Is there a problem with 1099-C debt forgiveness?
It seems more and more people are getting tax form 1099-C issued now for the forgiveness of old debt from as long as twenty years ago. That’s a problem for consumers. This old debt is sometimes called “zombie debt” because it appears to come back from the dead. The first thing you should do is not panic.
When do you have to file a 1099-C debt cancellation?
Lenders and creditors must send a 1099-C to the IRS and to borrowers if $600 or more in debt was canceled or forgiven. 1 In most cases canceled debt counts as income. If you receive Form 1099-C, you must report the amount on your income tax return on the “Other income” line of your Form 1040 or 1040-SR.
What happens when you receive a Form 1099-C?
The Internal Revenue Service does not say that your debt balance is zero after a Form 1099-C is issued, or even that the bank cannot try to collect after the notice is sent. I received a Form 1099-C Cancellation of Debt in 2016 for credit card debt that I was unable to pay.
Do you have to report forgiven debt as zero on your tax return?
If the banks won’t report the amounts due as zero, you can still resolve your debts the same way you would have before you received the Form 1099-C. Since the tax impact was minimal the year you reported the forgiven amount as income, you shouldn’t need to amend that year’s tax return.
How to deal with a new 1099-C issued?
Call the IRS (1-800-829-1040 ) and have an IRS representative initiate a Form 1099 complaint. The IRS will fill out form 4598, “Form W-2, 1098, or 1099 Not Received, Incorrect or Lost”. A letter will be sent to the creditor requesting that they furnish a corrected Form 1099 to the taxpayer within ten days.
When did PRA issue Form 1099-C for Stewart?
On the other hand, IRS contended that Stewart’s debt was discharged in 2008 when PRA issued Form 1099-C. IRS noted that a decision by a creditor to discontinue collection activity may require that creditor to issue a Form 1099-C.
Where can I get a 1099-C tax form?
Ironically, however, they do not provide this form on their website at IRS.gov. Jim Buttonow, a CPA and frequent contributor to this site says that to deal with this errant 1099-C consumers should: Call the IRS (1-800-829-1040 ) and have an IRS representative initiate a Form 1099 complaint.
