Reporting Form 1099-A & Form 1099-C

A few weeks ago, I did a blog post titled “You got a Form 1099-C. Now What?” We’re still getting questions on an almost daily basis over there. But it’s gotten a little buried and I want to make sure that information stays accessible. Please post your questions here – I’ll be moving them to this post if any come on the older one too.

Some of the things we’ve discussed: What is the difference between the Form 1099-A and Form 1099-C? The Form 1099-C report cancellation of debt. The Form 1099-A does not report the cancellation. This leads to the question of whether you should report debt forgiveness income from a Form 1099-A. Readers of the blog have reported that the IRS has told them they should and others have been told that they should not (also told by the IRS).

The Form 1099-A is used to report that property was received. Period. It does not say whether the debt was cancelled. If the debt is cancelled, then you get Form 1099-C. If you have property that is both foreclosed on and the debt is cancelled, you’ll get both Form 1099-A and Form 1099-C. If you only get Form 1099-A, that probably means the debt has not been cancelled. Look out. Depending on the state you’re in, the lender may have as long as 4 years to come after you for that debt.

The problem is that many lenders have been merged, bought or otherwise changed and the paperwork is a mess. Plus, the lenders don’t seem to have a good grasp of when to use the right form either.

So what if you don’t get the right form or they’ve used the wrong address to send it to you? One suggestion may be to go ahead and file anyway, assume you’ve gotten the cancellation and then either offset it with a loss in the property (hopefully) or be able to prove why you’re not liable for the tax by filing Form 982.

Got questions? Pleas ask them here.


101 Responses to “Reporting Form 1099-A & Form 1099-C”

  1. Julie says:

    I have received the 1099c last tax season, and this year i received the 1099a. Im in california. Does that mean i dont have to do anything with the 1099a in filing for this year?

  2. Diane says:

    Julie, this doesn’t seem right. Is the Form 1099-C the same loan? The Form 1099-C should be the end of it. Is it possible that the next year (this year) Form 1099-A is for another loan on the same property? Otherwise, call the lender and find out why they gave you a second form. If wrong, make them correct it.

  3. Julie says:

    Thanks for replying. It’s for the same loan, all info are the same, the only difference is one is C and the other is A and i got them 1 year apart. My accountant got confused too, she said its complicated. Im
    trying to do reseach on this too so i can understand it.

  4. Joe says:

    I received a 1099-A for tax year 2009, but no 1099-C. I’m assuming the bank will want to come after me for deficiency since the FMV (Box 4) is much less than Box 2. Plus, this was for an investment property that was foreclosed. My question is what do I do with the information on the 1099-A? One tax pro said I can write it off as a Capital Gains Loss on a Schedule D since it was on an investment property. She also suggested I contact the bank and ask if they will forgive any of the debt. I seriously doubt it since I haven’t received a 1099-C yet, and the bank has since been bought out by another bank.

    So, should I include the 1099-A info on a Schedule D, or just not even report it on my return this year? Thank you whole heartedly for your help in advance.

  5. Sam says:

    i have same problem as Joe ..will you please reply his question n concern.

    thank you.

  6. Diane says:

    Hi Joe & Sam, I wish I had a definitive answer for both of you.

    Let me answer it with an example. In California, there are lawsuits breaking out all over because lenders have take the position that they can go after former property owners. But the property owners have take the position that because of the type of contract, and California law, that the lender can not.

    I’m not a lawyer and so I want to be really clear that I can’t give legal advice here. From the lawyers I’ve talked it, it seems that the former property owners have a very good argument. We have to wait for the courts to sort it out.

    But that meanwhile leaves these property owners in a limbo. What do they do? We are taking the position that they should report this as COD income, even though all that they received was a Form 1099-A (not a Form 1099-C.

    If you have a loss from the disposal of an investment property, by all means report it on Schedule D or Form 4797 (depending on the property type). You can’t deduct the loss on a principal residence.

  7. Christine says:

    Hi Diane. We gave 2 vacant lots back to the bank in 2009. After 2 years we could not get them sold. We worked with the bank and did a Deed in Lieu of Foreclosure, and kept our payments up through the process. Before the closing we received a letter on both lots saying we owed $0 on each, a month later we closed & received a Warranty Deed in Lieu of Foreclosure for each lot. They did tell me I would be receiving a 1099 on each property at the end of the year. I received a 1099-A for each lot. Lot 1 – $23,145.54 Balance of Principal Outstanding & $48,000 FMV (bought for $29,500). Lot 2 – $17,770.67 Balance of Principal Outstanding & $18,000 FMV (bought for $23,000). I don’t know where or how to record this on my taxes. I looked at the Sch. D, but it doesn’t really seem to work right for this situation. At first I was under the impression I had to claim as income a gain of the difference of FMV (like I sold it at a profit) and either my loan balance or what I bought the lot for. But I found a Worksheet on page 5 of Publication 544, which seems to tell me otherwise, that I have a loss. Either way I don’t know how or where to record this on my taxes – don’t know if I have a gain or loss. I’m pretty good at this stuff and doing my own taxes but this situation has me stumped. I would so greatly appreciate your help. Thank you.

  8. Diane says:

    Hi Christine:

    You do need to report this on Schedule D. On Lot 1, basis is $29,500 (plus any other capitalized costs), sales price is 23,145.54 – You will have a loss on the sale. It sounds like they expect to sell the property for profit, so there will be no cancellation of debt income.

    Lot 2, basis is $23,000 plus any other capitalized costs and sales price is $17,770.67.

  9. Christine says:

    Thank you Diane. So I don’t have to do anything with the Fair Market Value the bank put on the 1099-A forms? As they are expecting to sell it for more than what I owed? That was confusing me. I was thinking I might have to claim $48,000 and $18,000 as the sales price. So what your saying is I claim the Balance of Principle Outstanding as the sales price. What did you mean there will be no cancellation of debt income? Also, if the bank ends up selling the lots for less than what I owed, will they or can they come back at me in some way? I was thinking I was protected as we worked with them to do the Deeds In Lieu of Foreclosure. Thanks again for your help.

  10. Diane says:

    Christine, If the property sells for more than you owe, than the bank will make money. That means they don’t have to write off your debt (cancellation of debt) and there will be no taxable income to you.

    If the bank sells for less than you owe on the property, they will either come after you for the difference or they will write it off (which means you have taxable income).

  11. Michael says:

    Diane,
    My spouse and I each own a condo located in our former home State(formerly each of our primary residences prior to marriage – neither of us is liable for the others mortgage note). We moved out over 2 1/2 years ago due to job loss and moved to another State. One property became a second home and we couldn’t sell it, the other became rental property. We unfortunately met with additional lay-offs and were unable to keep up with either mortgage as of 10/09, as we had to continue pay our rent in our new home State. The second home finally came under short-sale contract (temporarily ceasing the pending foreclosure) and is taking some time to process, as expected. The other property continues to linger in lender’s black hole. In the process we have become what would be considered insolvent and have considered filing for BK. My thought is if we can earn sufficient income to keep up with our non-RE debt, is it really necessary to file BK since we are insolvent (and will be for some time as we dig out) and should not have to pay income tax in the event of debt forgiveness on either condo. If they should decide to sue us for deficiency on either property, we could always negotiate down further or file BK then. What is your opinion? Should they accept the short-sale and then issue 1099-C on either property and should we not be able to prove insolvency through form 982, or my bigger fear is we will have we lost our ability to file BK and discharge those taxes owed since the forgiveness of debt (short-sale) will have occurred pre-filing and prior to BK discharge? Are we better off allowing them to go to foreclosure and prove insolvency in the instance 1099c’s are issued and if they aren’t, I am certain we maintain our right to discharge through a BK if they sue. Please advise
    Thank you

  12. Anne says:

    Hello,

    I have a 1099-A for business property abandonment – I have calculated the gain that would be recognized…however I’m confused as to whether it needs to be reported at this point, since they have not actually canceled the debt….

