2012, his doctor said no more work for my husband, his lungs are failing and he had an incident in the hospital where he “flatlined” after a lung biopsy and it is a miracle he is alive. It is now January 2014, I personally have had medical issues including a mini stroke and more from stress I’m sure. We live in the condo and I’m working in real estate as that is what I know. My husband is on oxygen at home and is now 63 and finally got on disability. I am almost 62. My business is at a loss due to fees and expenses to run it, my husband is ill and I’m doing my best with real estate through it all. We just received a 1099-C from Bank of America today for the 2010 foreclosure. It is about $100,000 for the home improvement loan we took out on the house to “get through the tough times”. Now what do I do? I’m in shock tonight as I write this. Thank you for any advice you can give. We owe a ton in medical bills but have been working to continue the $1500 a month and going up in health insurance to be able to go to the doctors we have been going to for years. Obama care will probably take my husband off oxygen and me off my meds to keep us going. This is becoming a sick country and I know we aren’t the only ones scared.

    • Gerri Detweiler

      You may be able to avoid including this income in your taxable income if you qualify for the insolvency exclusion or another exclusion. (It doesn’t sound to me like the Mortgage Debt Forgiveness Relief Act exclusion applies, but I can’t be certain.) You’ll find information about these in IRS Publication 4681.

      However, this can be confusing and this is a large amount of money and could create a huge tax liability for you. My recommendation is you find a tax professional with experience in these forms to guide you through it so you can hopefully eliminate or at least minimize the taxes you’ll have to pay.

  • Gerri Detweiler

    Three years of non-payment may trigger a 1099-c. Since 2010 is three years before 2013, it is possible you can get a 1099-C for tax year 2013.

  • Gerri Detweiler

    Keisha – Who is the company? And what do you mean by a letter? Did you get a letter from the IRS or this company?

  • Pingback: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt | Credit … | Consumer Debt()

  • Gerri Detweiler

    Sandra without a 1099-C it is impossible to tell you want to do. You have to get a 1099-c with the tax year. Can you tell from the letter what tax year they are talking about?

  • Gerri Detweiler

    That sounds just plain weird. If you can’t get them to send you a 1099-C I’d suggest filing a complaint with the Consumer Financial Protection Bureau. But try to get them to send you a 1099-C. You are entitled to a copy.

  • mary

    My Husband bought my son a truck in my husbands name and credit in 2008, my son paid for 2 years then lost his job got the truck repossessed in 2010, my husband was unable to pay, Both my Son and Husband have passed away in 2011, now my husband received a 1099c, how do I handle this? I filed with IRS and his death certificate
    for 2011 in 2012 Thanks for your advice

    • Gerri Detweiler

      Mary – I am so sorry for your loss. I am working on another article for these types of situations. Hope to have it done in the next couple of weeks.

  • Oda

    I had a foreclosure in 2008 at the end of the year a received a 1099 c for the first loan which I included in my taxes as insolvency, but just this month on January 2013 I received a 1099 c for the second loan for the amount of 61,000. Please help I do not know what to do!!!!!!!!!!!!!

    • Gerri Detweiler

      Oda – You’ll handle this the same way as the first one by trying to establish whether you qualify for an exclusion such as the insolvency exclusion. The tricky part is figuring out when to calculate insolvency here. I’d suggest you talk with a tax professional with lots of experience with these forms. They may recommend you calculate insolvency at the same time as you did for the first loan, but as I am not a tax professional I don’t want to steer you wrong.

  • O.L.

    I got 1099c I know that I can qualified for the Federal exclusion or exception, but how can I deal with the CA because it shows that I have to pay almost $1, 800.00. Do California has an exclusion or exception?

    • Gerri Detweiler

      Not all states have the same exclusions as are available on federal taxes. You’ll need to check with a tax professional in your state to be sure.

  • Gerri Detweiler

    Please look at Page 4 of IRS Publication 4681. It specifically addresses joint debts. Beyond that, I’ll have to suggest you talk with a tax professional.

  • Gerri Detweiler

    Kim – Here are the instructions from publication 4681:

    How to report the insolvency exclusion. To show that you are excluding canceled debt from income under the insolvency exclusion, attach Form 982 to your federal income tax return and check the box on line 1b. On line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation. You can use the Insolvency Worksheet, later, to help calculate the extent that you were insolvent immediately before the cancellation. You must also reduce your tax attributes in Part II of Form 982 as explained under Reduction of Tax Attributes, later.

    I hope that helps! I know it’s confusing but glad this is helping a bit. (By the way, I encourage you to share your difficulty in filing this form out with the Taxpayer Advocate which is interested in hearing about taxpayer’s problems.)

  • Anne Buckmaster Hartman

    i received a 1099c for 2013 on a foreclosure, my question is, on the 1099c they have it in my name, my husband was the owner and i was co-owner, his name is no where on the form, and they did not provide information for all boxes, they only filled out box 1, 2, 4, 5, 6, and when i try to fill an amended return, i need the information for boxes 3 and 7.

