We Prepare Tax Returns!

We prepare most type of tax returns:


S Corporation.

C Corporation.




Client Video Testimonials

Click here to watch some of our clients in their video testimonials!

Client Testimonials

My husband and I had to deal with canceled debt from a Deed in Lieu of Foreclosure on a second home with our 2012 taxes. We never had to deal with this type of tax experience and needless to say, we were fearful. Owing taxes on possible additional income was stressful. We searched for CPA’s as well as info about DILs and how Insolvency worked. When we came across Gary’s website, we were impressed. We found his website 8 months prior to tax season. We kept it as a “Favorite” as we knew we would need to contact him for assistance. When it was time to get a CPA, we called Gary. We felt relieved that we actually had someone that not only understood our concerns but was an expert in this area. He walked us through the process and all the time telling us not to worry. When our taxes were completed, you cannot imagine the relief we had when we actually were able to get a refund.

Gary is a dedicated professional and attentive to his clients. We love the virtual office as it is convenient during tax time and he’s fees were fair and affordable when you consider the depth of work accomplished on our taxes!

We’ve already started recommending Gary to others. We are so blessed and grateful for all that Gary did to assist with our taxes.


Patty and Tim, Fredericksburg, VA

Free Consult

Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

Pay Your CPA

Enter $ Below
Other Amount:
Your Email Address:

Cancelled Debt CPA discusses the 2017 IRS Publication 4681, Form 1099-C instructions, Form 1099-A instructions and Form 982

Form 982 instructions. IRS instructions for Form 982. Form 1099-C instructions. Form 1099-A instructions. Form 4797 instructions. Cancelled debt CPA. Form 1099-C CPA. Form 1099-A CPA.

Lots of personal cancelled debt issues aren’t covered in the 2016 Form 982 instructions. If you don’t have a local CPA well versed on Form 982, rental property foreclosures, etc., please consider calling me for a free consult. (910) 399-2705.

Cancelled debt CPAs think of Form 1099-C, Cancellation of Debt, or Form 1099-A,  Acquisition or Abandonment of Secured Property as adding insult to injury. The taxpayer had a financially tough couple of years, and the IRS adds more stress. The Form 1099-C instructions are for bankers, so there’s no help there. Ditto on the Form 1099-A instructions. The Form 982 instructions simultaneously offer too much and too little information to be of any use.  In this post, I’m using a rental property cancelled debt scenario. But, like the 2016 IRS Publication 4681 shows, there are lots of quirks you can stumble over. It’s not rocket science but the first time with anything is usually the hardest.

Update; many States no longer honor the federal cancelled debt exclusions on Form 982, Reduction of Tax Attributes. Talk to your cancelled debt CPA and work out a strategy for the State. Also note most States are more aggressive about collection than the IRS. So it pay to handle the State tax due ASAP since the IRS will grant you an installment agreement for 72 months.

Note that I handle business cancelled debt, too. That’s a completely different beast, although some similarities to personal cancelled debt exist.

The best IRS source for personal cancelled debt tax reporting is the 2016 Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. For an IRS Publication, 4681 is simple to read. But it might take a few passes. I think Pub 4681 makes a good primer before reading the Form 982 instructions. However, cancelled debt scenarios often include other tax reporting issues such as:

  • The notorious Form 4797, Sales of Business Property.
    • The Form 4797 instructions are complex, and it’s hard to ferret out what you need.
    • Use it to calculate gain or loss on the “sale” of the property. Yes, even a rental property foreclosure is a sale for IRS purposes.
    • Do not trust your tax software. I always do a manual calculation and check that Form 4797 is correct.
      • Why? The IRS handles selling costs differently than the way I think. Same answer, different process.
    • IRS tax Form 1099-A, Acquisition or Abandonment of Secured Property, requires you to report, say for a rental property foreclosure, the gain or loss on Form 4797, Sales of Business Property.
    • The Form 4797 instructions are complex. I think most CPAs use third-party databases as their source of info, not the actual Form 4797 instructions.
    • Form 1099-A instructions are for the bankers.
    • Form 1099-A itself generates no cancelled debt and subsequent potential taxable income.
  • On rental property there can be prior disallowed losses you can now claim in the year of disposition. These prior disallowed losses accumulate in form 8582. I’ve seen cases of over $100,000 of prior disallowed losses that are now deductible on Schedule E in the year sale. Happy dance!
    • Some issues like depreciation prior disallowed losses (Form 8582 discusses below), NOL carryforwards, etc., span multiple tax years. Be sure these important tax reducing figures don’t get lost when you change tax software or CPAs.
    • Didn’t like the Form 4797 instructions?
      • Welp, the Form 8582 instructions are worse.
      • With Form 8582, Passive Activity Loss Limitations, you’re better off learning from the actual form and not from the Form 8582 instructions.
      • Most landlords have active participation status for their properties.
        • That means you can deduct up to $25,000 passive real estate losses a year, which phases out as your income increases.
          • For example in year 201x you lost $40,000 on the rental property. The extra $15,000 (40-25) flows to Form 8582.
          • Then, in 201y the landlord has $10,000 of loss but can’t deduct because his/her income is too high. So this $10,000 flows to Form 8582.
          • So in this example there are $25,00 of prior disallowed losses on Form 8582.
          • Again, these disallowed losses aggregate in the 10 tables of IRS Form 8582, Passive Activity Loss Limitations.
        • These prior disallowed losses on Form 8582 are deductible when you “sell” the property. Claim them on the final Schedule E. The Schedule E instructions explain a lot more than rental property, so maybe looking at one the annual layman tax manuals is best. Book store, Amazon.com, etc.
          • A rental property foreclosure or abandonment is a sale for IRS purposes.
        • I don’t even know what to say about the Form 8582 instructions. Years back I just took a whole day off and read them using various scenarios I created in my tax software program as a learning tool. So it’s not a DIY project. And some tax software doesn’t support Form 8582.
        • These prior disallowed losses on Form 8582 sometimes don’t carry through if you switch real estate CPAs or tax programs.
  • Settlement charges on the sales and purchase HUD statements. That can save $2000 +/- in actual tax.
    • Why? These raise the basis (the purchase price of the rental property) which generally translates out to more deductible loss.
    • On a rental real estate foreclosure for example, there wouldn’t be settlement costs.
  • Depreciation. Real estate depreciation is pretty straight forward.
    • Some landlords don’t claim depreciation on Schedule E.
    • But you have to re-capture it and factor it into the Form 4797 calculation anyway as discussed above.
    • If the timeline is right, your cancelled debt CPA can sometimes use Form 3115 to keep you from paying tax on gains you could have written off over the years as depreciation.
      • I really hate to see such a rudimentary issue generate so much un-required tax. Take a glance at the Form 3115 instructions, and then punt it to a cancelled debt CPA well-versed in rental real estate issues.
  • The cancelled debt reported on Form 1099-C, Cancellation of Debt, becomes taxable income on your IRS tax return, unless you can use Form 982, Reduction of Tax Attributes, to exclude it.
    • So you’re taxed on money you never received. Seems unfair to most folks.
    • You can use multiple exclusions on Form 982.
    • It’s not all about insolvency.

