Yes, you have to file a 1099-C if you received one. (The IRS gets a copy of the form and will sooner or later send you a letter to collect tax due (if any), penalties and interest. You don't want this.) Code G states that the 1099-C was issued because of a "decision or policy to discontinue collection."
To enter your 1099-C,
- In your open Federal Return, choose the tab for Wages & Income
- Scroll down to the topic Less Common Income. (You may have to click Add more income and See a list to find it.)
- Scroll to the very last item Miscellaneous Income, 1099-A, 1099-C and choose Start/Edit
- This will open the screen for Miscellaneous Income. Scroll down again to Cancellation of debt (Form 1099-C) or the abandonment and/or acquisition of secured property (Form 1099-A) and Start/Edit
- The first screen says Tell us about your canceled debt.
- Choose the correct radio button and Continue to complete the interview.
Please read this unofficial legal source to determine if you have future responsibilities to pay this debt. You do need to report this 1099C as income on your return.