Form 1099-C

Form 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.  A copy is filed with the IRS and the lender is required to send a copy to the taxpayer as well. 


Four common reasons for filing a 1099-C

• The TP negotiated a settlement to pay a debt for less than the amount they owed and the creditor forgave the remainder;
• The TP owned a home that went into foreclosure and there was a deficiency (a difference between the home’s value and what was owed on it) which was either forgiven or remains unpaid;
• The TP sold a home in a “short sale” where the lender agreed to accept less than the full balance due; or 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.

Nontaxable income

Do not report any nontaxable income on Line 21.

Examples of nontaxable income

Child support payments the TP received to help pay the mortgage loan under the HFA Hardest Hit Fund or the Emergency Homeowners’ Loan Program, or similar state program.
Any Pay-for-Performance Success Payments that reduce the principal balance of the TP’s home mortgage under the Home Affordable Modification Program.
Life insurance proceeds received because of someone’s death (other than from certain employer-owned life insurance contracts).
Gifts and bequests.