    • Gerri Detweiler

      Anne – I assume this is a large amount since it is a foreclosure. Is that the case? If so, I would really encourage you to consult a tax professional with experience in these forms so you get a right. That said, it is my understanding that they have the option of reporting interest (box 3) and that if they don’t provide FMV you can try to ascertain it through a real estate professional or using real estate sites (though the current information may be different now).

  • Credit Experts

    Lisa —
    It sounds as if you may want to contact a tax professional for advice, giving him or her the facts specific to your situation. We are not tax professions or lawyers and can’t advise you on how best to file taxes. Good luck to you.

  • Susan Klineman

    Hello, i received a 1099-C from a large debt buyer whom I settled out of court with, the original creditor charged it off over 4 years ago, what do i need to do with this, the original amount they reported to the IRS was $8300, but I settled for $1500, how are they able to report when they are not even a lender or the original creditor?

    • Gerri Detweiler

      Susan – It’s a valid question. Presumably they bought the debt for much less than the face value and cannot even verify whether the amount is correct or not. I think it is worth filing a complaint with the Consumer Financial Protection Bureau and the Taxpayer Advocate.

      Have you tried to use the insolvency worksheet in Publication 4681 to see if you are insolvent? It may be the easiest way to deal with this. If your level of insolvency is greater than the amount of cancelled debt they are reporting you can file Form 982 and be done with it.

  • Denise

    My husband & I filed a Chapter 7 bankruptcy which was discharged in Nov. 2012. We included our home in the bankruptcy and were under the impression that we would not have a tax liability. We received a 1099A & 1099C this year. What do we do?

    • Gerri Detweiler

      As I mentioned in the article, Denise, if you discharged these debts in bankruptcy you can claim the insolvency exclusion. You will have to fill out Form 982 to include with your return so the IRS knows why you excluded this amount from your income.

  • Erin

    Hi There! I got a 1099-c after doing a short sale on my house. It says on the form the difference on what my home was worth and what was left is about 60,000. I thought I was covered under the Mortgage Forgiveness act and was not liable to pay taxes on the $60,000 difference. Is this not the case? If I can’t prove insolvency do I owe taxes on that amount??
    Thank you!

    • Gerri Detweiler

      Erin – You may be covered by that exclusion, but it’s up to you to determine that not the creditor. Read the instructions in Publication 4681 for this exclusion to make sure you qualify and, if you do, file Form 982 to tell the IRS why you are not including that amount in your income.

  • chris

    what does letter H (LINE 6) on 1099C.. expiration of non testing period
    i was discharged from a bankruptcy in 2013 that debt was included i
    have already filed my taxes now what do i do? im in florida HELP :(

    • Gerri Detweiler

      Chris – Was this debt discharged in your bankruptcy? If so then you can claim the bankruptcy exclusion (and it sounds like the creditor made a mistake). If you did not discharge this debt in your bankruptcy then you need to see if you qualify for the insolvency exclusion.

  • KrayHart

    My husband and I filed chapter 11 banktruptcy. I was under the impression we would not have to pay on anything else. Now I received a 1099-c with “A” in box 6. My husband and I are separated and he does not file taxes because he is on military disability. Do I have to pay taxes on this and since he does not file, will I end up paying on it solely? Please help, this is so unfair!

    • Gerri Detweiler

      If you discharged the debt in bankruptcy you do not have to include it in your income. You may need to file Form 982 to explain to the IRS why you are not including it in your income – though I am not sure you have to since you didn’t get a 1099-c. I would suggest you talk with the IRS and ask them if that’s the case.

  • Gerri Detweiler

    Unfortunately I can’t tell you that because it depends on a lot of factors. Get IRS Publication 4681 and try to fill out the insolvency worksheet to see if you qualify for that exclusion, and if so, by how much. If you are confused by it talk with a tax professional. It is great that you are trying to plan for this rather than being surprised after the fact.

    • Ian

      A related question … student loan goes through a three year monitoring period for disability, so the debt discharge is conditional. We were suprized to receive the 1099-c this year rather than at the end of the three year persiod. Should we report the 1099-c as income this year or three years from now when the conditional period has expired? Have a tax professional working on this but they don’t even know.

      • Gerri Detweiler

        As I understand it, the position of the Dept of Education is that the debt is discharged when that determination is made, and the three-year monitoring position can only rescind that discharge. See this page: I am not aware of Tax Court cases challenging this, though, so you may want to talk with a tax attorney.

  • Gerri Detweiler

    Mike – 1099cs for debts that are settled are the norm. They should be reporting the amount that you didn’t pay – the amount that was cancelled. That’s what a 1099-C reports.

    If it is correct, then you need to re-read the article above to figure out if you qualify for an exclusion or if you need to include that amount in your taxable income.

  • Gerri Detweiler

    Yes if the 1099cs are filed for the wrong year then you may be able to fight them. Daniel J. Pilla has a book that walks you through how to dispute one that is sent for the wrong year. In this case, I’d suggest you check it out. Also given the amount you are talking about, I would strongly encourage you to talk with a tax professional who really understands these forms. It’s going to get complicated since it involves business debt.