    If it is taxable at the time of receiving a 1099-A, then what happens if they don’t cancel the debt and you end up still needing to pay the remainder of the loan? How is this interest & principle taken into account for tax purposes?

    Very confusing to me…as is all IRS laws…:)

  13. Diane says:

    Michael, first off, I strongly recommend you talk to an attorney in your home state. You need to know what the rules are for deficiency judgements (ie, can the lender come after you?), plus want to make sure that you are properly prepared to BK if that’s the choice you make.

    In general, though, if you qualify for insolvency, the debt forgiveness will not be subject to federal income tax.

    Check out the 6/23/10 blog post on http://www.USTaxAid.com on the states that are now taxing debt forgiveness, even if there is insolvency. You don’t want to get caught by surprise with state tax.

  14. Diane says:

    The Form 1099-A is puzzling because the lenders often aren’t following the rules! If you have a bankruptcy, they do not need to give you a Form 1099-C even though the debt has been forgiven. They might do so anyway… And if you have a principal residence with debt forgiveness, you may not get a Form 1099-C either.

    If you believe that the debt is forgiven and they can’t come after you (due to state law), report the sale.

    If they later come after you with a default judgment and you pay it, you then report the loss on the property.

  15. Mark says:

    Diane, is there anymore on the deficiency laws with a 1099A, i got one last year and paid taxes on it in for 2009. 6 months ago or so..now i just recieved a letter from a collection agency for the $125,000 that i had already paid taxes on. They’re killing me, or at least kicking me when im down. any advice of what to do with this collection agency?

  16. Shawna says:

    My husband and I filed bankruptcy in Sept 2008, it was discharged in Dec 2008. In February 2009, I received a 1099-A ( Our mortgage was included in bankruptcy, had to go through foreclosure, etc) The house FINALLY sold in March 2010, I am assuming that I am going to be receiving a 1099-C for this tax year, are we going to be taxed on the difference of the sale or are we safe since the debt was discharged?

  17. Lupe says:

    Diane,

    My in-laws took out 200k out of their primary home in order to buy a new home in 2005. Then they turned around and rented out the original primary home, which now is being foreclosed on. They have been renting it out for 5 years and the renters have gone under and it has become a financial burden for them. They can’t sell because the property is upside down. Their primary home that they used the 200k is also upside down but they were able to modify the payment. They are on Social Security income only, they do not have any assets or retirement, other than the SS income they receive… will they be able to claim insolvency on the foreclosed property? By the way, these properties are in California.

  18. Mel says:

    Hello,

    I have a concern about a property that I short sold last year in California. I’m 29 years old and sold my second house after going a divorce, we ended up agreeing to sell the property. There was a first and a second loan on the property, after filling out all the paperwork the house was sold in a short sale, with both lenders being Chase. A couple of months past and they sent me a 1099-c one for the first loan, and another 1099-c for the second. I filed as insolvent in 09 now a year later I receive a call from a collections agency saying that I owe the full amount of 146k that was still my debt to pay to Chase. My question is can the lender come after you for a debt that was forgiven and that they sent you a 1099-c form for and have paid taxes on. I’m really confused as to why a year later they would come after me if on my credit report that loan states it was closed and that I owe Zero dollars on.

    I could really use your professional advice in this matter, and any advice would be greatly received.

  19. Diane Kennedy says:

    Lupe, most likely your in-laws will be able to claim the insolvency exemption and the COD (cancellation of debt) income will not be subject to federal tax. The state laws are rapidly changing and so this is something they will want to check on specifically. Does CA give the same exemption at the time that the forgiveness occurs? Reminder that you need to file Form 982 with the tax return to get the insolvency exemption.

  20. Diane Kennedy says:

    Mel,

    Wow, I hadn’t heard of a story like yours. It doesn’t make any sense. The form 1099-Cs that you received means that the debt was cancelled…hence the Cancellation of Debt income.

    But if they now come back and say you still owe the debt, then that means the debt wasn’t cancelled.

    I’d call the collection agency first and tell them you have proof that the debt was cancelled and see if they give you any insight. Then I think you might need to get a lawyer involved.

    This is definitely not right.

  21. Diane Kennedy says:

    Shawna,

    We’re seeing that many mortgage companies are NOT issuing Form 1099-Cs when there has been a bankruptcy. They aren’t required to in that case because as you said, the Cancellation of Debt income would be non taxable anyway.

  22. Diane Kennedy says:

    Mark,

    The Form 1099-A reports that the lender has taken back the property. The Form 1099-C is the form that actually acknowledges that they have cancelled the debt. So, it’s possible it was never forgiven. Definitely talk to your accountant and your attorney right away to make sure you didn’t pay tax on something you didn’t need to.

  23. Vern says:

    I got a 1099A Dated 1/30/09 I was in BK (Chapt. 7) at the time which wasn’t fully discharged until 9/23/09 This 1099a was for an investment property…
    How is this going to affect my 09 taxes… Box 2 128,800 and Box 4 60,000
    Box 5 Check NO..

    Can anyone help me with this ? Am I liable for taxes on the difference amount ?
    I also understand the insolvency thing…. Well If I were in BK that means My debts exceeded my assets anyway or I wouldn’t be in Chapt. 7 BK..

    How is this going to affect me… I just want to make sure it isn’t considered income to me….

    Thanks
    Vern

  24. Vern says:

    Correction… BK was discharged in 2/23/09 from my prior post…. so roughly a month after 1099a was issued…

  25. Larry says:

    Hello Diane,
    I bought a piece of land a few years ago and had the mortgage, deed, etc, written up in the name of a single asset LLC, of which I’m the sole sharehoder, (I formed the LLC just for that land purchase). A few years have passed and things have gone bad financially for me. The bank has agreed to a short sale for a lot less than what I owe them. Being that everything is in the name of the LLC (even though my name and signature do appear on the last page of the mortgage). I would obviously declare bankruptcy for the LLC. My question is, would the LLC’s bankruptcy exclude me from having to pay taxes on the debt cancellation/forgiveness by the bank. Would I file for the LLC’s bankruptcy ASAP or after the closing, i.e., after the 1099 is issued? Does it matter? The bank has said they will issue a 1099. Maybe I need to make sure that they know that the sale/deal would be between the buyer and the LLC (not between the buyer and me personally, so that they issue the 1099 in the name of the LLC.
    Thanks for your help,
    Larry

  26. Bob A says:

    I’m a co-borrower on a commercial mortgage to a LLC which owns a rental office condo in which I am a 49% owner.
    The mortgage is in default, due to lost tenants. The loan was sold at auction to another bank, which is now discussing with me options to settle my obligation as co-borrower. The new bank wants to take deeds in lieu which I have no problem with. My question is what will be the basis for determination of COD income? Is it (a)the net carrying value of the loan in the hands of the new owner (which obviously purchased it at a discount)or (b)the original mortgage balance compared with fair market value? by the way,an appraisal was done by the original bank in Q4 2009 and it exceeded the loan balance. How will the new owner determine FMV and how can it be anything other than what they paid just paid for it? If that’s the case, the net carrying value and FMV are the same and their is no COD income, correct?
    Thanks
    Bob

  27. Janadean Ross says:

    Diane,

    We are currently in the process of a deed in lieu of foreclosure. Not sure if we will be getting and 1099 A or C or both. Original mortgage was for $199,900 and current amount owed is 196,970. House currently appraises at 125,000. We have not lived in the house for over 2 years so is it still considered a principal residence (we are renting)?

