Received a 1099-C?
If you received Form 1099-C, it means you had debt forgiven by a lender. Perhaps a credit card company or even your home mortgage lender discharged debt that you previously owed. Often, it comes to a surprise to taxpayers that debt cancellation can be required to be reported as income on your personal tax return.
Is Your Cancellation of Debt Income?
Do NOT ignore this form. The IRS receives a copy of this form when it is sent to you. Failure to properly report the debt forgiveness could trigger aggravating and time-consuming correspondence with the IRS. Consult with a tax professional familiar with Form 1099-C about how to treat it on your personal tax return. A qualified tax professional can also explain the reasons why you may not be taxable on this form of income.
Reporting Mortgage Debt Forgiveness is Complicated
If your 1099-C relates to cancellation of home mortgage debt, then proper reporting often requires two transactions be reported:
- the cancellation of the debt
- the sale or foreclosure of your home.
Reporting cancellation of mortgage debt is not a do-it-yourself tax reporting project for most people; Call me at 713-800-6069 for affordable, honest, and professional tax return assistance!