  • Gerri Detweiler


    I am so sorry to hear of your loss. Were you a cosigner on these loans or were they her individual loans?

  • Gerri Detweiler

    Mary – Don’t be alarmed that you both received a 1099-c for the same debt. The form isn’t designed to be sent to a couple or two people. In fact the IRS instructions for creditors that file these forms say:

    Multiple Debtors

    For debts of $10,000 or more incurred after 1994 that involve debtors who are jointly and severally liable for the debt, you must report the entire amount of the canceled debt on each debtor’s Form 1099-C. Multiple debtors are jointly and severally liable for a debt if there is no clear and convincing evidence to the contrary. If it can be shown that joint and several liability does not exist, a Form 1099-C is required for each debtor for whom you canceled a debt of $600 or more.

    You should ask TurboTax how to handle this but you shouldn’t double the amount of cancelled debt either.

    As for state taxes, each state is different in terms of how it handles exclusions. You will have to check with TurboTax or a local tax professional to find out how it works in your state.

  • Gerri Detweiler

    The 1099-C is triggered by an identifiable event such as an agreement to cancel a debt. If there was no agreement made and the taxpayer stopped paying then an identifiable event could occur three years after there was no substantial collection activity. You can read the list of identifiable events in the IRS publication, 2014 Instructions for Forms 1099-A and 1099-C. (These are instructions for creditors who must file these forms.)

  • Gerri Detweiler

    Agnes – it sounds like they probably either qualify for the insolvency exclusion or the Mortgage Forgiveness Debt Relief Act exclusion but you’ll need to go through Publication 4681 to figure out for sure. If they discharged the debt in bankruptcy, they may not get a 1099-C. Lenders aren’t required to file them in that situation.

  • Gerri Detweiler

    Richard –

    Depending on timing here, the IRS will include the amount of cancelled debt in your income and you’ll either get a smaller refund or a notice after the fact that you owe them money because they have recalculated your tax.

    At that point you’ll either have to pay them what they say you owe or fight it. If I were in your shoes, I probably would try because you really didn’t gain anything in this transaction. But unfortunately I can’t give you step-by-step directions either; this is not a situation that comes up in IRS guidelines for these forms. You may want to check out Daniel J Pilla’s book that talks about how to fight 1099-Cs if you want to try to do it yourself or find a tax professional with experience in these forms.

  • dkal

    We went through morgsn drexen a few years ago and our debts are settled and paid why did I get a cp2000??

    • Gerri Detweiler

      When you settle debt, the cancelled or forgiven amount becomes taxable “income.” You should have received a 1099-C for the amount of cancelled debt and figured out how to handle it in your tax return. It sounds like you either did not get the 1099-c or you ignored it when filing your return and now the IRS is telling you that you owe taxes. It may not be too late to amend your return if you qualify for the insolvency exclusion I described in my article, but it sounds like you will need to get help from a tax professional who understands these forms.

  • Dan

    I received a 1099-C indicating I negotiated $7000 from a Citibank credit card. I have a total of $160,000.00 of debt that I’m currently trying to pay off. The problem is I own a house that’s worth approximately $250,00, and I owe approximately $180,000 on my mortgage. Is there any way I can claim insolvency on form 982?

  • Dan

    I received a 1099-C for $7,000 of forgiven debt from a Citibank credit card. I currently have approx. $150,000 of debt. The problem is, I own a home valued at approx. $250,000, and currently owe $188,000 on my mortgage. Is there any way I can claim insolvency on form 982?

    • Gerri Detweiler

      You will have to fill out the insolvency worksheet in Publication 4681 to find out. Home equity does count as an asset. Be sure to include the amount of the debt as a liability before it was cancelled.

  • Gerri Detweiler

    If you discharged the debt in bankruptcy and receive a 1099-C then you can claim that exclusion. However, it is my understanding that you still need to fill out Part II of Form 982 Reduction of Tax Attributes and that may get a little tricky. It wouldn’t be a bad idea to consult a tax professional who understands these issues.

  • Gerri Detweiler

    Ah yikes sounds complicated. Have you obtained the bankruptcy papers to see what debts were discharged. (Those are public record; you don’t have to go through the company to get them.) Beyond that I am going to encourage you to talk with a tax professional who understands these forms, You have a complicated situation to deal with here.

  • Gerri Detweiler

    It is treated the same as earned income. But remember a 1099-C is only mandatory when they forgive $600 or more. They may or may not send one for $500.

  • Gerri Detweiler

    Unfortunately if it was your Mom’s account and the debt was settled, then she has to either report it on her income or claim an exclusion. She cannot ignore this or they may be notified that they owe taxes as a result of this form. Perhaps you can offer to pay for a tax professional to help her figure it out and then offer to pay any tax that is due as a result?

    • Barry Stone

      Thank you, I have told them I would pay the amount owed but they don’t want any part of it. I explained that the IRS will address this with her but she is too upset to care, all she wants is for me to deal with it. Thank you once again!

