1099C With a Co-Signer?

[mbuschbaum]

Is it ok to only claim 50% of the amount reported on a 1099C Cancellation of Debt if there was a co-signer on the loan that resulted in a cancellation of debt.  

[Opus 17]

You received the money originally, you never paid it back, therefore it is your taxable income now. It would never be taxable income to the cosigner unless the cosigner received half the money in the beginning.  

[macuser_22]

The purpose of a co-signer is to obtain the loan.   If you fail to pay the loan then the lender can go after the co-signer for the payments.   Since it seems that the lender has not done that and is forgiving (canceling) the debt, the co-signer is no longer involved at all.    They are canceling *your* debt, not the co-signers debt.

[QUESTION1234]

What if the 1099-C's are for loans over $10,000? Apparently anything over $10,000, they have to send the 1099-C to both the co-signer and the borrower. What should the co-signer do in this case?

[JohnW152]

As @Opus17 notes above, it's not taxable income to the co-signer unless the co-signer received half the money in the beginning.  The co-signer has no skin in the game: he or she received no benefit, so there's no liability.

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[QUESTION1234]

Do I need to include the copies of the 1099-C's with my return along with a letter stating they are not included in my return because I was the co-signer? Or do I just disregard them and go ahead and file?

[JohnW152]

Yes, you need to enter the 1099-C data, but no letter is necessary. Assuming that you're the co-signer, go ahead and enter the 1099-C, then make an adjustment to offset the income.

To enter your Form 1099-C in TurboTax, follow the steps below: 

1. Sign in to TurboTax (if you're not already signed in).
2. On the Hi, let's keep working on your taxes! page, select the dropdown to the right of Wages & Income
3. Select Pick up where you left off or Work on other income
4. Select the dropdown to the right of Less Common Income -- Home sale, canceled debt (1099-C, 1099-A), 1099-SA, gambling, etc.
5. Select Start or Revisit to the right of Miscellaneous Income, 1099-A, 1099-C
6. On the Let's Work on Any Miscellaneous Income page, select Start to the right of Cancelation of debt (Form 1099-C) or the abandonment and/or acquisition of secured property (Form 1099-A)
7. Once you've entered your information, you should be on the Let's Work on Any Miscellaneous Income screen

THEN:

1. Scroll down and select the Start or Revisit to the right of Other reportable income
2. On the Any Other Taxable Income? screen, select Yes
3. On the  Other Taxable Income screen enter the description 1099-C Co-Signer, then the amount, as a negative (i.e., -10,000).  Select Continue
4. On the  Other Miscellaneous Income Summary screen, you should see the transaction.  Select Done

If the TurboTax Online navigation described above doesn't look like what you're experiencing, see the TurboTax Help article Why does the TurboTax navigation menu look different for me?.

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@QUESTION1234 

[Opus 17]

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@QUESTION1234 wrote:

Do I need to include the copies of the 1099-C's with my return along with a letter stating they are not included in my return because I was the co-signer? Or do I just disregard them and go ahead and file?

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When filing by mail, you leave the 1099-C off your return, and attach a copy and a written explanation.  When e-filing, you can follow the other instructions to add the 1099 then create a negative adjustment with a brief explanation. 

[QUESTION1234]

I followed the instructions to make the changes and updated everything. I originally planned to mail my return and paid already. Now that I have made these changes and can file electronically, it's trying to make me pay again. What can I do?

[BrittanyS]

Follow these steps provided by TurboTax, to see what fees you are being charged for and what you paid for:

1. Open or continue your return.
2. On Tax Home, select Start or Continue to enter your return.
3. Select Tax Tools from the menu, and then Tools.
4. A Tools Center box will pop up on your screen.
5. Select My Fees.

If these steps don't work (for example, on your mobile device), go to Tax Home and open the Finish & File section. From there you can review your orders, purchases, and fees.

It could be that you selected an upgrade or service you did not intend to use.  If you selected an item you did not use or wish to downgrade you can make the select to remove the items or downgrade.

@QUESTION1234 

[QUESTION1234]

After following the instructions to add the 1099, etc., when I download a copy of my return, I'm not seeing anything referencing the 1099-c or the negative other income, etc. How do I know the changes were recorded and my return was updated before I e-file?

[Vanessa A]

You will find this on your Schedule 1.  On part 1 line a you will see the 1099-C reported.  Then on line 12, you will see the income removed from your income.  You will not see either the addition or subtraction on your form 1040.