    Taxable income for 2010 is 16,000 (yes, that is correct).

    I know we will need to file form 982 but trying to figure that out is completely confusing. What amounts are considered discharged indebtness? Would filing for insolvency be easier or better than filing as principay residence?

    Any assistance would be appreciated.

  28. Diane Kennedy says:

    Vern, sorry, I just saw your comments here. Hopefully by now you’ve filed your 2009 tax return and discovered that you needed to use Form 982 to use the bankruptcy exemption on any COD income. However, it sounds like you just received a Form 1099-A and NOT a Form 1099-C. If that’s the case, then there is no COD income to deal with on the 2009 return. You may have a loss if the property was an investment or rental property.

  29. Diane Kennedy says:

    Bob,

    The 1099-C gets a little complicated when there are co-borrowers. The lender will probably issue you both Form 1099-Cs for the full amount. You and your co-borrower need to sort out how you handle that (maybe both take pro-rata portion?) Since it was a commercial property there is also presumably a loss on the property that will likely more than offset the COD income.

    So, to put numbers on this: Let’s say the property has a basis of $1.3 mill and a loan of $1 mill. The FMV today is $800K. The bank is doing a deed-in-lieu of and forgiving the rest of the debt. You will have a loss of $500K ($1.3 mill – $800 K) and COD of $200K. Of course, this doesn’t take into account recaptured depreciation or suspended losses, both of which count. But, generally, in theory if you haven’t done a cash out refi or financed initially at greater than 100%, you have a loss that will take care of COD income.

    As far as the buyer, they get whatever they paid for the property as their basis (unless they are doing a like kind exchange). Your discharge will have nothing to do with their basis.

  30. Diane Kennedy says:

    Janadean,

    If you are otherwise filing for insolvency, then you will need to claim insolvency exemption, not principal residence. That’s part of the pretty complicated rules with Form 982.

    The fact that you have been out of the house for so long could be relevant. You need to be able to prove you lived in it for 2 out of the previous 5 years. If you can not, then this may count as a 2nd residence and you do NOT want that tax treatment. (No exemption and no ability to take a loss)

    I can tell you what should happen with the forms, but heaven only knows whether the lenders will comply. They seem to be doing whatever they feel like it when it comes to Form 1099-As and Form 1099-Cs.

  31. Louie says:

    Hello.
    I filed for bankruptcy in sept 2008 and discharged in November 2008. Today I just received a 1099-c from citibank showing the amount cancelled and the date it was discharged ( same date as bankruptcy discharge). The bankruptcy option was not checked off.
    Do I just ignore it or call the IRS and notify them that it is a mistake on the debtors behalf? Thanks.

  32. Brenda says:

    Hi,
    My husband and I bought a home in 2002 that wound up with Countrywide as the lender. We were on a 6% fixed rate loan that included our taxes and insurance, but they kept trying to raise our monthly payment. I’d call them, remind them about the fixed rate loan, etc., but it would resurface a month or so later. Then the nightmare really began. They paid someone else’s property tax out of our escrow in 2004, but we had no idea until Jan. 2006 when they wanted to raise our house payment an additional $300/month. So many calls! It wasn’t until July ’06 we learned about their error – and that was through one of their employees. It sounded easy to fix, right? Not with them. They wouldn’t admit the error. We were receiving letters of Default and Acceleration. I’d send a letter stating the error (found out it was because THEY didn’t pay our property taxes in ’04 and ’05, so they said our taxes ‘doubled.’). The ugly letters would stop, then I’d get one saying we were behind in escrow and the amount varied month to month – from $800 up to $1,800. The monthly house payment was usually fluctuating too. We fought this until in spring ’09 Bank of America entered the picture – I couldn’t believe the mess got worse. They (BOA) said they weren’t looking back into any records of CW and accepted them as accurate. By Aug. BOA took our house. We received no letters regarding if it’d sold at auction, etc., until Mar. 2010 when I received a 1099-A form. I couldn’t seem to find a tax person that knew what to do with our mess, so we filed for an extension – the first we’ve ever done. Found out in Aug. that BOA sold the house in Feb. The amount on the 1099-A was about $8,000 more than we owed on the loan. If it were accurate, then the new sale would’ve been just $3,000 less than the loan amount. We put down $28,000 on the house and can’t believe the banks don’t have to verify their info, that they can just take a house. It wasn’t like we didn’t pay, we both still had our jobs then, and we tried to stay in contact with them to fix the problem. Can anything be done at this point? Can we recoup any of our equity/down payment? We still have to file our ’09 taxes and don’t know how! I just found this website and will be taking some of the info here to our tax preparers. Thank you for reading and hope to hear from you soon.

  33. Diane Kennedy says:

    Louie, good luck trying to get Citibank to change it. :-) I would suggest that you plan to include Form 982 with your tax return and report the 1099-C income there. You won’t pay tax and it puts the IRS on notice that you are reporting properly, but you won’t have to pay tax. The Form 982 has a place for you to check that indicates there is no tax due because of the BK.

  34. Diane Kennedy says:

    Brenda, GOOD GRIEF!! what a story.

    There are two general points I see:

    (1) I’m not sure this was a legal foreclosure. This is not my expertise and I’m not a lawyer. But from what you’re telling me, it doesn’t seem right that B of A foreclosed on you without verifying Countrywide’s information. Definitely see a lawyer about that. B of A has had a lot of problems with foreclosure, including foreclosing on a guy’s house who didn’t have a mortgage on it! (And the court let them do it – kicked the guy out.)

    (2) For the tax part, that I can discuss. If this is your principal residence, there is no loss that you can take on your return. You calculate the gain or loss by taking the FMV (as shown on the Form 1099-A) less your basis (this is most likely the amount you paid for the property plus any major improvements and plus any depreciation if this was a rental property). This is probably going to show a loss, but unfortunately, you can not take a tax deduction for a principal residence.

  35. Ronni B says:

    I had a car loan from 2003 that was repossesed and a 1099-C was filed to the IRS in 2003. There was a judgment in 2004 that they just now are taking my wages (at 25%!) I was never served and was under the impression I didnt owe this anymore. Unfortunately, I was young and didnt keep good records of anything from any o f this. But I do have the documents from IRS that the 1099-C was filed from the credit union that I had the loan with. Now both the original credit union that I had my loan with and the credit agency my account was sold to say I still owe even though the cancellation of debt was sent to the IRS. They say I have to pay and then notify the IRS when completely paid. I am really confused and dont think that I should have to pay the loan plus interest. What should my next step be? Thank you in advance for any advice!! :)

  36. Susie says:

    I had a bankruptcy in 2004 and kept my house but this year due to financial issues worked out a deal with my mortgage company and they will do a deed and Liu. I already signed the papers and it all done. I am just waiting for my 1099 but wonder if the old bankruptcy will help me not pay taxes on the 1099. At the time i listed I was keeping the house but never signed a reaffirm which is why the mortgage company let mr do the deed in liu. Will I still have the 1099 to declare on taxes or does it get wiped out because of the old bankruptcy? Thanks and I live in Michigan if that matters.

