Based on the information below, the creditor may not have cancelled the debt at that time. If the Form 1099C is dated 2017, this would indicate the debt was not cancelled until 2017, which means it is required to be included on your tax return. If the Form 1099C has a date for a prior year, then it should be included on that tax return.
If you have documentation that the debt was cancelled in an earlier year, it was included on your tax return for the year of cancellation and a document was never received by the creditor, you can retain those records with your tax return as proof. If it was part of bankruptcy, and therefore not required to be taxable income, also retain those records. In either of these scenarios you can enter the income, then enter a negative miscellaneous income to cancel it out.
If it was never reported as cancelled debt and it was not part of bankruptcy, then it must be included in your income tax return for the year shown on the Form 1099C.
Filing Requirements for Form 1099C: In accordance with Internal Revenue Code (“IRC”) §6050P, discharges of indebtedness of $600 or more during any calendar year, must be reported to the Internal Revenue Service (“IRS”) on Form 1099-C. Entities that must file Form 1099-C include financial institutions, credit unions, the Federal Deposit Insurance Corporation or any organization whose significant trade or business is the lending of money. However, the IRC does not state that these are the only entities that can file such returns. IRS Service Center Advice (SCA) 1998-020 states that “an individual or entity not required to file a Form 1099-C under §6050P of the IRC may nevertheless voluntarily file the form.” Such reporting may encourage voluntary tax compliance and proper gross income inclusions now and in the future.
Debt
is considered canceled or discharged on either an identifiable date that an event occurs or
the date of actual discharge, if earlier.
The following are identifiable event codes that would be utilized for reporting in box 6 of Form 1099-C:
You can add a comment if you have more questions.
So just trying to clarify, the statute of limitations expired 3 years ago, the creditor issued a1099c for 2017 tax year for me to claim on my 2018 taxes. I still have to claim that as earnings on my taxes?
@kfrank1 Yes (exceptions noted). You can contact the IRS, but expect the same result.
Follow-up question, this debt is from a house that burnt down in 2004 that my husband and his ex-wife had a loan on. They each received a 1099 C for the entire amount. How is it decided who pays what for their portion of the taxes?
Be aware that limitation can be tricky to determine in many states.
If the Statute of Limitations actually did expired 3 years ago, they should have sent you a 1099-C for that year, and you would need to pay taxes on it for that year.
Which Code is on the 1099-C?
They are both responsible for it, but in most cases they would each claim half. However, I've read situations where if both parties don't claim half, the IRS will keep coming after both parties until 100% of it has been reported.
TG Bill, this is a loss from 13 years ago. Can they actually issue a 1099-C for the 2017 tax year, as has been indicated here? Something seems wrong with this scenario.
The ex says she can't pay for any of it. Is there a way to ensure she is responsible for half?
@kfrank1 According to IRS Publication 4681, "Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt.
If the debt was longer than 36 month., and I end up paying it after that can they still send me a 1099 - c?
You're asking a legal question. We can't offer legal advice. All we can do is tell you that if you received a 1099-C, you are required to report it on your tax return. For the legalities of it, seek legal advice from a competent attorney.
Received a 1099-C for 2017 tax year, but the date in "box 1" is July of 2012. Do we report the COD in that year? And, will we benefit from the mortgage debt forgiveness laws that were in place at that time?
If the box to the right of boxes 1, 2 and 3 has the numbers (2017) in it, then this is reportable on your 2017 tax return.
Carl - then what is the significance of the date in box 1?
@cjc0101!! The significance is for and from the issuer/owner of the loan. Box 1, Form 1099C. Shows the date the earliest identifiable event occurred or, at the creditor's discretion, the date of an actual discharge that occurred before an identifiable event. See the code in box 6 - .
A—Bankruptcy;
B—Other judicial debt relief;
C—Statute of limitations or expiration of deficiency period;
D—Foreclosure election;
E—Debt relief from probate or similar proceeding;
F—By agreement;
G—Decision or policy to discontinue collection; or
H—Other actual discharge before identifiable event
Basically, the date in box 1 has no meaning or significance for you. It's for the issuer of the form.
Often times these 1099-C received for a debt that has not been paid on for several years are easy to defeat.
@TurboTaxDianeW , I had an old bank account from about 8 or 9 years ago and I messed up didn't pay my loan and credit card payments. Just got notice from the IRS saying that this is the second time that they try to get in touch with me but this is the first notice that I have seen saying that I owe them tax money from 2016. After calling them up and being transferred 3 times I found out it was from debt from a bank and they close the account and did a 1099-C form and the bank never even sent it to me. Now I have to jump through some hoops and contact the bank get the 1099-C form that they issued the date that they close the account send it all to the IRS and then they decide if I am liable paying the taxes since it was from 2016. After all the running around and I get my paperwork and send it to the IRS around how long will this process take usually?
Tom,I submitted paperwork around April 10th and got a response last week, so around 2 months. There are several factors that can be used when contesting these old cancellation of debt claims. Court cases, statutes of limitations, when expectations of collections ended and so on. I just got an old cancellation of debt of $6,500 tossed out for a client.
I'm jumping on the thread instead of starting anew, but I can start a new query if preferred.
I received a 2016 1099C from a cc company of 0 dollars with specific account info. The account was stale for easily 8 years and we were insolvent even with IRS activity during that time.
I received a 2018 1099C from the same cc company of 30k on the exact same account. I sent them a note and advised this was not permitted and they responded that they were issuing it correctly anyway.
I suppose this is the spot where an IRS form 4598 is to be used?
Your thoughts would be appreciated.
I have a 2019 1099c. Line 6 has the letter H. Does this mean I owe taxes on the debt that was discharged?
Possibly.
According to the IRS, nearly any debt you owe that is canceled, forgiven or discharged becomes taxable income to you. You'll receive a Form 1099-C, "Cancellation of Debt," from the lender that forgave the debt.
For more information, please see When to Use Tax Form 1099-C for Cancellation of Debt.
But even if you receive a Form 1099-C from a lender, you still may be able to avoid taxation on the forgiveness of a debt. If your debt was discharged in a Title 11 bankruptcy proceeding, such as a Chapter 7 or Chapter 13 case, you're not responsible for taxes on that debt. Also, if you can demonstrate to the IRS that you were insolvent at the time the debt was cancelled, you can similarly avoid taxes on that debt.
To qualify for the insolvency, you must show that all of your liabilities (debts) were more than the Fair Market Value of all of your assets immediately before the cancellation of debt.
To show that you are insolvent and are excluding your canceled debt from income, you must fill out Form 982. Although the form is available in Turbo Tax, it is not available on line. You would have to use a cd/download and fill out the form manually, there is no interview questions for this.
I recommend that you first read the following links and fill out the insolvency worksheet and the form from the IRS website. Once you have completed it, purchase the cd/download to enter the forms' information into the software.
Please refer to page 5 for insolvency explanation and page 8 for insolvency worksheet:
https://www.irs.gov/pub/irs-pdf/p4681.pdf
Form 982 and its instructions:
https://www.irs.gov/pub/irs-pdf/f982.pdf