What is a 1099-C? If I get a 1099-C do I still owe the debt?

Receive a mysterious Form 1099-C in the mail? Debt, taxes, and confusing paperwork – it's enough to send anyone's head spinning. But fear not! We're here to unravel the mystery of the 1099-C and answer your burning questions, like:

What is a 1099-C?

Think of it as an official "heads-up" from your creditor. A 1099-C informs you and the IRS that some or all of your debt has been canceled. This could be due to various reasons, such as:

  • Debt settlement: Negotiating a reduced payment to clear your debt.
  • Foreclosure: Losing your home due to missed mortgage payments.
  • Repossession: Having your car or other property taken back by the lender.
  • Bankruptcy: Legally discharging a significant portion of your debt.

Do I still owe the debt if I get a 1099-C?

Just because you received a 1099-C doesn't mean you're off the hook completely. Here's the tricky part:

  • The debt may be canceled, but the taxman wants his share. In most cases, canceled debt is considered taxable income by the IRS. So, yes, you might owe taxes on the amount listed on the 1099-C.
  • However, there are exceptions. Certain situations, like student loan forgiveness or debt cancellation due to natural disasters, might not be taxable. It's crucial to understand your specific situation and consult a tax professional for personalized advice.

What should I do with a 1099-C?

Don't ignore it! Here are some key steps:

  • Review the form carefully. Verify the creditor, amount canceled and date of cancellation.
  • Contact the creditor. Double-check if the debt is truly canceled and inquire about any outstanding balances.
  • Consult a tax advisor. They can help you determine the tax implications and guide you through filing your return accurately.


  • Receiving a 1099-C doesn't automatically mean you'll owe taxes.
  • Ignoring the form can lead to penalties and interest.
  • Seek professional help if you're unsure about your tax obligations.

Bonus Tip: Keep a copy of the 1099-C for your tax records.

By understanding the 1099-C and taking proactive steps, you can navigate this financial hurdle with confidence. Remember, knowledge is power – and tax planning is key to keeping the IRS happy!

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