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.