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bobb1
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1099c cancellation debt. I have a bad debt should I mail the client a 1099c when I write if off for tax year 2016

 
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1099c cancellation debt. I have a bad debt should I mail the client a 1099c when I write if off for tax year 2016

You are only required to issue a 1099-C if you are in the business of lending money.  However, the IRS issued a ruling that anyone with a legitimate canceled debt may issue a 1099-C, on the grounds that it will help increase tax compliance.  Remember that to issue a 1099-C, the debt must be canceled and uncollectible, and you may not make efforts to collect the debt later if circumstances change.  It's meant to be final.  (So, you can't list yourself as a creditor if the client files for bankruptcy, you can't sue or send the debt to a collections agency, you can't try and collect if you discover later that the client was hiding funds or has suddenly come into money, etc.)

https://www.irs.gov/pub/irs-pdf/i1099ac.pdf

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3 Replies

1099c cancellation debt. I have a bad debt should I mail the client a 1099c when I write if off for tax year 2016

You are only required to issue a 1099-C if you are in the business of lending money.  However, the IRS issued a ruling that anyone with a legitimate canceled debt may issue a 1099-C, on the grounds that it will help increase tax compliance.  Remember that to issue a 1099-C, the debt must be canceled and uncollectible, and you may not make efforts to collect the debt later if circumstances change.  It's meant to be final.  (So, you can't list yourself as a creditor if the client files for bankruptcy, you can't sue or send the debt to a collections agency, you can't try and collect if you discover later that the client was hiding funds or has suddenly come into money, etc.)

https://www.irs.gov/pub/irs-pdf/i1099ac.pdf

bobb1
New Member

1099c cancellation debt. I have a bad debt should I mail the client a 1099c when I write if off for tax year 2016

Thank you for your response.  Very helpful

1099c cancellation debt. I have a bad debt should I mail the client a 1099c when I write if off for tax year 2016

If not a 1099C, can I issue a 1099MISC to a client of the bad debt since the bad debt is income to them?
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