  37. WALTER says:

    Hello:
    My house foreclosure on 09/092010 and i called the back and confirmed they will be sending me a 1099-A and 1099-C form.
    What exatly 1099-C means and 1099-A?
    Do i have to filled both when i do my taxes

  38. ARM says:

    I received a 1099 a in the mail today and
    Box 4 is more than box 2.
    I don’t know where to report this when doing my taxes.
    We have not gotten a 1099 c, but mortgage company and lawyer both said that we are free and clear, we owe nothing to them.

    Can you help me?

  39. John says:

    I bought a property for 33,000 and took out a loan for 30,000 and paid it for over 10 years and then could no longer pay on it due to the IRS garnishing my wages. I owe 17,000 and cannot pay and the property will be foreclosed.

    If the lender sell teh property for 10,000 and takesa 7,000 loss can I offset teh 1099 against what I paid?

    33,000 – 17,000 = 13,000 loss + 7,000 debt forgiveness still equals a 6,000 loss?

  40. John says:

    oh BTW it was an investment property that went bad and raw land

  41. Daniel says:

    Hi Diane,

    SO glad I came across this website. I’m in the same boat as the other posts up above. The other day, I received a 1099-C for a portion of the loan with my first lender. Box was checked indicating borrow not liable for debt. Today, I received the 1099-A for the remaining portion of the loan and box was checked that borrow is liable for debt. The discharge date for both forms was Mar. 4, 2010. How will the portion on the 1099-A be treated? I read somewhere on the IRS website that both forms need not be reported if boxes 4, 5, and 7 are completed (all boxes were completed on both forms).

    However, my name was on title until recently. I found out the condo finally sold and the transaction occurred on Dec. 2, 2010. I have a copy of the deed transaction.

    How does this impact the reporting of the information on 1099-A? I plan to use the same CPA firm as last year to assist with this as it is a bit tricky.

    Any advice you can provide is greatly appreciated!

    Regards,

    Daniel

  42. lori says:

    i live in ohio and filed bankruptcy chapter 7 in 2005 i received a 1099-c box 5 marked from capital one , can they do that after that many years and also it was discharged

  43. Susan says:

    I received a 2010 1099-C today for cancellation of debt. When I pulled out the two letters (two separate accts, both FIA Card Services) confirming my final payment and canceling the debt, they are dated December 22, 2009. An exact copy of the letters were sent again on January 2, 2010 from a different mailing address. The debt was settled in December 2009. I can remember quite clearly cashing out all my measly life savings to get Bank of America out of my life forever. I didn’t get a 1099-C last year. Honestly, I didn’t think twice about it as it was all new to me. Can they really alter the date and send this to me this year without any recourse?

  44. renee says:

    We owned a house in AZ, which was our primary residence for 3 years. My husband recieved a job transfer in 2006 to WA. We tried to sell the house in AZ, without success, so we rented the house out for 4 years. We never could make enough rent to cover expenses so we ended up doing a short sale on the home in AZ. My question is will we be protected under the mortgage forgiveness debt relief act because the home began as our primary home? Also, I have not recieved a 1099-c yet from the bank, if I call the IRS to see if they have anything on file, does that raise a red flag for an audit?

  45. Bern says:

    Diane
    I just received a 1099A from my previous 1st mtg holder Balance was 129K, Fair Market value 55K. We filed BK 13 which both 1st & 2nd mtg was filed and NOT reaffirmed BK 13 has not been discharged yet (we still owe 2 mths). We haven’t received anything from 2nd mtg holder (will I be)? We lost the home in foreclosure. Will we have to show the difference as income on our taxes? I am sick because this is so much more than triple than we make a year(yes the difference is) Please help.

  46. Frank D. says:

    Hi Diane. I live in AZ. My property got foreclosed in Sep 2010. I had 2 mortgages, one Primary and one Home Equity. I just received a 1099-C for my second mortgage and 1099-A for the primary one. So what does this mean? That only the 2nd one was cancelled but the first is still active? So Do I need to file both forms? Thank you in advance.

  47. Gary says:

    I had a 1st and 2nd mortgage on a home with my wife. We divorced and the home was foreclosed on. My ex-wife filed bankruptcy prior to the foreclosure but I did not. We owed $272K on the 1st and $100K on the 2nd. The house sold at sheriff’s sale for $317K. I recieved a 1099A for the 1st with no cancellation of debt. I am expecting a 1099-C for the 2nd mortgage. How would I handle this cancellation of debt? Do I split it with my ex-wife?

  48. Julie says:

    Hi

    i received irs 1099-C on a foreclosure home. What can do i need to do to avoid paying huge taxes??? Any advice is greatly appreciated!!

    Thanks

  49. Michael says:

    Hi Diane,

    We live in California and have a first and second on our home. My wife was laid off and we got behind in our mortgage payments. We have been trying to work out a Modification on our first and then we would deal with our 2nd loan. We just received a 1099-C from our 2nd lien holder? What do we do with this and do we have to pay taxes on this amount? This is our principle residence and we are still in the home trying to work out a modification with our 1st lienholder.

  50. Diane Kennedy says:

    Susie said:

    “I had a bankruptcy in 2004 and kept my house but this year due to financial issues worked out a deal with my mortgage company and they will do a deed and Liu. I already signed the papers and it all done. I am just waiting for my 1099 but wonder if the old bankruptcy will help me not pay taxes on the 1099. At the time i listed I was keeping the house but never signed a reaffirm which is why the mortgage company let mr do the deed in liu. Will I still have the 1099 to declare on taxes or does it get wiped out because of the old bankruptcy? Thanks and I live in Michigan if that matters.”

    Please check with your bankruptcy attorney on this. I believe that the 2004 bankruptcy is too old to help you with the 2010 debt. But if what you’re trying to do is keep from paying tax on the debt cancellation, it sounds like you’ll qualify for the debt exclusion because it was your primary residence.

    If your concern is that

  51. Diane Kennedy says:

    Walter says: “My house foreclosure on 09/092010 and i called the back and confirmed they will be sending me a 1099-A and 1099-C form.
    What exatly 1099-C means and 1099-A?
    Do i have to filled both when i do my taxes”

    The Form 1099-A reports that the bank took back the property. The Form 1099-C shows the cancellation of debt. If this was your primary residence, you probably won’t pay taxes on the debt. Generally, the bank won’t give you a Form 1099-C in that case. If they do and it’s not taxable, you’ll need to complete and include Form 982 with your return so you don’t pay taxes.

    There won’t be anything to report from the Form 1099-A.

  52. Diane Kennedy says:

    John says: “I bought a property for 33,000 and took out a loan for 30,000 and paid it for over 10 years and then could no longer pay on it due to the IRS garnishing my wages. I owe 17,000 and cannot pay and the property will be foreclosed.

    If the lender sell teh property for 10,000 and takesa 7,000 loss can I offset teh 1099 against what I paid?

    33,000 – 17,000 = 13,000 loss + 7,000 debt forgiveness still equals a 6,000 loss?”

    If the property is investment only and not ‘put in service’ you could end up with a capital loss. That means the capital loss can only go against capital gains + $3,000.