Per the IRS: Generally, if you owe a debt to someone else, and they cancel or forgive that debt, you are treated for income tax purposes as having income and may have to pay tax on this income. (sic)

Using real estate cancelled debt as an example

My opinion as a cancelled debt CPA:

  • There’s no single source of info for the entire tax reporting requirements for Form 1099-C, Cancellation of Debt, or Form 982, Reduction of Tax Attributes. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, is the best IRS source.
    • Try an annual tax book written for landlords instead from your local book store.
    • That would make a good primer, in my opinion, to IRS Publication 4681.
  • The taxpayer should read IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. That will help you  decide whether your specific circumstances allow an exception or exclusion on Form 982, Reduction of Tax Attributes, to keep cancelled debt on Form 1099-C, Cancellation of Debt, from becoming taxable income.
  • Other sources of information include the instructions for Form 982, Reduction of Tax Attributes, available on the IRS website. Again the Form 982 instructions will probably make sense only after you’ve done some leg work and get familiar with the IRS jargon.
  • Then use Internet chatter to gain insight. Lots of variance in opinions there. Even some older posts on this site aren’t accurate anymore, because cancelled debt tax reporting requirements change that fast!
  • Form 982 preparation doesn’t lend itself to generalizations.
    • But even if you have multiple Form 1099-C(s) they all funnel into a single Form 982, Reduction of Tax Attributes.
    • The reduction of tax attributes sometimes has future tax consequences. If your cancelled debt CPA does not discuss future tax consequences you might be working with the wrong person.
  • Each cancelled debt case is unique. So you have to learn how your particular fact pattern dictates Form 982 preparation.
  • No one should accept Cancelled Debt as Taxable Income without working through the allowed IRS Exceptions and Exclusions on Form 982.

“I suspect many 1099-C recipients pay taxes on Cancelled Debt despite being legally able to exclude some or all of it. If caught in time your cancelled debt CPA can amend that return and usually generate a refund.”
– Gary Bode, cancelled debt CPA and Form 982 tax accountant, 2017

Form 1099-A, Acquisition or Abandonment of Secured Property

  • Form 1099-A reports the transfer of an asset to the former owner and the IRS. Note it generates no cancelled debt but you might receive a Form 1099-C later if the debt is forgiven.
    • Typically this would be:
      • Rental property foreclosure or short sale.
      • Your home’s foreclosure. short sale or loan modification.
    • Use Form 4797, Sales of Business Property, to report the gain or loss to the IRS.
      • The Fair Market Value (in) Box 4 of IRS tax Form 1099-A, Acquisition or Abandonment of Secured Property, sometimes becomes the amount of sale. Sometimes not. You can argue about the fair market value with the IRS in some cases. I just document and explain the situation.
        • For example, let’s say the 1099-A shows a Fair Market Value of a rental property is $200,000. But it sold two weeks later for $125,000. Well the $125,000 is the FMV. I think banks inflate the FMV so they can increase their bad debt deduction on their own tax return.
    • Form 1099-A, Acquisition or Abandonment of Secured Property, by itself doesn’t trigger cancelled debt. Read that twice because it’s a common misconception even among tax professionals.
      • But a Form 1099-C usually follows Form 1099-A and that might be in a future tax year.
    • If there’s immediate cancellation of debt the lender may skip issuing Form 1099-A and just issue Form 1099-C.
      • Form 1099-C triggers the same “sale” as the above discussion.

Form 1099-C – Cancellation of Debt

The recession caused an amazing amount of cancelled debt. Supposedly 53 million Form 1099-Cs got issued before 2016. Cancelled debt returns sometime raise IRS red flags I don’t think just having a 1099-C or 1099-A raises your tax audit rate. Just my opinion. So while using Form 982 can raise IRS red flags, your cancelled debt CPA can usually show that the calculations are legit through increased explanations and documentation e-filed with the return. Cancelled debt was about 85% of our practice in 2016. It’s about be 90% +/- in 2016 so far. Despite an improved economy many folks thinks cancelled debt will still be a huge factor through 2018.

But Form 1099-C(s) are notorious for arriving late. Especially in 2016. This deluge of Form 1099-Cs in 2016 is called zombie debt. If the 1099-C doesn’t come, I advise you extend your tax returns by April 17th, 2017. Then use IRS 4506-T to request a wage and income transcript from the IRS for 2015 and 2016, maybe around August. You’re required to report a cancelled debt transaction in 2016 on a 2016 Form 982, even though the 1099-C hasn’t arrived. But a substitute 2016 Form 1099-C is always a few bucks off. Having the actual numbers from the 2016 Form 1099-C circumvents having to amend the 2016 return later. But sometimes there’s no choice.

Some taxpayers find out a 2016 Form 1099-C got filed when an IRS CP2000 Notice arrives, informing the taxpayer of a Form 1099-C not listed on your 2016 tax return. They calculate the additional tax “proposed.” But usually doesn’t invoke a penalty. That alone shows you how common 1099-C(s) are, and that the IRS understands many Folks do not receive a 1099-C. For several reasons. Please read below on how to handle a Form 1099-C after you’ve filed the tax return. Again the Form 1099-C aren’t for the taxpayer. Read IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments.

Common examples of cancelled debt reported on Form 1099-C, Cancellation of Debt, include:

  • Cancelled credit card debt.
  • Car repossession.
  • Home foreclosures short sales, and workout agreements.
  • Rental property  foreclosures, short sales, and workout agreements.
  • Student loan defaults.

Form 1099-C issues I see as a cancelled debt CPA include:

  • The IRS thinks Form 1099-C, Cancellation of Debt, is correct. You have to prove it isn’t, if mistakes exist.
    • The IRS wants you to get the bank to reissue a corrected Form 1099-C.
    • Since the banks virtually never issue a corrected Form 1099-C(s) you’re stuck with challenging errors with the IRS.
    • That means more explanations and documentation get sent with the tax return.
  • Form 1099-C. The amount reported in Box 2 Form 1099-C can be incorrect, so verify it. Generally the bank is correct in my experience. And it’s hard to argue the amount of debt forgiven with the IRS.
  • The date of the cancelled debt is sometimes wrong.
    • Some lenders revert to a 12/31/2016 date.
    • This 1099-C date is crucial to avoiding cancelled debt becoming taxable income.
    • Why? If you’re using the insolvency exclusion of Form 982 and you signed rental property foreclosure papers in February, you’re likely to be more insolvent in February than December 31st, 2016.
    • We often challenge a wrong date if there’s documentation we can use to prove a “better” date for the Client.
  • Sometimes your cancelled debt CPA can challenge the Fair Market Value on Form 1099-C, and we document it thoroughly and present the calculations to the IRS as a supplement to Form 982.
    • Sometimes your cancelled debt CPA can build a case for a better FMV number.
  • Another situation that pops up is the taxpayer not receiving the 1099-C. The IRS expects you to report 1099-C income even if you didn’t receive Form 1099-C yet.
    • Lots of folks don’t receive one, and that’s not a “the dog ate my homework” excuse.
    • Plan to extend your 2016 tax returns by April 17th, 2016.
    • Then pull your IRS info when it becomes available. Use Form 4506-T and request a wage and income transcript for 2015 and 2016.
    • Maybe a third of my insolvency cancelled debt Clients don’t receive the 1099-C, but the IRS did.
    • Why? The IRS address doesn’t change.
    • The taxpayer address changes and bank gets the 1099-C back by return mail.
    • I’m not the only cancelled debt CPA that thinks some vendors don’t send a IRS Form 1099-C to the taxpayer deliberately as a form of revenge.
  •  If you don’t claim the 1099-C on your 2015 tax return, the IRS sends you a CP2000 notice “proposing” increased taxes based on a Form 1099-C you never received. That can be years later. Ouch. Amending an earlier tax return to include Form 1099-C and Form 982 often decreases or eliminates the IRS demand.
    • Sometimes you don’t have to amend, just send in additional cancelled debt information.

Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments (For Individuals)

This is a well-intentioned IRS publication describing a complex topic. You should blame Congress and not the IRS, but it quickly degenerates into accounting nomenclature and potentially confusing examples. Explanations on the Web don’t seem helpful other than for general background. Calling the IRS may be helpful, but multiple calls often yield contradictory advice. And you can’t rely on IRS verbal advice. Common situations covered in Publication 4681 are:

  • Non-business credit card debt cancellation.
  • Personal vehicle repossession.
  • Main home foreclosure or abandonment. 2016 is the last year for this Form 982 exclusion.
  • Main home loan modification (workout agreement). As above, 2016 is the last year.
  • Rental real estate foreclosures, short sales, deed in lieu of foreclosure, etc.

Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)

Well, here the title alone conveys the complex nature of Form 982 and the process for excluding Cancelled Debt from taxable income. The tax attributes section of Form 982 are the hardest to understand. Exclusion or exception of cancelled debt from taxable comes at a cost. Sometimes Form 982 merely delays the tax on cancelled debt to the future when you sell an asset affected by Form 982. Ouch! One way to tell if you’re talking to a seasoned cancelled debt CPA is s/he will discuss potential future tax consequences of Form 982. Even the Form 982 instructions note you may have future tax consequences. Sometimes that’s a big deal. Future tax consequences, at least in clients who switch to me, are seldom discussed. But they deserve careful consideration.

Forgetting the Underlying Sale on Form 1099-C

There are lots of cancelled debt issues the Form 982 instructions and the Form 1099-C instructions don’t cover. So you have to integrate other info with cancelled debt tax returns. With rental real estate short sales and foreclosures there’s a sales component that must also appear on your tax return. Calculation of the gain or loss is tricky and the Form 4797 instructions are so complex the average Joe has to trust the tax software. For example, folks seem to forget about depreciation recapture. Consider filing Form 3115 if you didn’t claim depreciation. Deducting depreciation over the years might have reduced your taxes due, let’s say by $15,000. But you have to recapture that depreciation even if you didn’t claim it. Ouch.

Cancelled Debt tax software

Some software doesn’t handle cancelled debt at all. You have to do a manual workaround. So Form 1099-C and Form 982 aren’t handled as automatically as a W-2 would.

Sometimes you need a Professional

I’m Gary Bode, a cancelled debt CPA with a virtual office to help you with Form 982 wherever you or your company are located. Many of our posts help folks prepare their own tax returns. Other posts try to help you decide when it is prudent to hire a professional. If you’ve done some due diligence and decide that you need help with a cancelled debt issues, please give us a call at 910 399-2705.  I feel Form 982 is an area where some folks shouldn’t self prepare their return. Maybe riding a bike is a good analogy. Almost everyone can learn to ride, but most of us fall on the first few attempts.

Insolvency as an Example of an IRS Exclusion

The IRS has Exceptions and Exclusions that may allow you to avoid paying taxes on cancelled debt. Insolvency is one allowed exclusion.  Publication 4681 has a worksheet that helps determine if you were insolvent just before the cancelled debt occurred.

The current state of cancelled debt CPAs

CPA specialties exist, sorta kinda like medicine. But specialist CPAs are harder to find. I became a cancelled debt CPA by accident. When the CPA license went national, I left my brick and mortar CPA firm, came home and shredded my ties. And then suddenly had lots of free time. My girlfriend’s nephew was a web consultant for plastic surgeons. He suggested a blog site to snag local business. So I just started reading up on various tax issues or taking Continuing Professional Education courses. I learn best if I explain something to another person. At three months out, I started getting calls from all over NC. With another three months, I got calls from Virginia, South Carolina, and Georgia. To my surprise the blog then touched all of the US and even international calls were coming in. Then the Recession started and a blog post on cancelled debt generated so much interest that it became prudent to tackle the steep learning curve of cancelled debt tax reporting rules.

We hear lots of horror stories from folks supposedly told to them by tax professionals. I understand that the client’s perspective is different from that tax preparer. Experience sometimes makes a difference. Sometimes not. Again you can amend an earlier tax return if a refund is due.

So why am I different? I just draw from a wider client base making it economically prudent to understand all the details of cancelled debt instructions.

Find me on Google+
Like me on Facebook

146 comments to Cancelled Debt CPA discusses the 2017 IRS Publication 4681, Form 1099-C instructions, Form 1099-A instructions and Form 982

  • Tom

    Your Blog is great! It gave me greater insight into this whole 1099-C area. I’ve self-prepared my entire life but am now facing a potential, significant tax consequences if I agree to a proposed “short refi” loan, because it includes significant debt forgiveness on my existing mortgage. There is no 2nd note on my house but the existing note included two cash payouts at closing (one to my ex and one to me). I used some of this payout to help me make my mortgage payments and repairs on the house (since I was paying a lot of money out for several years to attorneys). My fear is that I will claim exemption under the “Mortgage Forgiveness Debt Relief Act”, get flagged for an IRS audit, and then get my exemption claim reversed (with a large bill owed to the IRS).

  • dorothy

    what about the 982 A?

  • Montana

    Please help. .I’m on ssdi since 1999. I received 2 1099-c forms for charged off credit cards in the amount of 7, 000. I am married with a home. This debt is soley mine not my husbands. He is however retired on ss. I incurred this debt by trying to help my mother stay in her home at age 87.I was sole heir to her estate. At the time I believed her home was paid off and would pay this debt when she passed. She did pass away in 2010. I kept up payments as long as I could only to find out she took a reverse mortgage and found out she had no estate left. Technically I know the debt mine for thinking with my heart not my head. Do I have to claim this as income. Should we file separately. Do you think I could get an exclusion from claiming this as income or insolvency??? your input is greatly appreciated.

  • judith

    Dear Sir, I lost a rather large business that left me holding the bag with about 200k in personal debt. My chapter 13 was rejected, a 7 is too dangerous unless I get a divorce. this I the 6th year since the loss and so far 3 1099c’s have been sent to me, all from 1 company totaling 30k. I have 3 questions. Is it true that the companies can only issue a 1099c within the 6 years? Is it a good idea to fight these 1099c’s in court, if they are thrown out, they would not be taxable? Is there a way to see if I have missed any other 1099c’s, do they show up on my credit report? I am told that tax debt is difficult to include in a Chapter 7, even if I get the divorce. Please advise me, the IRS has no answers!

  • John Williamson

    Mr. Bode, thank you very much for your informational site. I find it very helpful.

