If you receive a Form 1099-C, it means you had debts that were cancelled by the lender. Most taxpayers must include this as taxable income; however, some cancelled debt exclusions may apply.
Form 1099-C is filed by a lender to report debts that were discharged. Cancelled debts are considered taxable income for U.S. federal income taxes.
Form 1099-A is filed by a creditor to report the acquisition or abandonment of property. In this example, the taxpayer receives a Form 1099-A for a foreclosed piece of real estate.
If a person has debts cancelled by a lender, the lender may send the debtor a Form 1099-C to report the cancelled debt income. Taxpayers may be able to use Form 982 to exclude those amounts from income.
If an S corporation has any debts cancelled or forgiven during the tax year, it may be required to provide additional disclosures on IRS Form 1120-S.
U.S. taxpayers must include in their gross income any cancelled debts. If a taxpayer has cancelled debt income, they may be able to use Form 982 to exclude it from their taxable income.
