Form 1099-C Cancellation of Debt

If the amount of cancelled/forgiven debt is $600 or more, it is required for the creditor to issue a Form 1099-C lto the person(s) responsible for the loan.

If the amount of canceled debt is under $600, the creditor is not required to issue a Form 1099-C. However, the taxpayer may be required to report the cancelled debt as income regardless of the amount (ref Pub 4012 pg D-58).

Box 4 Debt description:

  • The only type of cancelled/forgiven debt which is in-scope for AARP TaxAide is non-business credit card.   Any/all other types of cancelled debt are Out of Scope.

Box 6 Identifiable event code

  • Code A Bankruptcy - Out of Scope for TaxAide
  • Code B Other judicial debt relief
  • Code C Statute of limitations or expiration of deficiency period
  • Code D Foreclosure election
  • Code E Debt relief from probate or similar proceeding
  • Code F By agreement
  • Code G Decision or policy to discontinue collection
  • Code H Other actual discharge before identifiable event

Insolvency

  • If the taxpayer was insolvent at the time the debt was cancelled, that also makes the form Out of Scope. The solvency/ insolvency status of the taxpayer would not be known by the preparer of the 1099-C, so there is no way to note it on the form. For that reason, the volunteer counselor must make the solvent/insolvent determination using the Screening Sheet in Pub 4012 pg D-58, and the worksheet on page D-59.

    Click on this link to display the worksheet so you can print it out and complete the entries. Always give the completed worksheet to the taxpayer to go with his/her printed tax return.