Do both borrower & cosigner file 1099-C?

[AlexM1]

Do both the borrower & cosigner have to file a form 1099-C on their federal income taxes for canceled private student loan debt sent to collections due to cosigner's Chapter 13 bankruptcy?  The cosigner never made a payment throughout life of loan, even before it was sent to collections.  Only borrower made payments.

[AmyC · Accepted solution]

The borrower is the debtor and includes the income. The cosignor was the guarantor and not required to claim the 1099-C income. See Legal information.

If you incorrectly receive the 1099-C, contact the issuer and ask for a corrected form to be issued, excluding you. If the issuer will not, you will need to add a statement to your return explaining why you have chosen to not include the 1099-C on your return. You will have to mail in your return. You will not be able to e-file with a statement.

[jjschwie2]

Is there a specific form/statement that needs to filled out.  Form 982?

[AmyC]

No, the  1099-C is other income. See How do I enter a 1099-C?

Related: Topic No. 431 Canceled Debt – Is It Taxable or Not? | IRS

@jjschwie2

[jjschwie2]

I just want to be sure I understand... I received the 1099-C but was not the beneficiary of the money from the original loan that my daughter used for her college tuition .  She received a 1099-C for the same loan that was forgiven.   I contacted the issuer and they responded with a basic response and would not send a corrected form or remove me from the record.  Since she is adding the 1099-C to her taxable income, what do I need to submit since I will not be adding this to my return?  They can't expect 2 people to pay taxes on the same money, can they?

[AmyC]

No, only your daughter needs to include the income on her return. As a cosigner, the issuer sent you the form as well. If the IRS decides to ask about it in a few years, tell them it was reported on the borrower's return, you were just a cosigner.

[Whitney5522]

Hi! What ending up happening for you? My mom was the cosigner on my car loan, I settled for less than owed and we both received 1099 C forms. 

[AlexM1]

I would ask one of the tax experts what happens when you both receive 1099-C forms. In my case, I was the borrower and the only one to receive the 1099-C. My cosigner did not receive a form. My cosigner had his tax preparer create a letter for the IRS explaining who I was and that I received the 1099-C and to refer to my tax return in case the IRS would somehow find a way to link my cosigner to my 1099-C anyway. The letter was sent along with my cosigner's filed taxes. It was strange, but it wasn't rejected.

[DaveF1006]

@Whitney5522 You will be the one that needs to file the return reporting the 1099C.  As Amy C referenced in the previous post, the issuer sent your mom the form as well as yourself. If the IRS decides to ask about it in a few years, tell her to tell them it was reported on the borrower's return, She was just a cosigner. To report in Turbo Tax.

1. Log into Turbo Tax.
2. Go to Your tax returns & documents and select 2019.Next choose to amend (change) 2019 return.
3. After going through the questions you will go to federal>wages and income

4. Less Common Income>show more

5. Go to Miscellaneous Income, 1099-A, 1099-C>start

6. Then go to Cancellation of debt (Form 1099-C) or the abandonment and/or acquisition of secured property (Form 1099-A).

[DaveF1006]

@AlexM1 It sounds like the tax preparer did his/her due diligence anticipating an IRS inquiry later. This is perfectly acceptable. In the meantime, you will need to file the 1099C to report the income since you defaulted on the loan.

In reality, your co-signer was not obligated to report this on their return and if there was an inquiry later on, they would just need to explain that they were the co-signer and that the borrower (you) reported this income on your tax return.  While we are here, here is how to report in Turbo Tax.

1. Log into Turbo Tax.
2. Go to Your tax returns & documents and select 2019.Next choose to amend (change) 2019 return.
3. After going through the questions you will go to federal>wages and income
4. Less Common Income>show more
5. Go to Miscellaneous Income, 1099-A, 1099-C>start
6. Then go to Cancellation of debt (Form 1099-C) or the abandonment and/or acquisition of secured property (Form 1099-A).

 Edited 01/25/22|05:10 PM PST

[rodriguezkimberley]

This has happened to me this year. I am the co-signer for my daughter's loan and we both received a 1099-C for the amount. I called Sallie Mae and explained the situation and they told me to contact a tax expert. 

I have read a couple of different answers to this situation.

So - Should I file my taxes without claiming the 1099-C -or- not claim it and include a letter stating why it wasn't reported on my taxes?

[BrittanyS]

Yes, you can file your return without claiming the 1099-C, with a statement as to why it was not claimed.  

Per the IRS instructions, "You are not required to file Form 1099-C for a guarantor or surety. A guarantor is not a debtor for purposes of filing Form 1099-C even if demand for payment is made to the guarantor."

Since you have reached out to the issuer and they stated to ask a tax expert you can refer back to them and state that you were advised a corrected 1099-C should be issued by them.  However, as AmyC stated, if the issuer will not correct the 1099-C, you will need to write a statement explaining you are the guarantor which is why you are not filing the 1099-C on your return.  You will need to mail the return along with the statement to the IRS.  

@rodriguezkimberley 

[rodriguezkimberley]

Thank you for the clarification. I did call Sallie Mae and was told for loans $10,000 and higher they send the documents to all parties. They will not correct it.

Do I draft the statement on a Word document to include with the return? Should I staple the 1099-C to it?

[Cynthiad66]

Yes, just write a note explaining the situation and you may attach a copy of the form 1099-C for clarity.  You must mail your return to the IRS.

@rodriguezkimberley