    I have but one question concerning 1099-C for cancellation of debt.

    Box 3 says “Shows interest if included in the debt reported in box 2. See Pub. 4681 to see if you must include the interest in gross income.”

    I have looked up this publication at irs.gov but can’t seem to find this question addressed. Can you tell me how to know if I must include the interest on this cancelled debt in my gross income?

    • Hi John: I agree Publication 4681 isn’t clear on whether the interest in Box 3 of IRS Form 1099-C becomes taxable income. Note Box 2 includes interest (in Box 3) and principal. Depending on the particular circumstances, which I don’t have as yet, only Box 2 minus Box 3 becomes cancelled debt. Hope that helped. Give me more details and maybe I can further clarify.

  • John Williamson

    Gary, please email any comments you have with reference to my question concerning interest in box w of 1099-C for cancellation of debt. Thank you, sir.


  • Gary,
    I had a car repossessed in 2007. My lender charged off the debt but I never got a 1099-c. I was doing some credit repair this year and about a month after I disputed a few things I got a letter from the IRS saying I owed 3300.00 for a 1099-C reported to them by the lender that repossessed the car in 2007. The were adding the 1099-C to the 2011 year taxes which changed my income thus creating the 3300.00 tax bill which I now have to deal with. I have two questions. first, why would the 1099-C go against my 2011 taxes when the car was discharged in 2007? second, if I go the insolvency route (which I was in 2007) would I do it for 2007 or do I have to prove it for 2011 because that is the tax year that is affected?



    • Hi Darrin: Lenders issue late Form 1099-Cs all the time. My guess? The bank should have cancelled the debt in 2007 and they’ve violated IRS directives by issuing Form 1099-C late. But maybe not. I’m mot sure if we could amend 2007 even if the bank corrects the Form 1099-C. I’d see what potential effects amending 2011 with Form 982 offers. If nothing, then check to see if the IRS allows application to 2007 and then see if the bank will correct it. Hope that helps.

  • Corazon

    We sold three homes on short sale in 2012. One is a rental property from acquisition, one is converted from personal to rental and sold. Two n one half yrs after conversion and the third was personal residence at time of short sale wherein we have Lived two n one half yrs. we received 1099c on all of them wherein box 5 was marked we maybe liable. The tax preparer did use form 982 but claimed cancelled debts as income in line 21 “other income”. Because of this we paid $16K in taxes and our Medicare Part B went up by $50.00 per month. My first time to use a tax preparer and I honestly don’t know her well. Is there something you can advise me how to check her accuracy. I noticed in some schedules that she missed important deduction like $4174.00 mortgage interest in one Your help comment will be greatly appreciated. Thank you

  • Carl

    Hello Gary,

    I received a 1099-A for my rental property that was foreclosed one. Do I use the basis and FMV to compute the gain/loss or do I wait on a 1099-C sense the property wasn’t “sold”.


    • Hi Carl. Form 1099-A, Acquisition or Abandonment of Secured Property, triggers the “sale” reportable to the IRS via Form 4749, Sales of Business Property. While Form 1099-C, Cancellation of Debt, can trigger the same sale, you have to report Form 1099-A this year. Hope that helped Carl.

  • Franz Schillmoeller

    I received a 1099-a form this year for a my main house that was foreclosed in 2013. I bought the house in 2008 and received the 7500 tax credit. ON form 5405 when I show that its not my main home and was foreclosed it asks me few questions about amount of cancelled debt, legal fees, and percentage. I called the bank and was informed until they sell the house threw HUD and take that amount from amount owed will not get a 1099-c until then. I filed chapter 7 Bankruptcy in 2012 and was discharged. Any help would be greatly appreciated I read form 4681 and honestly just makes it more confusing. Thanks for your time….

    • Hi Franz: I’d make sure your tax return reflects the “sale” of the house even though you shouldn’t owe any tax or deduct any loss. If you don’t they’ll come back and ask about. Better to be complete. Hope that helps.

  • Cory

    I received two 1099-A from the foreclosure on my home in 2010. One for the first bank mortgage and another for the 20% down second(same bank) mortgage. They were both reported on my taxes in 2011. Apparently in 2011 Freddie Mac had taken it over and the difference between the foreclosure sale and amount I owed, from both first and second loan, was $45G and was exempted per form 982. This year 2013 the bank sent me a 1099-C for the $72G second mortgage.

    I’ve been online and calling friends to try to figure this out. Please help me, what am I supposed to do with this?

    • Hi Grace: it sounds like I can get rid of the entire $72G in Box 2 of Form 1099-C, Cancellation of debt, by using Form 982. Maybe you need a CPA with lots of Form 982 experience this year. We’re virtual, so distance isn’t a factor. I don’t know any sites that offer comprehensive example for your situation. IRS Publication 4681 has some examples that might help.

      • Cory

        I realize from reading more online that when I received the two 1099-A forms in 2011, I should not have added them to my taxes that year. And instead waited until I received the 1099-C for both loans. None the less, that year I submitted a 982 form using the primary homestead exemption.

        Now my question is, do I resubmit form 982 for the 1099-C on the second mortgage loan on this year’s 2013 taxes? And should I expect to receive a future 1099-C on the first mortgage also?

  • Chad

    Dear Mr. Bode,
    My mortgage lender offered me a sizable principal reduction. Can I still use the Qualiied Principal Residence Indebtedness exclusion now that the Mortgage Forgiveness Debt Relief Act has expired, or is the exclusion the very thing that has expired? Thanks!

  • John

    I received a 1099C for a credit card debt from 2004 They list the identifiable date as 12/31/13. How is this possible and am I liable to claim this as income for 2013? The debt was originally around $8,000, but in box 2 they have $17,592.24 with $2,027.87 in box 3. I was never contacted nor did they ever try and collect from me. Do I have a valid argument that this debt is past the 36 month waiting period?

    • Sorry John, yes Form 1099-C(s) often arrive late, although your example is extreme. I’m unaware of any three year rule. The IRS has specific guidelines as to when a lender issues a Form 1099-C. So maybe you can challenge it. It sort of sounds like the lender kept the meter running. I doubt the lender would cooperate. I’ve some success with getting the IRS to challenge these issues. Hope that helps.

  • Ted Pugh

    Mr. Bode, I received a 1099-C for a foreclosed home that I had in Virginia. I live in Greensboro, now and I can claim insolvency but what does this do for my North Carolina taxes? Will I owe NC tax for the full amount of the 1099-C? Turbo Tax says I owe it but I didn’t owe any from last year when I declared insolvency for another debt. Thanks for the help.

  • john

    hi, thanks in advance for your help, I received 1099c in box 2$50000 and box 3$27000 which one is the one I have to report, and can I do insolvency I only make like $20000 this year ,this 1099c is for a investment property that give me a loan modification.

  • Eric Emory

    Hello sir. I received a 1099c. I did a deed in lieu on my home. This was my only home. I have no assets. I only have a car note. And three children. In box 2 78,031.14 in box 3. 0.00. In box 7. 100,000.00. I was wondering if this was taxable. And what do I have to do? Thank you in advance.