  • Gerri Detweiler

    Here’s the thing. The IRS doesn’t care that the VA paid the loss to the lender. They aren’t looking at the lender’s loos with these forms; they are looking at whether you, the taxpayer, had cancellation of debt income. (And remember the VA is a federal agency – which took a loss – and taxes get paid to the federal Treasury…)

    Have you reviewed Publication 4681 to see if you qualify for one of the exclusions?

  • Gerri Detweiler

    The IRS will assume it is taxable income. You must either wait for the IRS to notify you or amend your tax return. You may not have to include this amount in your income if you qualify for one of the exclusions I described in the article. I recommend you read it again and review Publication 4681 for more details.

  • Gerri Detweiler

    Barb – That’s a question for your accountant. I am not a tax professional. However, it is possible that the 1099c is for the correct year, if for example, no identifiable event took place in 2012. (The fact that you got the 1099a in 2012 does not necessarily trigger a 1099c.) But it is possible that the 1099c should have been issued in 2012, again depending on the facts and circumstances. I would recommend you read Publication 4681 carefully (I know it’s dense) and ask your accountant whether he agrees they issued it for the wrong year. If so, you can dispute it. We should have an article on the site about disputing 1099s within the week.

  • Gerri Detweiler

    Crissy – the problem is that not all states offer the same exclusions and exceptions as federal tax code. I am going to have to suggest you talk with a California tax professional for this one.

  • Gerri Detweiler

    If you reached an agreement to settle the debt in 2011 then that would seem to me that is the identifiable event and should be reported for that year. I am not sure why you or they chose 2012. In IRS Publication 4681 you will see this: Code F — By agreement. Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration.

    If you get a 1099-c for a different tax year then you’ll need to consider disputing it for the wrong tax year. We’ll have an article on that on the site within the week.

    • Event_Horizon

      I didn’t get a 1099c in 2012 from them. I had assumed (incorrectly) that the “income” was from the year of the last payment made, not the time that they agreed to settle.

      I assumed I was going to be forking over big money to the IRS and was unaware that the insolvency worksheet would reduce what I owe to zero (I am not a home owner and my car is worth $800-1800 in blue book at the absolute most).

      Annoyed that I could have / should have done this one or two years ago.

      I did contact the IRS to send me a print out of my ‘account’ to see if either 1099 was sent in 2011 or 2012. They haven’t swooped in to try and get me for unpaid taxes so I think it wasn’t done.

      Worrying about how my state will handle the settlement.

      I guess I submit a 1040x – revision to include these 1099s ?

      Do CC / creditors wait 36 months of zero activity before bothering to send the 1099 no matter what year it transpired ?

      • Gerri Detweiler

        Yes it sounds like you will need to amend your returns. If there is a settlement of the debt that would be an identifiable event that should trigger the form for that year. If not then three years of no activity or significant collection attempts would likely be the next trigger. We wrote about that here: 1099-C: The Worst Tax Mess of the Year?

  • Gerri Detweiler

    Hi Lynn –

    I have written a story specifically about how to dispute a 1099-c. I hope you find it helpful: The Little-Known Form for Avoiding a Big Tax Bill

  • JMC331

    We short-sold our house in 2013 and my tax preparer asked for a 1099C. After calling my lender (Wells Fargo) they informed me that they were not required to issue a 1099C to the IRS. I have a Release of Mortgage from the lender, but am afraid I will be taxed on the difference of the loan/sale. What should I do?

    • Gerri Detweiler

      Did your short sale agreement absolve you of any liability for the deficiency (the difference between what was owed and what you settled for)? If so, I can’t imagine why the lender thought a 1099-c was not required.

  • Gerri Detweiler

    No that’s not my understanding at all. If it’s one debt for $19,000 then it should not count as $38,000 in income. The creditor is required to file a 1099-c in both names but it is just one debt.

  • Credit Experts

    Contacting the company to sort out the discrepancy (or to ask for an explanation) would be a good idea.

  • Gerri Detweiler

    Rose – First of all, I always recommend someone who gets a 1099-c for a rental property work with a tax professional who understands these forms. Even if you can figure whether you qualify for an exception or exclusion in Part I you will still have to deal with Part II which gets really complicated. As for the joint debt issue, the IRS describes that in IRS Publication 4681 (just search it “joint” – you will see info on page 4. But quite honestly, I suspect it will raise more questions for you then answers. You’re going to need to consult with a tax pro. Make sure they have experience with these forms.

  • mmbts

    In 2005 I secured a loan on my first rental property house in the amount of $320,000 for the purpose of constructing a second rental property house. In Oct. 2013, a short sale was closed on my first rental property house and received 1099-C in the same year for $80,000. Can I exclude the full amount from my 2013 income? Can I still report the net loss on my first rental property from Jan-Sept 2013 in my 2013 tax return? Also I have a 2012 Passive Activity Loss on the said rental property. Please help. Thanks!

    • Gerri Detweiler

      You definitely need to find a tax professional with experience in these forms to help you hopefully minimize the tax bill you may face as a result of the short sales. It becomes quite complicated when rental properties are involved and it’s a large enough amount that you can';t afford to get it wrong. Make sure you find someone who really knows what they are doing. Sorry – but this is just not a DIY project.

