Form 1099-C: Cancellation of Debt - Instructions for 2022

Updated on January 26, 2023 - 10:30am by Admin, TaxBandits

IRS Form 1099-C is used by creditors (including domestic banks, a trust company, a credit union) to report the cancellation of $600 or more in debt owed to the debtors. Debtors can be individuals, corporations, partnerships, trusts, estates, associations, or companies.

This form must be filed regardless of whether the debtor chooses to report the debt as taxable income.

Completing Form 1099-C accurately is as important as paying the taxes. Incomplete or incorrect information in the form may attract penalties. To avoid unnecessary penalties, complete your 1099- C with ZERO ERRORS.

To help you with this, we will explain each box of Form 1099-C and the information
entered into it.

1. Line-by-line instructions to complete your Form 1099-C

Line-by-line instructions to complete your Form 1099-C

Let’s take a look at the Form 1099-C instructions:

1. Creditor and Debtor information

Enter the following information of the Creditor in form 1099-C

  • Name
  • TIN
  • Street address, city or town, state or province, country
  • ZIP or foreign postal code
  • Telephone number

Enter the following information of the Debtor in form 1099-C

  • Name
  • TIN
  • Address
2021 Form 1099-C

2. Boxes for debt information

  • Box 1 - Date of the identifiable event

    In this box, enter the date of the identifiable event. However, if you cancel a debt before an identifiable event and you choose to report that cancellation, enter the date that you canceled the debt.

  • Box 2 - Amount of debt discharged

    In this box, enter the amount of the canceled debt.

    Note -The amount of the canceled debt cannot be greater than the total debt less any amount the lender receives in satisfaction of the debt by means of a settlement agreement, foreclosure sale, a short sale that partially satisfied the debt, etc.

  • Box 3 - Interest, if included in box 2

    Enter any interest you included in the canceled debt in Box 2 of 1099-c.

    However, you are not required to report interest in box 2. But if you do, you must also report it in box 3.

  • Box 4 - Debt description

    Describe the origin of the debt in this box, such as student loan, mortgage, or credit card expenditure. Be as specific as possible.

    If you are filing a combined Form 1099-C and 1099-A, include a description of the property.

  • Box 5 - Check Here if the Debtor Was Personally Liable for Repayment of the Debt

    Check box 5 with an “X” If the debtor was personally liable for repayment of the debt at the time the debt was created or, if modified, at the time of the last modification.

  • Box 6 - Identifiable event code

    In this box, enter the appropriate code to report the nature of the identifiable event.

  • Box 7 - Fair market value of property

    If you are filing a combined Form 1099-C and 1099-A for a foreclosure, execution, or similar sale, enter the FMV of the property. Generally, the gross foreclosure bid price is considered to be the FMV. However, if an abandonment or voluntary conveyance to the lender in lieu of foreclosure occurred, enter the property’s appraised value.

    2021 Form 1099-C

Get Started Today with TaxBandits to File Form 1099-C before the deadline to avoid late filing penalties. E-File Now!

2. What are the Advantages of E-Filing Form 1099-C with TaxBandits?

TaxBandits is an IRS authorized e-file service provider trusted by businesses of all sizes to file their tax returns safely and securely. We support the e-filing of various tax forms, including Form 1099-C.

When you file your tax returns with TaxBandits, every form will be checked against the IRS business rules and validations. This ensures that your returns will be transmitted to the IRS without errors, minimizing the chance of rejection.

Here are a few features that make us the best e-filing service provider in business!

  • Accurate & error-Free Filing
  • Postal Mail option to send out Debtor Copies
  • Volume-Based Pricing
  • TIN Matching feature
  • IRS Business Rule Validation
  • USPS Address Validation
  • Access to Form Copies (PDF)
  • Excellent Live Customer Support

3. How to file Form 1099-C with TaxBandits?

Form 1099-C is used by creditors to report if they have canceled any debt worth $600 or more. Creditors can file Form 1099-C with TaxBandits securely in minutes. Simply gather and enter all the information required on Form 1099-C.

Follow TaxBandits simple, form-based process to e-file Form 1099-C with the IRS.

  • Step 1 : Enter the Creditors and Debtor’s details. This includes the Name, Address & TIN 9TaxPayer Identification Number)
  • Step 2 : Enter the debt Details
  • Step 3 : Review your Form 1099-C
  • Step 4 : Transmit Form 1099-C tax form to the IRS
  • Step 5 : Send Recipient Copies to your recipients