    • You should be able to exclude that entire Form 1099-C, Cancellation of Debt, through use of Form 982, Reduction of Tax Attributes. IRS Publication 4681 has a nice example for you. hope that helps. If not, I’m happy to prepare that tax return for you.

      • Wife received a 2014 1009-C from CITI BANK. I will file the 2014 1040 on or
        before the October 15, 2015 time to file extension ends.
        I have hope that this 1009-C is technically invalid because no interest is referenced ten years after a 9/7/2004 Judgment

        Box 1 Date of Event… 10/27/2014
        Box 2 Amount of debt discharged… $16,496.60
        Box 3 Interest if included in box 2… BLANK
        Box 4 Debt description… CREDIT CARD LOAN
        Box 5 Debtor personally responsible for repayment of the debt… X
        Box 6 Identifiable event code… G (decision or policy to discontinue collection)

        This CITI BANK1009-C was issued when the California 10 year Statue of Limitations expired ON A COURT JUDGEMENT.
        We will contact the Court to determine the 9/7/2004 Judgment amount.
        ***I do not believe that the 9/7/2004 Judgment amount could have been the Box 2 amount of $16,496.60 ten years ago. Again note that Box 3 (Interest if included in Box 2)is BLANK.
        *** Therefore Box 2 $16,496.60 debt discharge has no Box 3 interest (Blank) if the discharged debt can in fact be reduced by interest.

        Hope that I am writing clearly. I am an 88-1/2 year old disabled WW2 Vet recovering from pneumonia and shingles. Continuously in pain, tired cannot walk without a walker, living by God’s strength and peace. A $16,496.60 debt discharge is beyond our ability. Our main assets are our individual (wife 1/7
        and myself 1/7 life estate) share of the farm which operates at a loss after over 70 years. California is a Community property State.

        Thank you for your time. Needless to say I have been a bit worried. Was going to use my(husband) bank money for new windows as I am cold in the winter even when wife Kathy is warm. This is my second year with Pneumonia
        triggered by a cold house.

        Much appreciation and thanks.

        Marshall (husband of recipient of 1009-C)

  • Carolyn Bailey

    Mr Bode,

    This information is very helpful. I have searched the Form 982/1099-C/Publication 4681 topic and have turned up some potentially conflicting information. My husband and I filed bankruptcy and were discharged 11/19/2013. It was primarily credit card debt, however there was a medical bill of $1600 and 2 vehichle loans. One of which has been resolved (trade in) and the other the payments continue being made. We have received no 1099-C forms, which according to the articles I have read, are not a requirement for the creditors to send. Why would they do it if they don’t have to? Therefore, how can I fill out the form 982 with no 1099-Cs, and multiple articles specify not to use any amount other than what is on the 1099-C. Any guidance you could offer would be so appreciated.

    Thank you so much. Carolyn

  • Michael Miller

    My son sold a home in January 2013, which he was using as a rental property for the past 4 years. The sale was called a short sale because he owed 90,000 and the bank agreed t sell it for 36,000. He initially thought he needed a 1099S from the bank and kept hounding them for one, until they emphatically stated he was not going to get one. Now I am thinking he should have received a 1099C, but to date has not received anything. Is there any situations where the bank would not be required to provide a 1099C?

  • Joe Knight

    I received a 1099-c for year 2013 on a foreclosed home from Dec 2010. I realize I will not be taxed federally, but does NC offer the same “forgiveness?”

  • I just found out (after trying to settle an account that I did not know was closed) that I had two additional 1099C forms submitted to the IRS in 2011 for 2010 taxes. I turned in two that year but evidentally I had four and somehow failed to get notices. The IRS has never sent anything on this. It has been over three years. Did they just miss it or will I be hearing from them? Should I file an amendment. Bad thing is I am now single and was married the year these were left off my tax filing. I looked at my Wage and Income transcript for that year and sure enough four were sent to the IRS.

    • I hate it when I’m right Anita. I always tell folks the Form 1099-C will come. But sometimes in a future tax year. I can help you with the amended tax return Anita since your circumstances have changed.

  • Brian

    Hi Gary, great informative website.

    Hoping to enlist your services to help with a 1099C issue. I was issued a 1099C for ~$48K in tax year 2013. The debt is excludable at the federal level as a main home qualified mortgage debt exlusion, but North Carolina did not conform to this extension in 2013 so they want to collect taxes on this. I will not be able to claim insolvency in 2013.

    After reading the IRS guidelines, I think the approach for me here is twofold. Insolvency is based on the financial condition immediately preceding the debt cancellation. In this case the lender took posession of the property in 2010, then closed my account, reported $0 balance to the credit agency and stopped all collection efforts in 2011. So my interpretation is that 2011 is the real tax year this should be effective in. The lender won’t modify the 1099C and made the statement that they have 36 months to file the form. While there is 36 month testing period in my understanding, my read is they should issue the 1099C when the debt is actually discharged, not willy nilly whenever they feel like it in a 3 year period.

    In 2011 I would qualify for insolvency for at least a portion if not all the debt. Now, if this logic holds, and then 1099C is acually issued in the wrong year and should have been 2011… then I could use the main home exemption at both the state and local level negating the for an insolvency test. (Note: in 2011 I filed an insolvency claim to exlude a rental home foreclosure as well)

    So, here I am now in 2013 needing to file taxes and not sure how to report this. Since there doesnt appear to be a mechanism for disputing a 1099C with the IRS, my internet research has led me to a few options.

    1. Do nothing differnt: Report the 1099C as 2013 income as qualified mortgage exlusion and put the additive income on NC return and pay the extra state taxes (not happening if I can help it)

    2. Claim mortgage exemption but explain as prior year: Report the 1099C as 2013 income on the federal return without a qualified mortgage exlusion, but also report an equal negative income with a rationale explaining the “back-out” as an adjustment accounting for the morggage exlusion in a prior year. This seems the most honest approach but seems like it would draw attention from the IRS.

    3. Claim insolvency using prior year data: Report the 1099C as 2013 income and use my 2011 insolvency amount on the Form 982 to wipe out the 2013 debt. While this mixes two different exlusions up, it seems like I could just file this way and hope no one audits it. I wonder if the IRS will even care as none of the options impact the amount of federal taxes collected. If I get audited seems like the IRS would quickly realize that a change would yield no additional revenue for the IRS and move on to other problems.

    4. Hoping you can provide me the best route here. 🙂 I left you a voicemail with my telephone number.

  • Nancy

    Can you please remove my last name on my previous post.

  • Tyler

    In May 2010 we filed for Chapter 7. We reaffirmed our mortgage within the Chapter 7. We had a 1st and 2nd mortgage. After our bankruptcy, we did a loan modification with our 1st mortgage and were able to keep our house. In 2011 we unexpectedly received a 1099-C on our 2nd mortgage.

    We just pulled title on our home and both the 1st and 2nd mortgage are still on there. What does this mean. We thought that if the 2nd mortgage was cancelled, then the lien and title would be removed as well. Any insight you can give us on this would be greatly appreciated.

  • BJ

    Hi Gary,

    I completed a short sale on my home in May of 2013, but only received a HUD-1 Settlement Statement and no 1099c.

    While the HUD-1 form indicates a “Payoff” amount, I can’t determine the accurate amount to report as forgiven debt.