  • Gerri Detweiler

    I wish I could tell you exactly what do to but I am not a tax professional and I definitely don’t want to steer you wrong. It does get more complicated with real estate because even if you can fill out Part I properly you have to fill out Part II as well, and that gets complicated, as I wrote about in the article below. Quite honestly, given the amount of money involved, I would encourage you to consult a tax professional who really knows these forms. Read: The Tax Form From Hell: The 1099-C Saga Continues

  • Gerri Detweiler

    My understanding is no, however, I am not a tax professional so I would encourage you to get expert advice.

  • jjcrebo

    I am going through the deed-in-lieu process. The bank has forgiven amount due. But, obviously, I will get a 1099c for this amount. I am disabled – is there any avenue to pursue to stop the IRS from taxing this write off as income?

    • Gerri Detweiler

      As you may have heard the exclusion for homeowners has expired so unless Congress extends it your option is probably the insolvency exclusion. Please see a tax professional asap to find out if you will qualify. If not, bankruptcy may be a better option. (The fact that you are disabled, unfortunately does not entitle to you to any special consideration or exclusion.)

  • Gerri Detweiler

    Please see a tax professional who really understands these forms. They are very difficult to fill out if you are dealing with a rental property – and more so with joint debt. Hopefully the tax pro can help you lower the bill – but most likely the only exclusion available will be the insolvency exclusion.

    (Unfortunately a lot of real estate investors didn’t have a clue that this could be an issue, and it’s coming to light far too late for them to change things.)

    As for the deal with the developer, perhaps that is some basis for disputing some of the debt, I am not sure. My sense is there is a lot of grey areas. I don’t know if this article will help or not: The Little-Known Form for Avoiding a Big Tax Bill

  • Gerri Detweiler

    It depends on what you mean by written off. Did you have a settlement agreement then or was it just charged off after you stopped paying?

  • Gerri Detweiler

    Kris – Why are you getting a 1099-C for a house that went to sale in 2007? That’s 7 years ago. Unless they actively tried to collect that debt, it sounds to me like this is way too late for them to file a 1099-c. Please read this article and then contact a tax professional who understands these forms. The Little-Known Form for Avoiding a Big Tax Bill

  • Gerri Detweiler

    Maya – If you counted this as income would you still owe taxes? If so then you have to file. If you do have to file, then you can fill out the worksheet in Publication 4681 to see if you qualify for the insolvency exclusion. If you can’t do this yourself you are no doubt eligible for free tax help based on your income. The Complete Guide to Finding Tax Help

  • Larry R.

    jason, I am in the same predicament with my son’s estate. what did you do to handle this?

  • Gerri Detweiler

    There are a number of problems here and I am not sure the IRS agent gave you full and accurate advice. Yes you probably need to dispute the 1099-c (and should do so in writing with a paper trail) but not just because you disputed the original debt. It sounds like there is the issue of the fact that they sent you a 1099-c for 2011 in 2013 (a 2011 1099-c is due by Feb 2012!) for a debt written off in 2006 (which means they probably should have filed it for 2009 – maybe 2019 at the very latest). Then you have the issue of your dispute.

    There’s no simple straightforward way to handle these matters but I would suggest you start here: The Little-Known Form for Avoiding a Big Tax Bill Dan Pilla’s book may prove helpful to you as well. Hope you’re able to straighten it out!

  • Gerri Detweiler

    Hi Greg –

    I am not sure I understand your question. What are you trying to accomplish here? Do you want to undo the settlements? Were you represented by an attorney in your divorce? If so, then this would be a matter I would bring up with them.

  • Gerri Detweiler

    They likely can write it off but I am not a tax expert. (I investigated the 1099-C issue because it related to unpaid consumer debts.) You may want to try the website.

  • Gerri Detweiler

    If you partially qualify for the insolvency exclusion then my understanding is you check Box 1b and then in line 2 you report the amount that you are insolvent. The remainder is reported as taxable income on your 1040. Please keep in mind that I am not a tax professional though, so if you don’t fully understand this form please get professional tax help.

  • Gerri Detweiler

    Are you saying that the debt was cancelled, a 1099-C was issued and you paid taxes and now a new collection agency is trying to collect that debt?

    How old is this debt (when was your last payment) and what state do you live in?

  • Denki Demuerto

    Can a person get a 1099 C from the issuing credit card company and then get a 1099C from a debt collection company for the same debt if you settle?

    • Gerri Detweiler

      How did you handle the first one? Did you pay taxes on the full amount of the debt?

      • Denki Demuerto

        Form 982, my debts exceeded my assets. So effectively I did not pay taxes on it.

        • Gerri Detweiler

          I am not positive on this one, and I am not a tax professional but I suspect you should dispute the 1099-c with the collection agency since one was already issued for this debt. We wrote about how to dispute a 1099-c here.

  • Isabel A

    I notice the questions are for student loans I work for a medical clinic who are now considering sending 1099-c for outstanding debt. Is this possible?

    • Gerri Detweiler

      1099-cs can apply to other debts as well. Read the Instructions for Form 1099-c on the IRS website and consult your tax professional about any questions.

