Form 1099-C (Cancellation of Debt)

Form 1099-C (Cancellation of Debt) is an IRS tax form used to report canceled or forgiven debt. Key points include:

1. Issued by creditors when they forgive $600 or more of debt

2. Reports the amount of debt canceled as taxable income

3. Common scenarios:

   – Credit card debt settlements

   – Mortgage foreclosures or short sales

   – Student loan forgiveness

4. Includes information on:

   – Creditor and debtor details

   – Amount of debt canceled

   – Date of cancellation

   – Interest if included in the debt

5. May have tax implications for the recipient

Receiving a 1099-C doesn’t always mean you owe taxes, as there are exceptions and exclusions. For example, debts discharged in bankruptcy or when the debtor is insolvent may not be taxable. It’s important to report this form on your tax return and consult with a tax professional to understand your specific situation. Ignoring a 1099-C can lead to IRS scrutiny and potential penalties.