    I’ve contacted both the bank and FHA multiple times in an attempt to get a 1099c, or at least to get the specific amount of debt I was forgiven. Neither of them have been cooperative in providing information, and both have insisted that they are not responsible for sending me a 1099.

    At first, the bank said that there would not be a 1099 processed because the sale was under $250,000. Then they said there wouldn’t be a 1099 because they didn’t forgive any debt to me because they were reimbursed by the FHA.

    When I spoke to the FHA servicing center, they first stated that they probably sent a 1099 to the bank, which would then be forwarded on to me. When I followed up for me clarification, they stated that, in fact, they did not need to process a 1099 for me, and told me to contact the IRS to determine if I’d have any penalty.

    I’ve called the IRS a few times, but they were unhelpful in clarifying anything.

    My best guess about my “cancelled debt” amount is the difference between the principal amount I owed on the mortgage as of my short sale closing date, and the payoff amount listed in my HUD-1.

    Thanks for any insights or suggestions you can provide.

    • I think you’re on the right track BJ. But I would extend the 2013 returns and then pull the 2013 IRS transcript in May or so. Let’s make sure they didn’t receive on before submitting figures that don’t match their records. Hope that helped.

  • RK

    Hi Gary,
    After reducing attributes on form 982, is there anything further to do on other forms for the same year? Suppose you are reducing capital losses or NOL for 2013, how does this get reflected elsewhere? For example, 1040 shows a large NOL or capital loss, form 982 is completed to reduce these attributes, does the IRS assume you will simply not carry them forward when filing 2014 taxes or does one have to adjust the 2013 1040 or other schedules?

    I can’t find this answer anywhere.


  • Dan

    Received a 1099A for timeshare. Company misrepresented so we stopped payment. They show box 2 outstanding balance of 18078.31 & box 4 Same amount, 18078.31 for FMV. Box 5 is not checked. Should I file any income on our return?

  • Amy

    Hi Gary,
    I did a short sale on a rental property in Arizona, bought it 270K (7/2006) (purchase money – 2 loans), sold 130K in 11/2013. I received a 1099C from the first with box 5 checked (which I think is wrong since in Arizona, purchase money is nonrecourse I believe) and 1099C from the second unchecked. The first refuses to reissue 1099C. Total amount on box 2 of the two 1099C is (138K). Can I use form 982 to exclude the entire amounts? I appreciate your help a lot! Thanks a lot for any help or suggestions!

    • Well Amy, I’d look at the loan documents to make sure you aren’t personally responsible. If you’re not I’d still present the Form 1099-C on the tax return but not include in taxable income. I frequently submit explanations in these type of cases. But if you are liable, there are two provisions on Form 982 to help you exclude the rental property cancelled debt from taxable income.

  • Will

    I received a 1099C with for approximately 70K, I then received a corrected 1099C for $0. I filed a Chapter 7 Bankruptcy in 2009 and the loan was discharged. I decided to work with the lender and pay a portion of the debt so they would release the deed on the home. This has been my primary home for 11 years and last year I rented it out for approx 10 months because I could no longer afford it. I claimed the rental income. Does my bankruptcy discharge still cover this 1099C?

  • Megan

    The house my now ex-husband and I bought in 2007 was a short sale in 2013, which is the same year we divorced, for $75k. It was our primary residence until the short sale. The 1099-C has both our names on it. However, it doesn’t seem reasonable for both of us to claim the full amount as income, since we’re not married any longer, and filing individually. I should be responsible for half. Not sure how to do this. Any advice or tips would be appreciated!


    • Megan

      To clarify, the income from cancellation of the debt was $75000. The house sold for much more than that, but that sum which I now have on my Income lines is doing crazy things to my income and tax burden! I think I would be reasonably responsible for half that, at about $37,500.

    • Well Megan, that sounds reasonable but you’re both responsible for the entire amount. If you half and the ex doesn’t, you’re on the hook for the other half. Ouch!

  • Brad

    I just found a forwarded 1099c from a canceled debt in my pile of mail. I had just checked my transcript with the IRS and there weren’t any 1099s listed for the current tax year 2013.

    I had made a settlement deal with the collections company in November 2012. Shouldn’t that date be the identifiable event ? I have a confirmation letter retroactively accepting this agreement on January 22, 2013.

    Instead, the 1099 lists May 2013. (The month after my last payment in the arrangement). I thought I was going to have to revise 2012’s taxes and not worry about this until next week, e.g. after I conclude stressing out over filing this year’s taxes.

    I think a 982c in either year will reduce my obligation as I have a junky car worth less than the debt not much personal property. The original debt+other debt(s) > assets…

    Should I fight for a correction or just bite the bullet ?

    • Well Brad, my answer is based on listening to hundreds of people in your situation. I think the psychological advantages to just moving on with life sometimes out weigh the tax issues. So you could try to challenge the date on the 1099-C, Cancellation of Debt. But if you can negate the 2013 tax consequences through Form 982, Reduction of Tax Attributes, I’d ride with 2013.

      • Brad

        That’s pretty much what I did. I actually pulled my *2011* and *2012* transcripts so of course that would not have been on there. I went back and looked at my documentation. I actually *requested* the collection agency to put the 1099c into 2013 when I was compiling a settlement offer. My reasoning – I wanted debt one to be taxed in 2012 and this debt in 2013. I had no idea that the ‘insolvency’ worksheet would have cut this down. In that case I should have settled with both of them simultaneously and declared it on the next years taxes. Combined there would have been no way I was solvent under the IRS standard.

        I do owe some state back taxes (<$450 for three years) that I've been putting off for too long. For whatever reason I just didn't file. I saw that I could have put that information down in my 'favor' for insolvency but didn't use it. If my 1040 gets kicked back to me then I will add it.

        I still have one debt forgiven account floating out there. Unless they sent a 1099c for 2013 as well and I never got it. That would be just wonderful. (sarcasm font).

        • Brad

          addendum: I am finally filing and paying off those state taxes. It’s been a long slog but I’ve paid off 95% of my debt (or negotiated 20% away)and it only took about five years. Not sure if the stigma of bankruptcy was worth five years of ‘PTSD’ but that’s how it goes…

        • The process profoundly affects your life. My ex call me the CPanalyst

  • Edward

    Mr. Bode, I received a 1099-C on a rental property in the amount of $97,000 debt discharged and the FMV is $104,550. The debt description is Mortgage. This is for a rental/investment property that was foreclosed on that I could no longer maintain. The value of it decreased and I could not sale. I purchased the property back in 2006 for $138,000. I have a mortgage own my home (permanent residence), and own another rental property that I have a tenant in and am current in both. What is the best way to handle the 1099-C I received on my 2013 taxes? Thanks for your input!

    • It sounds to me like you have four issues Edward. The first is the final 2013 rental profit or loss, sounds like Schedule E from your post. Next you have a Form 4797 issue involving gain or loss on the foreclosure. The third is cancelled debt from Form 1099-C. Use Form 982 to exclude that from taxable income. And the fourth is adjusting your tax attributes (maybe) on your remaining assets. Hope that helps.