      • Isabel A


  • INQ

    Gerri: For the debt forgiveness on a 1099c, what is the tax liability date? For example if a credit card was not paid for say 2012, 2013 and 2014 and in 2014 the credit card company agreed to a settlement on May 1, 2014, then I understand the debt forgiveness becomes income for me and that the tax liability on this income can only be assessed to the year 2014 in which the debt forgiveness was granted; i.e. taxes on this debt forgiveness/income cannot be assessed back to the first date the debt started, i.e. 2012, but what is the first date the IRS can begin assessing taxes? In this example the credit card company will likely enter May 1, 2014 as the box 1 date of identifiable event on Form 1099c. But this form is not issued by the credit card company to the debtor (me) until the first quarter of 2015, being the time during which all companies must issue tax forms to vendors, customers and employees for the previous tax year (2014). Is the first date for which taxes can be assessed the “Date of identifiable event” in box 1 form 1099c, or is it the last day of the tax year (generally 12/31/14), as is the customary date for business debt assessment? If the former (May 1, 2014) then estimated taxes should be paid to the IRS for the debt forgiveness beginning May 1, 2014 with estimated taxes paid as early as 3rd quarter 2014 for quarter 2 income (May 1, 2014). For this example assume there are no exceptions that could be reported on form 982. Does your answer change if the credit card was a business versus personal credit card, both for business expenses? Are businesses issued 1099c’s for debt forgiveness or another form? For business credit cards, guarantors for some stop at the business level, others flow through to the person on the card/or guarantor. Does the answer change in any of these situations?I appreciate your advice.

    • Gerri Detweiler

      These are great questions. I have not received them before and am not sure of the answers. Will need to look into it.

  • Gerri Detweiler

    Kelly – We’re sorry to hear of your loss. You really need to get professional legal and tax advice from someone familiar with these forms. The 1099-c may have to pass through your father’s estate, but that’s a question for a tax professional. As to the second mortgage, again, you are going to need to talk with an estate planning attorney familiar with this kind of situation.

  • Wondering

    Hi. I received a 1099 c for a charged-off debt (student loan for son) my husband signed. We settled with the lender. I was unaware of the amount affecting my income bracket which makes sense after I read the literature regarding a 1099c. We now owe the irs 6000.00.

    My question… there anything I can do to reduce what I owe. I filed an extension to figure out how to come up with the money and recently read I owe interest and possibly penalties. I prepared my taxes myself. I hope you can give me some information. I know I owe just trying to figure out how to handle. I was displaced back in 2008 and went from 79000 income to 0.00

    Thank you
    Ms wondering

  • Credit Experts

    In almost all cases, they are not.

  • Gerri Detweiler

    Have you asked Capital One to release the lien? What did they say? As for how it is reported, paid liens may be reported for 7 years from the date the lien was filed. If you haven’t done so already, you will need to get your free annual credit reports to see what is being reported.

  • Anna

    I borrowed 29k in private Sallie Mae school loans in 2006, but the loans defaulted in 2008 and sold to Nazient (a Sallie Mae company) for 37,561. 37,561 is now the principal balance and I am settling for $11,000. I am single, unemployed and had a baby this year. Also, am in repayment of 36,000 to Sallie Mae in federal taxes. Can you please tell me what taxes, if any, I will have to pay on the difference of 26,561 this year? Also, will I get taxed in the following years as well?

    • Gerri Detweiler

      Anna – If you settle this year you should get a 1099-c for the full amount in January or February of next year for Tax Year 2014. That means it should come all at once, not over a couple of years. To figure out what (if anything) you will owe in taxes, you need to complete the insolvency worksheet which you will find in IRS publication 4681. That worksheet will help you understand whether you qualify for the full insolvency exclusion.

      This is a substantial sum of money that is being forgiven so if you aren’t sure how to fill that out, or how to handle this on your taxes, I’d recommend you talk with a tax professional. (Now is the time to do that – and it’s great you are checking now rather than after the fact.)

  • John

    I found the answer to my question here under Example 2 on Page 16:

    Thanks, Gerri.

    • Gerri Detweiler

      Glad it helped!

  • Gerri Detweiler

    You do need to complete the reduction of tax attributes section (Part II) which will deal with the questions you raised. Beyond that, I will have to suggest you talk with a tax professional. We wrote generally about that topic here:

    The Tax Form From Hell: The 1099-C Saga Continues

  • Gerri Detweiler

    I am going to have to suggest you work with a tax professional who really understands these forms. It gets very complicated when it comes to rental properties.

  • Gerri Detweiler

    Yes, we talked about that in this article: The Little-Known Form for Avoiding a Big Tax Bill. She may also want to get Mr. Pilla’s book in which he discusses this.

  • worried in florida

    I am a cancer patient unable to work. I am currently 3 years in a chapter 13 which froze my student loans but did not forgive or include payment to them. I just got a full permanently disabled discharge (I am receiving social security) and my student loan debt is now zero. I am expecting a 109 for this canceled debt. MY QUESTION is can I file for the insolvency exemption while under chapter 13. We do not own a home and my cancer treatment wiped out all our savings. Thanks!!

