There are exceptions to reporting the income if applicable to your situation. Review the following information below and use the links to determine if you must report this income. Keep in mind that lenders do file a Form 1099C with more than one person on occasion. For example, a cosigner and the actual debtor will both get the same 1099C, only one must be reported, do not double the cancelled debt.
If you determine the cancelled debt should be taxable follow the appropriate steps for your situation.
- Nominee the cancelled debt from your social security number (SSN) to the EIN of the S Corporation to report the income there. Any income or loss will carry to the shareholders on the K-1. See below how to nominee income when it is reported to the wrong person.
- If the S Corporation has been finalized and is no longer filing tax returns, report the cancelled debt on your personal return.
Nominee returns.
Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received). You must also furnish a Form 1099 to each of the other owners.
File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)
- On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer. The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.
The forms filed with the IRS should be the red copy so if you don't have a color printer, go to the IRS website and order the forms here:
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