    Worst case, if you had $7K debt forgiveness (ordinary income), you could offset $3K of the loss. Then next year, you take the rest of the loss.

  53. Diane Kennedy says:

    ARM said: “I received a 1099 a in the mail today and
    Box 4 is more than box 2.
    I don’t know where to report this when doing my taxes.
    We have not gotten a 1099 c, but mortgage company and lawyer both said that we are free and clear, we owe nothing to them.

    Can you help me?”

    If this is a Form 1099-A for your primary residence, there is nothing further you need to do.

  54. Diane Kennedy says:

    Daniel said: “SO glad I came across this website. I’m in the same boat as the other posts up above. The other day, I received a 1099-C for a portion of the loan with my first lender. Box was checked indicating borrow not liable for debt. Today, I received the 1099-A for the remaining portion of the loan and box was checked that borrow is liable for debt. The discharge date for both forms was Mar. 4, 2010. How will the portion on the 1099-A be treated? I read somewhere on the IRS website that both forms need not be reported if boxes 4, 5, and 7 are completed (all boxes were completed on both forms).

    However, my name was on title until recently. I found out the condo finally sold and the transaction occurred on Dec. 2, 2010. I have a copy of the deed transaction.

    How does this impact the reporting of the information on 1099-A? I plan to use the same CPA firm as last year to assist with this as it is a bit tricky.

    Any advice you can provide is greatly appreciated!”

    This does seem confusing. Are you sure you did get a Form 1099-C? It sounds like you’re describing a Form 1099-A. Was this a primary residence? If so, you don’t need to report the transaction unless you do get a Form 1099-C.

    If this was a real estate investment, you will need to report the disposal.

    Generally speaking you won’t get a Form 1099-C until after the sale, otherwise, the lender won’t know exactly how much of a write-off there is.

  55. Diane Kennedy says:

    Julie said: “i received irs 1099-C on a foreclosure home. What can do i need to do to avoid paying huge taxes??? Any advice is greatly appreciated!!”

    If this is a primary residence, you may have an exemption. If it’s a rental house, you may have a loss that can be used to offset the income.

    Please join us on Sat 2/5/11 for our FREE teleseminar “You Just Got a Form 1099-A (or 1099-C) – Now What?” Sign up at http://www.DianesSeminars.com

  56. Diane Kennedy says:

    Frank says: “I live in AZ. My property got foreclosed in Sep 2010. I had 2 mortgages, one Primary and one Home Equity. I just received a 1099-C for my second mortgage and 1099-A for the primary one. So what does this mean? That only the 2nd one was cancelled but the first is still active? So Do I need to file both forms? Thank you in advance.”

    There are different answers depending on whether this is a primary residence or an investment property. If it is a primary residence and the 2nd loan qualifies as acquisition indebtedness. You call it a home equity loan, which strictly speaking means it doesn’t qualify, but you might have unknowingly used that term.

    Worst case, the 2nd loan reported on the Form 1099-C is taxable to you unless you declare bankruptcy or are insolvent.

  57. Diane Kennedy says:

    Gary says: “I had a 1st and 2nd mortgage on a home with my wife. We divorced and the home was foreclosed on. My ex-wife filed bankruptcy prior to the foreclosure but I did not. We owed $272K on the 1st and $100K on the 2nd. The house sold at sheriff’s sale for $317K. I recieved a 1099A for the 1st with no cancellation of debt. I am expecting a 1099-C for the 2nd mortgage. How would I handle this cancellation of debt? Do I split it with my ex-wife?”

    In this case, you need to go back to the original divorce and look at the property settlement. Who got the house in the divorce? If it’s just you, then all the Form 1099-C COD income is reported on your return. If you need to split it, then you will have to report all of the income and then show your ex’s name and SS# and explain on the return that half should go to her. You definitely will need to make adequate disclosure on your return. You also need to contact the lender to request that they correct the Form 1099-C and report it on two (which some will do).

  58. Diane Kennedy says:

    Susan says: “I received a 2010 1099-C today for cancellation of debt. When I pulled out the two letters (two separate accts, both FIA Card Services) confirming my final payment and canceling the debt, they are dated December 22, 2009. An exact copy of the letters were sent again on January 2, 2010 from a different mailing address. The debt was settled in December 2009. I can remember quite clearly cashing out all my measly life savings to get Bank of America out of my life forever. I didn’t get a 1099-C last year. Honestly, I didn’t think twice about it as it was all new to me. Can they really alter the date and send this to me this year without any recourse?”

    If you didn’t report the Cancellation of Debt income (COD income) in 2009, then you will need to report it in 2010. It is taxable to you. If there is a problem with the amount that they wrote off (what you owed less what you paid when you cashed out your expenses), then by all means contact them to correct it. Also, if you meet an exemption due to insolvency or bankruptcy, then file Form 982 and you won’t need to pay the tax.

    Oh, and make sure the Form 1099-C amount doesn’t include interest that they accrued. You don’t need to pay tax on that accrued interest.

  59. Diane Kennedy says:

    Lori said: “i live in ohio and filed bankruptcy chapter 7 in 2005 i received a 1099-c box 5 marked from capital one , can they do that after that many years and also it was discharged”

    It sounds like you received a Form 1099-C 6 years ago in 2005. Is that correct? If so, you can’t go back and amend. So, keep the paperwork trail in case it’s ever questioned. (We recommend keeping tax records for 10 years)

  60. Pat says:

    Diane,
    I read somewhere in your answers, you stated that the banks won’t send you 1099-a or 1099-c for debts discharged in Ch 7 as you are not liable for taxes. But what happens if the properties were rental that were discharged. Don’t you have to figure out the gain/loss on disposition of property and for that you need FMV or something from the bank. How do you report a sale for a rental property whose debt is discharged in Ch 7 bk and does not receive 1099-a or 1099-c?

  61. Ricky says:

    I had a 1st and 2nd mortgage on a house that got foreclosed. I received 2 1099-A. The primary mortgage had a balance of principal outstanding of almost $181K with a FMV of $191K. The 2nd mortgage had a balance of $22K with no FMV. This was not my primary residence at the time of the foreclosure and I did have tenants at one point but not when the house foreclosed. It was my primary residence for about 13 months before I found tenants so I guess it would have been considered an investment property then? What do I do now? Since the FMV was higher then the outstanding balance do I owe anything on it? And what about the 2nd mortgage? Thank you SO much for any help!

  62. julie says:

    I purchased a condo in CA in 2004 and my husband and I lived in it for a year. We relocated and were unable to sell it because the market changed drastically and it was upside down about $100K or more. We rented the condo (with a loss each month of $500+) but finally had to short sell it in May 2010. The condo was purchased for $300k and sold for $90. I received a 1099c (I’m estimating we will be insolvent so not too worried) but also received a 1099a. I am not understanding what i do with the 1099a and how it’s going to effect our taxes. This was rental property so will the 1099a help me or hurt me, generally speaking?

  63. Diane Kennedy says:

    Ricky says: “I had a 1st and 2nd mortgage on a house that got foreclosed. I received 2 1099-A. The primary mortgage had a balance of principal outstanding of almost $181K with a FMV of $191K. The 2nd mortgage had a balance of $22K with no FMV. This was not my primary residence at the time of the foreclosure and I did have tenants at one point but not when the house foreclosed. It was my primary residence for about 13 months before I found tenants so I guess it would have been considered an investment property then? What do I do now? Since the FMV was higher then the outstanding balance do I owe anything on it? And what about the 2nd mortgage? Thank you SO much for any help!”