    • Gerri Detweiler

      I am not a tax professional and can’t give tax advice, however, I am not aware of any reason why you can’t qualify for the insolvency exclusion just because you are in the process of filing for bankruptcy. Did you fill out the worksheet based on your finances just before it was discharged? Did that show you qualified for the full exclusion? If so, I am not aware of any reason why you can’t claim it. (And I am so sorry to hear what you are going through!)

  • Gerri Detweiler

    I am sorry I don’t fully understand your situation. It sounds like Citibank wrote off $2000 in debt then sent the 1099-c to the settlement company you were working with and you never saw it. Is that correct? If so, then I believe your next step would be to see if you were insolvent at the time the debt was cancelled. You do that by filling out the worksheet in Publication 4681 based on your information right before the debt was cancelled. (I understand that may be hard to do at this late date). For more advice on how to dispute 1099-c forms this article may help (or you may need to get Dan Pilla’s book and/or professional advice): The Little-Known Form for Avoiding a Big Tax Bill

  • Becca

    We got a notice from the IRS that my husband had a debt cancellation from a bank and we never received the form 1099. How do we get a copy of the 1099 to see what it was from? It listed the bank, but he stated that he has never had an account with them. I do understand that banks sell debt, but how do we find out where this came from?

    • Gerri Detweiler

      The IRS website has instructions for ordering a wage and income transcript for the year in question. It should list the company that filed the 1099-c though, and that may not be the original creditor. If you contact the company that issued the 1099-c they should be able to tell you that. Let me know what happens OK?

  • Gerri Detweiler


    The first thing I would suggest you do is to contact the IRS and tell them you never received a copy of the 1099-C. Ask them how to get it. You will probably request a wage and income transcript for that year.

    You also need to figure out whether you qualify for an exception or exclusion. If you lost the home that you lived in as your primary residence, then you may qualify for the exclusion under the Mortgage Forgiveness Debt Relief Act. If not, you may qualify for the insolvency exclusion. If you do, you will fill out IRS form 982 to report why you believe you qualify for the exclusion. You will find instructions in IRS publication 4681. If you don’t understand it, you may be eligible for free help through volunteer tax assistance. Read: The Complete Guide to Finding Tax Help

  • Gerri Detweiler

    I am sorry but I don’t feel qualified to provide this advice. Edward Zollars, one of the experts I have interviewed for these stories, teaches this subject matter to tax professionals. You may want to contact him.

  • Gerri Detweiler

    It sounds like you are able to claim the insolvency exclusion. Fill out the worksheet in IRS Form 4681 and keep a copy in case you are ever questioned. Then in the meantime, you will have to fill out Form 982 and include it with your return so the IRS understands why you didn’t include that amount in your income. I am not a tax professional, however, so please be sure to get professional advice if you have questions.

  • Michael Bovee

    If every other measurement of your assets and liabilities remains static (not common), and the only moving measurement are the debts being settled, incrementally reducing your total liabilities, and were you to settle all of these in the same year, say 2014, than the numbers will likely come out the same regardless which ones are settled first, when all are settled with whats left of 2014.

    I have encouraged splitting up settlements into different calendar years in order to delay any potential taxes for the following year. You can sometimes negotiate the same settlement amount, but rather than a single lump sum, pay it over 3 monthly installments. Example:

    First payment is Nov 5th.
    Second payment Dec 5th.
    Final payment Jan 5th.

    Your debt was not truly settled, and any amount actually forgiven, until you lived up to your side of the deal by making the final payment of the agreement in 2015. If you need time to save for taxes, you have until the following year.

  • Gerri Detweiler

    I really wish I could give you a reassuring answer but these situations can be very difficult. With regard to the tax issue, Congress has failed to extend the Mortgage Forgiveness Debt Relief Act, but if you qualify for the insolvency exclusion then you may be able to avoid taxes on any forgiven debt. I know you’re under a lot of stress right now, but if you can manage, try to fill out the insolvency worksheet in IRS publication 4681 to see if you can qualify for the insolvency exclusion. That may take one worry off your mind.

    My second piece of advice is to please meet with a bankruptcy attorney. The first consultation will usually be free, and the attorney may have ideas you hadn’t thought of. They are used to dealing with consumers who don’t have any money, so they may be able to come up with a solution for you to gather the money you need if filing is your best option.

    Finally, you could also consider filing a complaint about the mortgage servicing with the Consumer Financial Protection Bureau, which is recently released some guidance around this issue. However, even if you go that route I would strongly recommend you get legal advice.

    I hope these suggestions are helpful and that you are able to get back on your feet.

  • Gerri Detweiler

    The IRS says the 1099-c does not officially mean the debt is forgiven by the lender; it may be triggered by other identifiable events such as non-payment for three years. However that doesn’t mean the lender’s actions in issuing the 1099-c were correct. As I have reported in numerous articles on the blog, there are plenty of times that 1099-c forms are wrong.

