If you defaulted on a debt, negotiated a reduced pay-off with your lender, or lost a home or other property due to foreclosure or repossession, you may have received a Form 1099-C Cancellation of Debt in the mail. Since the IRS expects you to include in your gross income any forgiven debt—and pay taxes on it (unless you qualify for an exclusion or exception)—this is a form that requires your careful attention.
If you have received one of these forms, you’re not alone. The IRS projects that it will process 2.8 million 1099-Cs for the 2010 tax year, up from nearly 2.7 million for the 2009 tax year. Thus, this week’s infographic is dedicated to the Form 1099-C, the new tax-time mascot of the Great Recession.
For more on the Form 1099-C, see Gerri Detweiler’s article, 1099-C In the Mail? How to Avoid Taxes on Canceled Debt.