If you’re facing tax headaches because you received a 1099-C for cancellation of debt income, you are not alone. An estimated 6.3 million of those forms have gone out to taxpayers and they are creating all sorts of confusion. It’s a big mess, and the IRS isn’t exactly handing taxpayers a broom. If you’re among the millions struggling with these forms, take a look at the resources we’ve put together for you here.
If you received a 1099-C, then read this in depth article: 1099-C In The Mail? How to Avoid Taxes on Cancelled Debt which will explain how you may be able to avoid paying taxes on this “income.”
If you received a 1099-A, most likely due to a foreclosure, then you’ll want to read 1099-A In The Mail? How to Avoid Taxes on Cancelled Debt. A related article, More Confusion Over the 1099-C talks about whether Home Affordable Foreclosure Alternatives payments are taxable, and what happens when private mortgage insurance (PMI) is involved in cancelled debt.
If you filed for bankruptcy or had a student loan forgiven, then hopefully this article, Just Received a 1099-C? Don’t Freak Out! will give you the additional information you are looking for.
If, like many of our readers, you have received a 1099-C for a very old debt, then my article 1099-C: The Worst Tax Mess of the Year? is for you.
I would be remiss if I didn’t warn you that the mess these lenders are creating can also increase your chances of being audited. I explain why in 1099-C Wrong? Taxpayer May Pay With An Audit.
And finally, if you believe a 1099-C form you received is wrong, or too old, you’ll want to make sure you read Tax Help: How to Dispute a 1099-C as well as my more recent article, What to Do If You Get a 1099-C for an Old Debt.
Thanks so much to our readers who have shared their questions, comments and frustrations. I wish we had all the answers, but we don’t. It’s clearly something the IRS needs to fix, and fast. If you’re facing financial problems or hardships due to a 1099-C, or if you can’t get straight answers to your questions, I’d encourage you to contact your elected officials in Washington and let them know what’s going on.
And take heart: maybe it won’t be as bad as you think. One of our readers who first wrote in “freaking out” when she got one of these forms now writes:
Just want you to know I made out okay with my taxes regarding the 1099C…….not as bad as I thought it was going to be……so I will pay off what I owe the IRS………at least I will be able to eat in the following months……….I have certainly learned a lesson in this experience. Never want to have this happen again.
Hopefully you’ll find a way to put this behind you as well, without resorting to an all Ramen Noodle and peanut butter diet.
Image: Linzi Clark, via Flickr