    As to the issue of the judgment, it sounds like you are definitely at risk of offset. I would recommend you meet with a bankruptcy attorney familiar with SBA loans to discuss your options. Sometimes settling the debt is possible, but it may also be that bankruptcy is the best way to put this behind you.

    We wrote more about SBA loans here:
    What To Do If You Can’t Make Your SBA Loan Payments

  • Gerri Detweiler

    This is very serious so please get legal advice. If you are going to owe taxes on this amount you may be better filing for bankruptcy. (Debt discharged in bankruptcy is not subject to this type of tax.)

    Before you do anything, talk with a tax professional with experience in these forms. You may qualify for the insolvency exclusion (read out it in IRS publication 4681) but you want to make sure you fully understand it and qualify. If you don’t you could back yourself into a corner where you owe a huge tax bill.

  • Gerri Detweiler

    The type of debt is not the issue with insolvency. Fill out the worksheet in IRS Publication 4681 to find out if you are insolvent. Read the instructions carefully and if you have questions you may need to get help from a tax professional familiar with these forms.

  • Gerri Detweiler

    Jo ann – You can fight it. Unless they were actively trying to collect in the past three years there’s no excuse for sending a 1099-c after all that time. You’ll find more information here: The Little-Known Form for Avoiding a Big Tax Bill

  • Gerri Detweiler

    Jo ann – You can fight it. Unless they were actively trying to collect in the past three years there’s no excuse for sending a 1099-c after all that time. You’ll find more information here: The Little-Known Form for Avoiding a Big Tax Bill

  • JMPO

    I am not sure whether I should be receiving a 1099-C. I was out on disability this year and i had a credit card in which i paid for the disability insurance on it. The card company made my first 2 monthly payments and then paid the balance in full the third month. The debt was cancelled but it was in accordance with the insurance benefit i took out with the card which had monthly premiums that i have paid since i acquired the card. Should i still receive a 1099-c?

    • Gerri Detweiler

      That’s an excellent question, and one I haven’t seen before. I am not certain of the answer but I suspect you won’t get one because the debt was not actually cancelled – it was covered by insurance you paid for.

      • JMPO

        i wasn’t sure because this is what I found on the IRS site “Credit card insurance. In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year.” And when i contact the IRS i just get an automated service or hung up on

        • Gerri Detweiler

          Then I stand corrected! Thanks for pointing that out.

  • Gerri Detweiler

    Was the debt discharged in bankruptcy? If so she can file Form 982 and claim the bankruptcy exclusion. (I am not a tax professional so please encourage her to read Publication 4681 for instructions.)

  • Gerri Detweiler

    You work with an accountant correct? I would suggest you start with him since he is familiar with your tax situation, You can educate yourself on the questions to ask him by reading IRS Publication 4681. It’s not super simple but it should help you understand your options.

    What is a 1099-C? Your Top 11 Questions Answered

  • Jeremiah Schrader

    Hi, I am a total a permanently disabled person. The only type of income I receive is SSA checks. My wife has a normal job, but only 15,000 a year while she’s in school. I hat about $69,000 in debt from student loans. After i got my 1099-c, i found out we owe over $10,000 in federal and state taxes. Is there any type of exclusions or exceptions for me because we can’t afford to pay this much. we really need the advice please.

    • Gerri Detweiler

      Jeremiah –

      Did you complete the insolvency worksheet in IRS publication 4689 to find out if you qualify for the insolvency exclusion? Remember to calculate it including the amount of the debt right before it was cancelled. In other words, the cancelled debt counts as a liability.

      If not, would you qualify if you filed married filing separately instead of joint? If you’re not sure, you may want to get professional advice to try to limit your liability here.

      There is no exclusion or exception specifically ed to the fact that you can’t afford it. However, this article addresses options for taxpayers in the situation:
      What to Do if You Can’t Pay Your Tax Bill

  • Gerri Detweiler

    Do you qualify for the Mortgage Forgiveness Debt Relief Act exclusion? If so that is your easiest route. IRS Publication 4681 spells it out in more detail.

  • Gerri Detweiler

    It’s impossible for me to say how much they will owe. Do they qualify for the Mortgage Forgiveness Debt Relief Act exclusion? If not, the insolvency exclusion? In the scenario you describe it they may qualify for both. IRS Publication 4681 contains instructions. They may also be eligible for free tax help because of their disability and income situation. The Complete Guide to Finding Tax Help

  • tre

    my husband is on SSI and i am on ssdi he received cancellation of student loan $60K how do we put it on tax form. How to fill out form? Does this qualify for insolnevcy? if so how to fill out form?

    • Gerri Detweiler

      You have to fill out the insolvency worksheet in IRS Publication 4681 to see if you qualify for the exclusion. If you do, you will report that on Form 982 which you will file with your tax return. If you don’t understand it, you may want to consider the
      insolvency calculator from Alternatively you may be eligible for help to file your taxes for free.

Find out where you stand.
Get your FREE personalized credit report card.

Sign Up Now

Stay Connected to Our Contributors

Please submit your email address to get credit & money tips & advice
from our team of 30+ experts, delivered weekly to your inbox.