  • Susan

    Hi Gary,
    We received a 1099c for some equipment that belonged to my husbands business (an Scorp). He had personally guaranteed it and we had to allow it to go back to the bank. We had to dissolve the corporation and declare chapter 7 personally. This is the only 1099c we received, although there was way more debt besides that. We were personally insolvent at the time. Our accountant is not sure how to deal with the debt. there were a number of precautionary debts listed on our bankruptcy that belonged to the corporation and our attorney wanted to list them just in case the creditors came after us personally. Do we list them on form 982? What about personal debt to family members when the debt is forgiven but there will not be a 1099c? Our first and second mortgages, although we have kept up on payments and reaffirmed the debts? It’s all very confusing! Thanks! Also, if we include all of the above, we are insolvent by about $200,000. We had carried over a Loss of about $60,000. Are we unable to use that loss?

    • Hi Susan, does the Form 1099-C, Cancellation of Debt, list your Husband’s Social Security or the S Corp’s EIN? Was the equipment included in the bankruptcy discharge? I’m not a bankruptcy attorney. But the tax issues seem straight forward, or would be with more clarification. Would you like us to prepare the tax return Susan?

      • Susan

        Thanks, it’s already in the hands of our CPA. The 1099c is in my husbands name and yes, it was named in the bankruptcy, but for some reason the amount named in the paperwork is $0. I think its because the amount had not been settled yet due to pending sale of the property by the creditor. Oddly enough, the document is dated the very day of our filing.

  • leonard fritzson

    is it true that form 982 for cancellation of debt on primary residence is out as of 01/01/14 ?

    thank you

  • Suzetteml

    Hello Gary,
    I just came upon your blog while researching info for a 1099-C I received in 2012. I claimed this amount on my taxes using a form 982 when I filed in 2013. I just received a notice from IRS telling me that they believed that this should have been claimed as taxable income; they are requesting $1800+. I have the original form that I filed, but they are now requesting “a breakdown of total assets and liabilities before the debt was discharged”. I have 3 questions: do I need to include my retirement funds as assets? Can this be a spreadsheet document, or do I need to include statements as backup? (The notice says I can use a worksheet in pub 4681.) And if this debt was just mine, do I need to include my spouse’s finances, we filed married jointly that year.

    Thank you for taking a minute to help us.

  • Marie

    Hello Gary

    First let me give you an overview.

    In Feb of 2013 My husband was injured and did not work for nine months. We own a s corp and we are the only two shareholders. In Oct. 2013, 58,000 in corporate debt was “Charged off” the business and became personal debt.This was the term the Creditors used while trying to collect. (it was all personal guaranteed.) This debt included 2 credit cards and a business line of credit. One bank owned both the business line and one of the Credit cards. prior to 2013 we personally took a loan from the corporation in the amount of 21,000.

    In Jan 2014, we personally filed chapter 7. the bankruptcy including all the corporate debt, the loan to shareholder and an additional 59,000 in personal debt. We were able to keep our home and car, but did not reaffirm these loans just kept paying on them.

    After the bankruptcy was discharged in April of 2014, the business received a notice from a bank that held the business line that they want payment in full. when I mentioned the “Charge off” and the bankruptcy they said that the business was not included in the bankruptcy and stilled owed the money. So we settled. The total amount owed was 10,000 and we paid 3,000. they never mentioned the Credit Card that they also owned.

    Questions 🙂

    1. Should we have received the 1099-C for 2013 or will we get them for 2014?

    2. Will we get any 1099-c from the mortgage company or car loan?

    3. Can we move the “loan to shareholder” to bad debt to offsite the forgiven debt 58,000-21,000= 37,000

    4. If we get the 1099-C in the business name do you let the income come over on the schedule k and then remove it using the 982 on the personal side because that debt was forgiven in the chapter 7 or do we fill out the 982 for the business?
    there is no assets for the business (small home office and service based company) the corporation is still open.

    Thanks for your help with this very complicated issues.

    • Well Marie, sorry you’re having problems. Some of this is too complex for a comment. Even if you don’t use me, please have someone well versed in cancelled and S Corp issues prepare the 2014 return.

      • marie

        Gary I’ll talk to my husband about using you. my biggest question is how do I prepare now so I don’t have a BIG surprise come April 2015. Is there anyway to figure this all out before the end of the year, with the all the different contingences?

        • Yes Marie, there is. We can extrapolate your expected 2014 and run alternate scenarios. Some of our fee reduces the actual tax preparation fee for 2014. Sometimes there are tax positioning strategies available.

    • Hi Marie. I would have to be retained to answer these complex issues. Sorry, it’s just too much for a comment. Call me if you’d like 910 399 2705

  • Alexa Marie

    I received a 1099-C for student loan discharge totaling $82,451.48 and $8,411.82 interest. The student loan was discharged due to me being totally and permanently disabled. My income is Social Security Disability benefits for 2014 $24,682.20 include $1,268.80 Medicare part b premiums and voluntary federal income tax $1,171.20. Current monthly income (gross) is Social Security Disability. I have two minor dependents that I support as well.

    I need help to determine if my mortgage payment can be listed as a liability when completing the IRS insolvency worksheet. I filed bankruptcy in October 2012 and it was discharged February 2013. During the bankruptcy I would keep my home and continued to make payments throughout the process and I still remain in the home and pay the mortgage. However, the mortgage company didn’t provide paperwork to reaffirm the mortgage. Thus as I identify the tax impact of the canceled debt I am confused as to whether the mortgage can be listed as a liability for insolvency purposes or any other tax option because I am still living in the home and paying the mortgage but the mortgage had not been reaffirmed. The mortgage lender asked was my intent to keep the home and I responded yes as the mortgage was moved out of bankruptcy status with the lender in July or August last year.

    Are there any options available to assist in getting some tax relief? Thank you in advance for your time and consideration to the above matter.

  • pat

    I have already filed my taxes this year,then i get a 1099C in the mail. What do I do? Will it be better to wait on the irs to send me something or what? I used Turbo Tax to do my return and I don’t Know if they can help.

  • Janice

    Hi Gary,
    I received a letter from the IRS stating I owe roughly $1800 for a credit card cancellation of debt, however, I never received a 1099-C for this to file back in 2012. Do I have any recourse and if so, my other issue is that, the Bank Call Center advised me they have no way of requesting or sending me another 1099-C. Can you help with that as well?

  • kaaren

    I received a 1099 c today and my return was done yesterday. I would like to know how I can get assistance to resolve this. A few years ago my home was restructured and in box B it says $ 62,000, I live outside Seattle and am recently retired. This is very concerning. Thanks

  • randy cash

    for 2014, how much approx. would you charge to do tax returns? i have business expenses and 1099c for old debt and other than that pretty straightforward as far as deductions and income – one 1099 from my employer.

  • Len Errick

    Mr. Bode, thank you very much for your informational site.

    I have received Form 1099-C for cancellation of Department of Education due to SSI permanent disability.

    Box 3 says “Shows interest if included in the debt reported in box 2. See Pub. 4681 to see if you must include the interest in gross income.” I am not sure where the Box 3 interest comes from as I was up to date with the loan payments at the time the loan was forgiven. It appears that Box 3 was added to the loan balance at the time of the loan forgiveness. How should this be handled on the 1040 Form for 2015?