    The first question to sort out is whether this was a rental property or a primary residence. You might have converted it to primary residence if you claimed the interest paid on Schedule A, changed your mail address, voter registration, etc to this address.

    If it’s a primary residence, you can’t take a loss upon disposal of the property. There is an exclusion to declaring COD income for mortgage acquisition indebtedness. The 2nd mortgage may or may not qualify for this.

    If it’s a rental, you will have offsetting loss (presumably) in the disposal.

    Meanwhile, though, you just have Form 1099-As, no Cs, which mean the lender hasn’t hit you with COD income.

  64. Diane Kennedy says:

    Pat says: “I read somewhere in your answers, you stated that the banks won’t send you 1099-a or 1099-c for debts discharged in Ch 7 as you are not liable for taxes. But what happens if the properties were rental that were discharged. Don’t you have to figure out the gain/loss on disposition of property and for that you need FMV or something from the bank. How do you report a sale for a rental property whose debt is discharged in Ch 7 bk and does not receive 1099-a or 1099-c?”

    Pat, actually I said that the banks might not send you a Form 1099-C because you’re not liable for the taxes. They should send you a Form 1099-A regardless, but we’re finding that many times they aren’t.

    Was your question hypothetical or do you have a fact pattern on what happened to you?

  65. Chris G says:

    Hi Diane,
    In 2006 I purchased an investment property (vacant land) in SC. I live in NY. Due to hardship I stopped paying the mortgage in 2008. During the foreclosure process I hired a SC attorney who was able to have the Deficiency Judgment waived by the bank. Finally in Oct 2010 the foreclosure was completed. Today, I received a 1099A; not a 1099C. If the bank can never pursue the D.J. should they have sent a 1099C? It is my understanding that a 1099A does not mean the debt was cancelled and that the bank can still pursue the D.J. Assuming this is true and I have a definitive “waiver” of D.J. how does this impact me and my tax filing? Do I report the 1099A only and assume that a 1099C isn’t coming? Is it possible that the bank sent a 1099A instead of the 1099C? If the bank knows the D.J. was waived and that they cannot purse the D.J. why not just cancel the debt and send the 1099C? Thanks for any input.

  66. aaron says:

    hi, i have a under water investment property in LV and I personally live in California, I have abandoned the property 2 years back but just received the 1099A last week, the 1099A show I still owed BoA $229k, FMV show $259k, so the FMV is over what is owed, do i need to report 1099A for this year return? and will I get the 1099C later?

  67. Edward says:

    Hi Dianne,
    I live in Ca. My chapter 7 bankruptcy was discharged in aug 2009. I did not reaffirm my loan. I continued living in the house till June 2010 while tryingthe to work with lenders (GMAC and DITECH), in vain, they foreclosed. They first was 240,000 and the second 140,000. I have recieved a 1099-A from both lenders. The balance on principle outstanding is 226,000 and fair market value 244,000 (for the first) and balance outstanding 140,000 and fair market value 00.00 (for the second). What should I do with regards to my taxes (filing jointly), I was hoping that the bk would not require me to pay any gains taxes ( a double wammy)
    thnks for your generosity
    Ed

    ——————————————————————————–

  68. SoConfused says:

    I have a few questions…
    I moved out of my house in June 2010 when wells Fargo foreclosed it. I haven’t heard anything from them until I received a 1099-a last week. I owned the home with my husband, who I’m now divorced from. Box 2 is-113,781.38 and box 4 is 128,374.68. Box 5 is checked yes.

    So, am I going to owe taxes on this property? Will they take my tax check? I haven’t filed bankruptcy yet but plan on it. Also, will they send this form to my ex husband for him to file as well?

    I’m concerned because I’ve pretty much lost everything in my divorce and was counting on this tax refund to buy a cheap vehicle since the judge let my ex have our vehicle and he let it get repossessed before it was taken out of my name.

    Thanks so much for your help. I’m lost.

  69. SoConfused says:

    Also, in our divorce the judge made no ruling on the home since my ex-husband states he would be filing bankruptcy on everything.

    Am I protected my something since this was my primary residence?

  70. Jason says:

    I received a 1099c and the SSN was wrong on it. I was told by the person that prepares my tax that because it didnt match my ssn that I did not have to file it even though the debt was canceled. Any advice on whether or not this is true.

  71. Sara says:

    Deed in Lieu was agreed to by Mortgage Co & the VA in July 2007 after almost a yr of negotiating, 5 mos of which we continued to pay on the mrtg altho we had been trsf’d to another state, paying for rent where we moved to at same time. We also continued paying the utilities on that house until the paperwork was signed/accepted by Mrtg Co on this VA loan. (Loan was in my husband’s name only (but deed to house (not loan) was changed to include my name shortly after we bought the house in 2004). After not hearing or receiving any ‘finality/ closure’, we contacted the legal team representing the Mrtg/VA & were assured the house was no longer our responsibility, and I also ck’d the county records and saw where the deed was no longer in our name. We didn’t know to expect it but finally received a 1099A in 2009. Strangely, 2 days ago we rec’d a 1098 substitute form in our name for year 2010 (not 2009) showing prop taxes paid! (we will not claim this on our inc tax of course). Then yesterday we rec’d a 1099C, which showed the debt cancelled (box 2) to be $20k more than the bal was when we stopped paying on it, $9k of which was interest; borrower shown to not be liable for repayt of debt. Also, the FMV showed 3 x’s less than the FMV appraised by the VA when we did the D.I.L. This must be the amt they finally sold it for in that greatly depressed housing mrkt. Finally to my question: 1099C rec’d nearly 3 yrs after the d.i.l. was accepted, nearly 4 yrs since we lived in the house, so I am very concerned that we may not be able to take advantage of the forgiven debt tax relief -specifically the ‘qualified primary residence’ factor. Facts Recap: Bought house in Apr 2004, trsfd out Sept 2007, D.I.L. July 2008, date debt cancelled on 1099C is 4/30/2010. Rented a house for nearly 3 yrs in state we were trsfd to. We thought this chapter of our lives was all behind us at this point. It gets a bit more complex here: My mother passed away & left her house to my married daughter & me; we were able to sell it right away & my husband & I bought a (foreclosed)home with our share(on April 1, 2010);no mortgage necessary this time. Ques#1: Going back 5 yrs from the date on 1099C of 04/30/10 wld be 04/30/05 & we left after 4/30/07 (Sept 2007)- so wld that qualify as living there 2 yrs out of the 5 yrs looking back 5 yrs from date of cancelled debt? Also, because we bought a home 04/01/10 after renting 3 yrs (but still lived in rent house til it was repaired/liveable (05/01/10), does that factor in or can that part be ignored in the prim residence factoring? DL/post office changes/etc not changed til May 2010. Sorry so wordy, I err on side of giving too much informaiton (rather than not enough).
    Thx in advance for your expertise/opinion on this.

  72. James says:

    I filed for bankrupcy under Ch. 13 on 4/30/2010. I had a rental property that was forclosed on 4/15/2010 with $128,000 received from the sherriff sale. The recourse mortgage amount at the time of forclosure was $220,000, and I purchased the property for $240,000. My under standing is that I have a loss on sale of $112,000. This I can claim on my 2010 Form 1040, and if I have an NOL carryforward at 1/1/2011, this tax attribute would get reduced at 1/1/2011. Is my understanding correct? Also, the banke issued a Form 1099-A reporting a FMV of $235,000 and a recousre mortgage of $225,000. The FMV reported on the form is clearly not right as the property was sold by the bank to an unrelated third party for $120,000 on 11/30/2010. It appears to me that the bank is calculating the FMV using the mortgage amount plus all other liabilities like unpaid accrued interest, property taxes and attorney fees. Does the bank get any payment from the federal government based on the FMV, and that is way the bank reported this as FMV. What should I do as this FMV is clearly not correct based on the facts?

