What Is a 1099-c?

Did you know that debt cancellation is considered taxable income?

If you received a 1099-C in the mail from a creditor, it’s probably because you were granted forgiveness or cancellation of personal loan debt, credit card debt, student loan debt, or any type of consumer debt.

Creditors report the amount of your forgiven debt to the Internal Revenue Service (IRS), which sends the 1099-c to the original borrower who must use it to report cancellation of debt income on their tax return.

Getting a 1099-c form is common after resolving consumer debt, including credit card debt and student loan debt, auto loans, etc.

Whenever a credit card company or lender forgives $600 or more, it is required by law to file the cancellation of debt notice with the IRS.

What to do if you get a 1099-c

If you receive a 1099-C form, don’t panic. The form may or may not affect your tax refund or tax return. Ask a certified tax professional or debt lawyer what the tax consequences might be for you, and whether the IRS will count your debt settlement as ordinary income.

People who are insolvent may qualify for an exception in some special cases. Insolvency means the amount of debt owed is more than the total of your income and assets. If you qualify for insolvency, there is an additional set of tax forms you’ll need to fill out on your federal tax return.

Consult a tax professional to find out how settling debts may affect you.


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I just wanted to thank your entire staff at The Law Offices of Leslie H. Tayne, for helping me get out of debt. If it wasn’t for your firm, I would have never been able to resolve my $13k worth of debt in less than 3 years. Your staff did a great job, I was finally able to buy myself a brand new car without using a cosigner. I can’t tell you again how happy I am. I would recommend your services to anyone.

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