A 1099-C reports Cancellation of Debt Income (CODI). A lender is supposed to file a 1099-C form if it “cancels” $600 or more in debt. It files a copy with the IRS and is required to send a copy to the taxpayer as well. Four common reasons for filing a 1099-C are:
You negotiated a settlement to pay a debt for less than the amount you owed and the creditor forgave the rest;
You owned a home that went into foreclosure and there was a deficiency (a difference between the home’s value and what you owed on it) which was either forgiven or remains unpaid;
You sold a home in a “short sale” where the lender agreed to accept less than the full balance due; or
You did not pay anything on a debt for at least three years and there has been no significant collection activity for the past 12 months.
1. What is a 1099-C?
A 1099-C reports Cancellation of Debt Income (CODI). A lender is supposed to file a 1099-C form if it “cancels” $600 or more in debt. It files a copy with the IRS and is required to send a copy to the taxpayer as well. Four common reasons for filing a 1099-C are:
You negotiated a settlement to pay a debt for less than the amount you owed and the creditor forgave the rest;
You owned a home that went into foreclosure and there was a deficiency (a difference between the home’s value and what you owed on it) which was either forgiven or remains unpaid;
You sold a home in a “short sale” where the lender agreed to accept less than the full balance due; or
You did not pay anything on a debt for at least three years and there has been no significant collection activity for the past 12 months.
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Caller: Jake
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