  73. Greg says:

    Diane-

    Great resource…this is very generous of you.

    I had a home foreclosed in 2010 by the first lender. I got a 1099-A (only) from the second (WF). On the form it clearly says “debt cancelled” with the specific amount, foreclosure details, etc.

    Hence, I called WF and asked if the debt was cancelled and the customer service rep I spoke to said yes.

    As far as I can tell, one of two things has happened, and both involve a lender mistake. A) The debt is cancelled and they erred in filing a 1099-A vs. a 1099-C. Or B) The debt isn’t actually cancelled and it was a mistake to write “debt cancelled” on the 1099-A and the customer service person erred in telling me what she did.

    Given that, and given that they could amend the 1099-A, I’m thinking I should get written confirmation…such as a canceled note.

    Not sure there’s a question here, but if you have any thoughts or insight, I’d appreciate it.

    Thank you,
    Greg

  74. Diane Kennedy says:

    Greg,

    One more possible scenario. I have heard of three banks (so far, did not hear that WF was one of them, but they could be now) who have decided that the fed support they received to handle losses from foreclosures meant that they could not then ‘forgive’ borrower debt so that it created tax for them. They had nothing to forgive, the feds stepped in.

    It’s created a nice little loophole (in a good way) for borrowers who end up being able to have debt forgiven, but don’t have to pay tax on it.

    I wouldn’t press it to hard with Wells Fargo, but I would follow up in writing and say that on such and such day you talked to XYZ and was informed, etc… this letter just serves to memoralize the conversation. If there is any change to this, please contact me immediately at…..

    If later down the road, they pursue you, you at least have something you can show them (and the IRS if they ask) that shows you acted in good faith.

  75. Diane Kennedy says:

    James,

    I don’t know how federal compensation works for the banks, but I’ve wondered the same thing that you have as I see more and more ridiculous FMV reports.

    At this point, the IRS tells us that we have to report the lower of FMV or the loan amount. That means you won’t get a loss on disposal. I’m not sure if we’re going to see some more rulings down the road that change that because there are so many really bad Form 1099-A valuations being given right now.

  76. Diane Kennedy says:

    Sara, you have a very complicated fact pattern and I can’t answer this adequately in an open forum like this. I can give you a couple general guidelines and then suggest you talk to your estate attorney (I think there is an estate issue here, but couldn’t quite figure that out), lawyer and personal accountant on the various issues.

    In general, the date of foreclosure will be the date you use to determine whether you had a temporary (less than 2 years) absence from the home.

  77. Diane Kennedy says:

    So Confused,

    You do not pay taxes on a Form 1099-A, only if you receive a Form 1099-C. Even if you get a Form 1099-C I don’t think you’ll pay taxes because it looks like you have two of the three possible exemptions:

    Personal residence, insolvency, bankruptcy

    You only need one exemption. If you do get a Form 1099-C, you’ll need to use a Form 982 to claim the exemption.

  78. Diane Kennedy says:

    Edward,

    Even if the bankruptcy didn’t provide the exemption, the principal residency exemption will apply. If you get a Form 1099-C, use Form 982 to use the exemption. Most likely, though, you won’t get a Form 1099-C and there is nothing further for you to do (and no taxes due).

  79. Diane Kennedy says:

    Aaron, you can report the disposal of property on either Form 4797 or Schedule D for this past year based on the Form 1099-A. But since the FMV is higher then the loan, it’ll show as a gain. You do have the option or reporting the loan amount for the disposal price, but that won’t get you anything.

    If the FMV is really off, try to contact to lender to get them to change it. Meanwhile, there isn’t a loss that you can currently take. If/when they give you a Form 1099-C, you will need to report it.

  80. Diane Kennedy says:

    Chris, your best bet is to call the lender and ask them your questions. Who knows what goes through their minds sometimes! :-)

  81. Diane Kennedy says:

    Julie says: “I purchased a condo in CA in 2004 and my husband and I lived in it for a year. We relocated and were unable to sell it because the market changed drastically and it was upside down about $100K or more. We rented the condo (with a loss each month of $500+) but finally had to short sell it in May 2010. The condo was purchased for $300k and sold for $90. I received a 1099c (I’m estimating we will be insolvent so not too worried) but also received a 1099a. I am not understanding what i do with the 1099a and how it’s going to effect our taxes. This was rental property so will the 1099a help me or hurt me, generally speaking?”

    You will need to report the Form 1099-C COD income on Form 982. The amount of debt forgiveness reduces your basis in the property. But I’m guessing that you may have some additional investment in the property that will still give you a loss. You will need to recapture depreciation and you’ll get to now take the deduction for any suspended losses. This one year where you’ll want some professional tax help.

  82. Andres says:

    We received a 1099A after the forclosure of a propety we had (not our primary home, have not received a 1099c … How do we report this. THanks in advance for your advise … we are very confused.

  83. Fernando says:

    Hi Diane,

    I did a short sale on my house (primary residence) in Las Vegas last year. I have received a 1099-C from the second mortgage holder but not from the first mortgage holder (WF). My realtor who handled the sale says the lenders do not always send them out. The agreement for the short sale said WF waived any deficiency rights. Should I report the debt deficiency from WF on form 982 as cancelled anyway? I would be insolvent to the degree that it would cover both the first and second mortgages debt cancellation. Should I claim the first mortgage using the primary residence exemption and the second using the insolvency exemption or claim everything under the insolvency exemption?

  84. Diane Kennedy says:

    Fernando, only report the one Form 1099-C that you received. If it qualifies for the primary residence exclusion, use that exclusion when you file Form 982.

  85. Diane Kennedy says:

    Andres says: “We received a 1099A after the forclosure of a propety we had (not our primary home, have not received a 1099c … How do we report this. THanks in advance for your advise … we are very confused.”

    Take a look at past blog posts and comments. You’re not alone with this question!

    The Form 1099-A is used to report the disposal of the property. The Form 1099-C is used to report COD (cancellation of debt) income. At this point, you just have the disposal of the property, not any COD income.

  86. So Lost says:

    Count me in as completely lost as to what to do. We filed BK in 2009 our home was included and was foreclosed on in April 2010. We received a form 1099-a and I really don’t get how to report it on our taxes. I called the mortgage company, and they said we will not be getting a 1099-c. I’ve called the IRS (3 phone calls and 2 1/2 hours of time) for guidance with alot of conflicting advice on how to report it.

    We refinanced the house in 2005 and also have a second mortgage, but didn’t receive a 1099-a or 1099-c from them. The 1099-a we got from the first mortgage shows the FMV as more than the loan amount (there is no way that the amount is correct either), so am I correct that it shows we made money? We bought the home in 2001, and during that time we did rent the house out for a year from 2005-2006 while we lived out of state, so I have also been told that we will have to put the depreciation amount taken during that period on our taxes and pay that back somehow? I’m completely lost, can you tell?

