What Is IRS Form 1099-C?

IRS Form 1099-C Explained

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IRS Form 1099-C is an informational statement that reports the amount of and details about a debt that was canceled. You can expect to receive the form from any lender that has forgiven a balance you owe, no longer holding you liable for repaying it. You're required to include this canceled debt as income when you prepare your federal tax return for the year in which the debt was canceled.

Key Takeaways

  • IRS Form 1099-C reports a canceled debt to you and to the IRS when a lender forgives an outstanding loan you owe and no longer holds you responsible for paying it.
  • According to the IRS, that canceled debt is taxable income to you and must be reported on your tax return.
  • Lenders must issue Form 1099-C when they forgive debts of more than $600.
  • Some debts, such as most debt discharged in bankruptcy, aren’t reportable on Form 1099-C.

How Does Form 1099-C Work?

A business extends money to you when you borrow, which might come in the form of a loan disbursement or a credit card purchase. In any case, you must enter into an agreement to pay that money back. It's not considered income, or subject to taxation, because you're not going to keep it.

The money becomes income and can be taxed when the lender cancels the agreement requiring you to repay it. Form 1099-C reports this income and various details regarding it, and you'll receive a copy. The IRS receives it as well, and the government expects you to include the income on your tax return.

IRS Form 1099-C Cancellation of Debt

Who Uses Form 1099-C?

The IRS requires that businesses send Forms 1099-C to consumers when the lender cancels or forgives more than $600 in debt. Businesses aren't required to tell you the tax implications of canceling or forgiving loans, but they're obligated to provide a 1099-C to you and to the IRS as well. You'll use it to correctly state the income on your tax return, and the IRS will include it in its file on you.

A lender might cancel your debt for any number of reasons, including:

  • The statute of limitations for collection has expired.
  • You've made a settlement agreement to pay part of the debt and have the other part canceled.
  • The lender has a business policy of discontinuing collection activity after a certain period of time.

You'll have no more liability related to that particular debt after you've dealt with any taxes related to it.

What to Do if You Don’t Receive Form 1099-C

Reach out to the lender if you know you've had a loan canceled over the $600 limit, but you haven't received a 1099-C. The oversight could be due to a clerical error, or perhaps the lender doesn't have your current address.


Don't make the mistake of omitting the income on your tax return simply because you didn't receive the form. That can result in penalties from the IRS.

It's also possible that you won't receive a 1099-C if the loan isn't considered to be reportable to the IRS. There are certain situations in which it can be canceled, but you don't have to report it as taxable income:

  • There's no reporting requirement if the debt was discharged in bankruptcy unless it was incurred for business or investment purposes.
  • Cancellation of certain student debt can be excluded from taxable income. This includes student debt that was canceled for meeting work requirements, loans that were canceled after Dec. 31, 2020 and before Jan. 1, 2026, and debt canceled under a student debt repayment assistance program.
  • Mortgages on a primary residence lost in foreclosure or sold in a short sale, or from a restructured mortgage fall into non-report status. You'll still need to include this forgiven debt on your tax return, but on IRS Form 982.

Your state's tax law for canceled debt might differ from federal tax law. Consult a tax professional, such as an accountant or attorney, to confirm your state's rules for reporting canceled accounts as taxable income. Form 1099-A


You might receive a Form 1099-A instead after a foreclosure event, or in addition to a Form 1099-C.

How to Read and Use Form 1099-C

The name and identifying information for the creditor who has forgiven your debt will appear in the upper left corner of the form. That section also reports the creditor's tax identification number, your Social Security number, your name, your address, and the account number of your forgiven loan.

The numbered boxes all pertain to your debt:

  • Box 1 tells you the date when the debt was canceled.
  • Box 2 cites the amount of debt that was forgiven.
  • Box 3 reports any interest that might have been included in the figure in Box 2.
  • Box 4 describes the debt in question.
  • Box 5 states whether you were personally liable for repaying the debt.
  • Box 6 is provided for a code that identifies why the debt was canceled.
  • Box 7 provides the fair market value of any associated property if the loan was a mortgage, a car loan, or for any other single-item purchase.

Requirements for Form 1099-C

You don't have to submit the 1099-C with your tax return when you file it, because the IRS already has a copy. You should include it with your other financial documents when you go to your tax preparer, however.

Make sure your tax professional has experience with this type of income. You don't want this issue to come back to haunt you. Your tax return might be rejected if you fail to include the income, or the IRS might simply correct your return and adjust your refund or send you a bill for any additional amount that's due if you fail to include the income.


You could face fines and other penalties if the income isn't reported, and any associated tax isn't paid on time.

You might also want to talk to a tax professional if you were insolvent at the time the debt was canceled, because you might not have to report the income. You were insolvent if your total liabilities were more than the fair market value of all your assets at the time. You had a negative net worth when the loan was canceled, so you can file IRS Form 982 to take an insolvency exclusion for canceled debt.

Frequently Asked Questions (FAQs)

How do I avoid paying taxes on Form 1099-C?

A lender issues Form 1099-C when they cancel or forgive a debt in excess of $600. If you have had debt canceled, that is considered taxable income. However, there are some exclusions and exceptions where canceled debt may not be considered taxable income even if you received Form 1099-C. Those include debts canceled under bankruptcy or insolvency, certain student debt cancelations, and mortgages on a primary residence lost in foreclosure or sold in a short sale, among others.

How do I dispute a Form 1099-C?

If you have received an incorrect Form 1099-C, reach out to your lender to correct the information on the Form. Lenders issuing a Form 1099-C while they are still trying to collect on the debt is a common error. If the lender does not correct the information, report the amount of canceled debt mentioned on the incorrect Form 1099-C on your tax return, but also attach an explanation of why the lender's information is not correct.

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