Why You May Have Received Tax Form 1099-C in the Mail
If you received your 1099-C tax form in the mail, you may be wondering where it came from and why it exists. You usually get this form when you pay off your debt. This means that you have to pay tax on the amount of the debt forgiven or canceled. However, there are several other reasons why you may have received this form.
According to IRS rules, creditors must file 1099-C if they have canceled a debt of $ 600 or more. As MarketWatch explains, this can happen for four common reasons:
You repaid the debt for an amount less than it was originally, and the creditor received the remaining amount (debt forgiveness).
You have not paid a debt for at least three years and there has been no debt collection activity in the last year.
Your home was foreclosed, and your deficiency (the difference in the amount owed and the value of the home) was either forgiven or you did not pay it.
Your home was sold short and you made a deal with your lender to pay less than what was owed.
In field 6 of the form, you will see a code that tells you which category your form belongs to (you can use this IRS publication to decipher it). If an error has occurred and you have definitely paid the related debt, you need to contact the lender and ask them to file the amended 1099-C.
However, if everything is correct, this means that you owe taxes on the forgiven amount and you will need to file 1099-C when you pay taxes. The IRS hasmore information on this form here and you can check out the full MarketWatch publication for more details.
What you need to know about the most hated tax form | MarketWatch