    The IRS is telling me to familiarize myself with publication 523 and report the foreclosure as a sale. There is alot of conflicting information online and on Turbo Tax (where I am trying to do my taxes) that says the 1099-a is a non-event and to wait to report anything until you get a 1099-c.

  87. Chris says:

    Diane,

    We received a 1099-c on a vacation home we walked away from. Box 5, “was borrower personally liable for repayment of the debt” is marked “no”. Does this have any impact on whether this cancellation of debt is considered taxable income? Do we still have to report it? Also, if we complete form 982 claiming insolvency, do we have to attach a financial statement supporting it?

    Thanks for your help!

  88. William says:

    Hi Diane
    ok, so here is my dilemma. My wife and I bought a duplex in 07 (washington state). We lived in one apartment for twelve months and then moved to az and rented it out full time. In march of 10 we did a deed in lieu of foreclosure because it was too difficult to maintain from distance and an added stress. the lender was my mom and she loaned us the money. So should she send me a 1098 a or C? she doesn’t expect any money from us and we had made payments promptly. We basically just gave it back and she took over the title.
    also how do I tell if i had a loss or not? the house hadnt lost much in value.
    Thank you

  89. Olga says:

    I am in active Ch 13 Bk, to stop foreclosure. My plan was confirmed in March 2010, (I filed ch 13 Bk in October 2008). I was paying in Attorney escrow account for mortgage to the bank whole 2009 and 2 month of 2008. After my plan was confirmed in the bankruptcy court, I was ordered by the judge to pay directly to the bank. In December 2010 I started to call to the Bank about 1098- will I receive it or not? because I paid about $75,000 in 2010 to the bank for mortgage.
    The bank promised that I will receieve the 1098.
    I called again in January 2011, every week to remind to them about it.
    EVery time I called to the bank, I was told that :Yes, it is on its way.
    And that according to their records 109 8 was mailed to me on 31 Jan 2011.
    from Wells Fargo bank.
    Then on 15 February 2011 when I still did not receive anything, I called to the Bank and ask if they indeed mailed it. The clerk answered and said that yes, they mailed it to me with $ 0.00 payments made for 2010.
    Because I am in active Bankruptcy chapter 13, the bank does not need and is not required to issue 1098 even if I paid $75,000.
    But the IRS said to me today that 1098 is not required to be attached to 1040.
    It is so very complicated.
    why Bank is acting like this? if anybody can help with advice I will appreciate it.
    Thank you.

  90. Diane Kennedy says:

    Chris says: “We received a 1099-c on a vacation home we walked away from. Box 5, “was borrower personally liable for repayment of the debt” is marked “no”. Does this have any impact on whether this cancellation of debt is considered taxable income? Do we still have to report it? Also, if we complete form 982 claiming insolvency, do we have to attach a financial statement supporting it?”

    RE: Form 1099-C. The ‘no’ has nothing to do with the COD income. If it had been a rental or investment property, it could impact how you reported the disposal. Unfortunately, since it’s a vacation home, you can’t take any loss on the disposal.

    RE: Form 982. This form is tricky. There are instructions that go along with it, but I’d really recommend that you get a tax pro to help you.

  91. Diane Kennedy says:

    Olga, I’m sorry this is happening to you. Banks/lenders are uncooperative to everybody these days it seems.

    You probably will need to calculate the amount of mortgage interest that you paid for the property in the year, in order to properly report it on your return.

    You do not attach Form 1098s to your return, so the IRS is correct in what they told you.

  92. Diane Kennedy says:

    So Lost says: “Count me in as completely lost as to what to do. We filed BK in 2009 our home was included and was foreclosed on in April 2010. We received a form 1099-a and I really don’t get how to report it on our taxes. I called the mortgage company, and they said we will not be getting a 1099-c. I’ve called the IRS (3 phone calls and 2 1/2 hours of time) for guidance with alot of conflicting advice on how to report it.

    We refinanced the house in 2005 and also have a second mortgage, but didn’t receive a 1099-a or 1099-c from them. The 1099-a we got from the first mortgage shows the FMV as more than the loan amount (there is no way that the amount is correct either), so am I correct that it shows we made money? We bought the home in 2001, and during that time we did rent the house out for a year from 2005-2006 while we lived out of state, so I have also been told that we will have to put the depreciation amount taken during that period on our taxes and pay that back somehow? I’m completely lost, can you tell?

    The IRS is telling me to familiarize myself with publication 523 and report the foreclosure as a sale. There is alot of conflicting information online and on Turbo Tax (where I am trying to do my taxes) that says the 1099-a is a non-event and to wait to report anything until you get a 1099-c.”

    If this was your primary residence, there is nothing to report. If it’s a rental property, then yes, you will need to report it.

    If you don’t get a Form 1099-C, there is nothing further for you to do. If you do get the Form 1099-C, you will get an exclusion for (1) primary residence if it qualifies for the indebtedness, (2) insolvency (if applicable) or (3) bankruptcy if the debt was discharged in the indebtedness.

  93. Diane Kennedy says:

    William says: “ok, so here is my dilemma. My wife and I bought a duplex in 07 (washington state). We lived in one apartment for twelve months and then moved to az and rented it out full time. In march of 10 we did a deed in lieu of foreclosure because it was too difficult to maintain from distance and an added stress. the lender was my mom and she loaned us the money. So should she send me a 1098 a or C? she doesn’t expect any money from us and we had made payments promptly. We basically just gave it back and she took over the title.
    also how do I tell if i had a loss or not? the house hadnt lost much in value.”

    If you made payments in 2010 and there was interest associated with them, your mom should prepare a Form 1098 to report the interest paid. If your mom is writing off the loan as a bad debt, then she should prepare a Form 1099-C. Otherwise, if she just took the property back, there is no cancellation of debt income and so she doesn’t need to do a Form 1099-C (I suspect that’s what the situation is in your case)

  94. Chris says:

    Diane,

    Thanks for the response. After posting my question for you I did some further research and found on the IRS website (http://www.irs.gov/newsroom/article/0,,id=174034,00.html) where it says “Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.” We live in a non-recourse state, so I believe box 5 does have to do with COD income, as it reflects that our loan was a non-recourse loan.

    Thanks

  95. So Lost says:

    I’m sorry, I’m still confused! We didn’t get a 1099-c, so does that mean we don’t do anything? It was our primary residence, but we did rent it out for about a year during 2005-2006. So do I have to report it, or is it still considered a primary residence? We bought it in 2001, and lived in it for most of that time. It was discharged in the bankruptcy. Thanks for your help!

  96. Megan Hughes says:

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  97. tara says:

    I have received a 1099a form aquisition abandonmenr form. If my fmv amount is bigger than the balance what do I do. Do I have to pay a taxon the difference.

  98. Patrick says:

    My friend and I foreclosed on a property and we both received a 1099-C for the full amount. How do we file our taxes? Split the amount or do we each file the full amount and both pay the full amount of taxes?

  99. cathy says:

    I did not see any information about discharge of a student loan. What are the exemptions for a governmental student loan that was cancelled? Please advise.

  100. Diane Kennedy says:

    Patrick, sorry for the delay in response. This thread is 4 years old and so we aren’t monitoring it as closely.

    You and your partner can split the amount of the Form 1099-C. You don’t need to double the amount.

  101. Diane Kennedy says:

    Hi Cathy,

    There is no specific exemption for a student loan write-off. If you qualify as insolvent or due to bankruptcy, you can have the 1099-C income exempted.

What do you think?