IRS Form 1099-C, also known as the "Cancellation of Debt" form, is used to report any debt you have forgiven for someone else.
This form is required when a debt of $600 or more is canceled, such as forgiven credit card debt, written-off medical bills, or foreclosed mortgages. It notifies the IRS that a debt has been forgiven and provides a copy to the taxpayer who had the debt for their tax records.
You need to file Form 1099-C if you are an "applicable financial entity" that forgives or cancels a debt of $600 or more owed by a taxpayer. This includes businesses such as:
In summary, if you are a business that forgives a significant debt, you will likely need to file a 1099-C.
Creditors must be aware of two important deadlines related to Form 1099-C:
The deadline for creditors to submit Form 1099-C to the IRS depends on the filing method:
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Creditors must share copies of Form 1099-C to recipients by January 31st of the year following the relevant tax year. This allows debtors to accurately file their tax returns on time.
Missing these deadlines or providing incorrect information on Form 1099-C can lead to IRS penalties. To avoid potential penalties, creditors should take steps to ensure that Form 1099-C is filed and distributed both accurately and on time.
If you miss filing Form 1099-C within the deadline, the IRS will impose a penalty. Here are the Form 1099-C penalty rates:
Days late | Penalty per return |
---|---|
Up to 30 days | $60 |
31 days late through August 1 | $130 |
After August 1 or not filed | $330 |
Intentional disregard | $660 |
Why risk penalties?
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Let's see line-by-line instructions on how to fill out Form 1099-C.
Enter your name, complete address, and TIN (SSN if you're an individual; EIN if you're a business).
Enter the debtor’s name, complete address, and TIN (SSN for an individual; EIN for a business).
Enter the date when the debt was officially canceled.
Exception: If you voluntarily cancel a debt before an identifiable event occurs and choose to report this cancellation, enter the actual date you canceled the debt.
Enter the total amount of debt canceled. This amount must not exceed the original debt minus any payments received, through any of the following:
If you included interest as part of the canceled debt amount in Box 2, enter that interest amount here in Box 3.
Important notes:
Provide a specific description of the debt's origin. Examples include:
Be as detailed as possible in your description.
Special case:
If you are filing a combined Form 1099-C and 1099-A, also include a description of the property associated with the debt.
Check this box if the debtor was personally responsible for repaying the debt. When to check:
Put an "X" in the box if either of these conditions is true:
Enter the appropriate code to indicate the nature of the identifiable event that led to the debt cancellation.
Report the debt as canceled on the earlier of:
Identifiable Event Codes
Code | Description |
---|---|
A | Discharge in bankruptcy under title 11 of the U.S. Code (See "Exceptions" section for discharges not requiring reporting) |
B | Cancellation due to receivership, foreclosure, or similar federal nonbankruptcy or state court proceeding |
C | Cancellation due to statute of limitations expiration (Only when debtor's defense is upheld in final court judgment with expired appeal period) |
D | Foreclosure election by creditor that legally bars further debt collection (Applies to mortgage lenders barred by local law after a "power of sale" exercise) |
E | Cancellation under probate or similar proceeding |
F | Discharge by agreement for less than full consideration (e.g., short sales) |
G | Cancellation due to creditor's policy or decision to discontinue collection (Can be written policy or established business practice) |
H | Other actual discharge occurring before any of the above identifiable events |
This box applies only when filing a combined Form 1099-C and 1099-A. Enter the Fair Market Value (FMV) of the property as follows:
You can file Form 1099-C, either online filing or by postal mail.
The IRS recommends e-filing due to its efficiency, accuracy, and quick processing notifications. To e-file Form 1099-C, use an IRS-authorized e-file service provider like TaxZerone.
Here's how to e-file Form 1099-C:
While less efficient, paper filing is still an option. Follow these steps to file Form 1099-C on paper:
Important considerations for paper filing:
Alternatively, you can file Form 1099-C electronically for faster processing and delivery, reducing the risk of delays or lost forms.
If you prefer paper filing, the mailing address for Form 1099-C varies depending on your business location. Below is a table summarizing the mailing address for Form 1099-C:
If your business operates in or your legal residence is… | Mail Form 1099-C to… |
---|---|
Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Texas, Vermont, Virginia | Internal Revenue Service Austin Submission Processing Center P.O. Box 149213 Austin, TX 78714 |
Alaska, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, Wyoming | Department of the Treasury IRS Submission Processing Center P.O. Box 219256 Kansas City, MO 64121-9256 |
California, Connecticut, District of Columbia, Louisiana, Maryland, Pennsylvania, Rhode Island, West Virginia | Department of the Treasury IRS Submission Processing Center 1973 North Rulon White Blvd. Ogden, UT 84201 |
Outside the United States | Internal Revenue Service, Austin Submission Processing Center, P.O. Box 149213, Austin, TX 78714 |
Before you start e-filing Form 1099-C, ensure you have all the necessary information to facilitate a smooth and efficient filing experience. Here’s what you need to gather:
Step 1: Complete Form 1099-C
Open Form 1099-C and fill out the necessary fields with the information you have gathered.
Step 2: Review and transmit the return
Carefully review all the entered information to ensure accuracy. Once verified, transmit the completed Form 1099-C to the IRS.
Step 3: Provide the debtor copy
After successfully transmitting the form to the IRS, share a copy of the completed Form 1099-C to the debtor.
E-filing Form 1099-C with TaxZerone offers several advantages, including:
By e-filing with TaxZerone, you can simplify your Form 1099-C filing, save time, and reduce errors.