Co-signer of private student loan recieve 1099-C

[RS8868]

Today I recieved a 1099-C, discharge of a private student loan, for my daughter that I co-signed. I am wondering is it right for the lender to first 1099-C the co-signer OR secondly 1099-C us both? My daughter has yet to recieve a 1099-C.  I am also wondering is the 1099-C then taxable?  I am on perminent disability and wondering if this has any effect on the loan discharge being taxable? 

[Opus 17]

The co-signer is not responsible and should not receive a 1099-C.  See this answer for more.

https://ttlc.intuit.com/community/taxes/discussion/do-both-borrower-cosigner-file-1099-c/00/1877982

You should contact the lender and ask them to cancel the 1099-C.  If they refuse, you should list it as income on your tax return and then create an item of "other miscellaneous income" in a negative amount (minus sign) to offset the income, for the reason, say something like "1099-C not taxable to co-signer".

I can't answer whether the 1099-C is taxable to the student borrower.  The rules on that have changed a lot and it depends on why the loan was canceled and who made the loan. Private loans may have different rules than government loans. 

[RS8868]

thank you for your response. I contacted the lender and they will not withdraw the 1099-C that I am a co-signer on the loan. They are 1099-C debtor and co-signer. Is there a seperate form to fill out to accompany my taxes to state the 1099-C tax is to be reversed and why? I spoke to a local tax preparer and he is stating there must be a proper form and not just a letter.

[Opus 17]

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@RS8868 wrote:

thank you for your response. I contacted the lender and they will not withdraw the 1099-C that I am a co-signer on the loan. They are 1099-C debtor and co-signer. Is there a seperate form to fill out to accompany my taxes to state the 1099-C tax is to be reversed and why? I spoke to a local tax preparer and he is stating there must be a proper form and not just a letter.

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If you file by mail, the IRS instructions say to leave the 1099 off your return, and attach a copy with a written explanation as to why you did not include it.

When e-filing, the correct procedure is to list the income (canceled debt, it will go on line 8c of schedule 1) and then add a negative adjustment to line 24z with a brief written reason (something like "1099-C not taxable to co-signer").  However, to make the entry on line 24z, you need to access the form directly in the desktop version of Turbotax installed on your own computer from a download.

When e-filing using Turbotax online, you can't access line 24z, so an acceptable alternative procedure is to list the income as canceled debt, then add a negative item of "other taxable income" to offset it.  Use the same brief written reason.  This will put the negative adjustment on line 8z of Schedule 1 instead of line 24z, but it's what Turbotax recommends when using Turbotax online.  

[RS8868]

I really appreciate your help!!

Thank You

[Parsons703]

Did you daughter end up receiving a 1099-C as well --  or just you as co-signer?

[BrittanyS]

If you are in the same situation, even if the daughter did not receive a 1099-C, the co-signer is not responsible for the 1099-C.  Opus17 provided great steps above for how to handle this situation on your tax return.  I have copied his response to this thread for easy review, "If you file by mail, the IRS instructions say to leave the 1099 off your return, and attach a copy with a written explanation as to why you did not include it.

When e-filing, the correct procedure is to list the income (canceled debt, it will go on line 8c of schedule 1) and then add a negative adjustment to line 24z with a brief written reason (something like "1099-C not taxable to co-signer").  However, to make the entry on line 24z, you need to access the form directly in the desktop version of TurboTax installed on your own computer from a download.

When e-filing using TurboTax online, you can't access line 24z, so an acceptable alternative procedure is to list the income as canceled debt, then add a negative item of "other taxable income" to offset it.  Use the same brief written reason.  This will put the negative adjustment on line 8z of Schedule 1 instead of line 24z, but it's what TurboTax recommends when using TurboTax online."

@Parsons703