    I have looked up Pub 4681 but can’t seem to find this question addressed. Can you tell me how to know if I must include the interest on this cancelled debt in my gross income?

    Thank you in advance for any help.

  • Terri


    Helping an individual with a reverse mortgage related 1099C. Voluntary conveyance. FMV is greater than the debt discharged. As a non-recourse loan, is this reported on the 982 or simply as a sale of home? Thanks.

  • jairo sandoal

    Gary your site is of great help to all of us when dealing with the must difficult forms to report on an income tax return. Kindly please provide me with an answer to the following:
    .-Back in 1998 I purchased land for investment and took a mortgage to pay for the land
    .-The property devalued substantially and I did not continue to make the mortgage payments
    .-finally in 2014 the bank took over the property and sent me a 1099-A
    .-Box 1: date of lender acquisition February 14, 2014
    .-Box 2: $215000
    .-Box 4: FMV $30000
    .-Box 5: X

    where should I report the above amounts and how. Please help

  • Bev

    Mr. Bode, I’ve learned quite a bit from the information you’ve shared. Thanks!

    I recently received a 1099-C for a loan on a property that was foreclosed in 2008.
    The loan in question was a second mortgage on a 100% financing deal. The first mortgage foreclosed and the 2nd was wiped out.

    The following items are in question on this document.
    Item #4 – Debt description is stated as CREDIT LOAN.
    Item #7 – 0.00 entered as Fair market value of the property.
    Can this be corrected to show Mortgage Loan?
    Secondly, does it make a difference?

    Thank you in advance for your help.

    • Hi Bev. FMV is $0 because the property isn’t yours any more. Be careful, the IRS requires you used the second mortgage for purchase or improvement if the property for qualified mortgage exclusion on Form 982. But insolvency is till OK. Hope that helps.

      • Bev

        I appreciate your comment. Thanks, Mr. Bode.

        Should I still request a lender correction since the original loan was a 2nd mortgage used to purchase real estate in the days of 100% financing or (80/20) loans?

        Thanks again!

  • Sarah M

    I have received a 1099-C for the foreclosure of my primary residence. The amount of discharged debt is 238,017.21 and the fmv is 226,000.00. I am unsure of whether I am able to exclude the entire 238K, only the 226K or what. The other concern for me is that block 6 is blank and we did do a “deed in lieu of foreclosure”, so I am unsure as to why this was not coded as a foreclosure and left blank. I am sorry this is so close to the 15th (I just received the 1099C), but any help would be greatly appreciated.

  • Bob


    What is “interest in pension” on publication 4681 ?
    If I have a pension, I am probably not insolvent, correct ?


  • I received a 1099-a block #2 105,727.17 and block 4 60,000.00 is there away to cancel this debt.

  • Maria Brewer

    When filing a Form 982 for insolvency calculation, does a lien on the property at the time of declaring insolvency remove that property value as an asset?

  • Birdie Faulkner

    Original 1099’s lost copies local IRS office provided just plain white paper, no boxes, no clue. Received 1099A and 1099C. 1099A shows Prpty FMV and then Debt Out figures. 1099C shows Amt Dbt Cn. What has to be claimed on taxes and where do we claim this? If I am understanding correctly the 1099A shows property was received.

  • Robin Elliott

    Gary, I am thinking abo9ut filing for debt cancelaation. When do I complete the insolveny sheet now or when the debt is cancelled?

    • The figures for the IRS insolvency are as of the date on the 1099-C. However, sometimes, there is paper work at an earlier date that states the loan is forgiven. If that works better for the Client we do that along with careful documentation and explanation.

  • Robin Elliott

    Gary, when completeting the insolvency form when i add my 401 K accounts do I include all of the amount since it is taxed before I am able to get my 401k. Also, how do I address life insurance question?

    • First Robin some retirement plans aren’t assets for IRS insolvency purchases. I use the full amount if the results avoid all cancelled debt income. If it doesn’t I use the net realized value for the pension plan. Hope that helped. (910) 392- 2705

  • Darcy


    If one receives a 1099-C and plans to fill out form 982 to declare insolvency on the debt, would any amount need to be added back on the North Carolina return? As of 2014, an addition is required for the amount of cancellation of qualified principal residence debt excluded from gross income on the federal return… just wondering if the same was possibly true in the case of cancellation of student loan debt excluded from gross income due to insolvency.

    Thank you!

  • Martin C. Womer, Esq.

    Does cancellation of debt income treatment apply to foreclosure of a reverse mortgage after the death of the borrower? If yes, does it get reported as fiduciary income on the estate’s Form 1041?

    Is it reported as income in the year that the foreclosure is completed by court order?

    If the deceased borrower’s estate’s personal representative signs a deed in lieu of foreclosure to the reverse mortgage lender, is the tax treatment different? Is the tax treatment with deed in lieu more or less favorable than going through the entire foreclosure process to a court order granting the property to the lender?

  • Tiffany


    The link to your example 982 for credit card debt isn’t working. Can you refresh or send it directly to me? We received a letter stating a 1099-c had been filed in 2014, but it was mailed to my husband’s former address from 6 yrs ago. I don’t have a copy of the actual 1099-c. Do I need it in order to fill out form 982?

  • Darrell

    I received a 1099-c for a credit card. Is there a calculation that is made to determine what amount is taxable or generally you have to add the whole amount is taxable?

    • Hi Darrell. The amount on the Form 1099-C is just the starting point for taxable cancelled debt. Publication 4681 might help you. Definitely don’t pay tax on the entire amount until you exhaust Form 982. Or I can do the tax return if you’d like.

  • Jenny


    I received a 1099-C for foreclosure of my primary residence.

    Box 1-2/12/2015
    Box 2-0.00
    Box 3-0.00
    Box 5-checked
    Box 7(fmv)-220,000

    I’ve read the pubs and I’m still pretty confused. How do I figure out what my taxable responsibility is for this and if it’s considered recourse, non-recourse, income, etc.? I’m not sure if it’s the fmv minus what the home sold for, the entire amount of fmv, nothing since Box 2 and 3 is 0.00 or some other combination. I was out of work for over a year from 2013-2014 which led to the foreclosure and in 2015 I made under $40k. Any insight would be greatly appreciated.

  • Tamye Craey

    I got a 1099a on a old mortgage loan with a G identitifiable code.and no fmv listed . And almost $19,000 in box #2 with a date of 7/30/15 in the event. We moved in 2006 how do I know if this is excluded

  • Nancy

    Hi Gary, I received a 1099-C this February 2016, however I foreclosed my home back in 2008. The date of identifiable event is for 07/09/2015. How is that possible? That’s about 8 years ago… What is my next step? I live in orange county (California)

  • Candy F

    Hi Gary- I did a mortgage modification for my townhome about 5 years ago, after payments made at the reduced rate they locked my payment and rate in (sometime last year). I received a 1099-C for 21K. My mortgage initially was 88K but the payoff is now is 68K. I understand it is taxable if they forgave some of the debt but what I dont get is 21K of the debt and 68k balance is still over what I originally borrowed as well as paid in the last 5 years on principal so how is this considered income?

  • Trudy

    I received a 1099-c for a Fannie Mae Home Saver Loan from back in 2009, I had the property foreclosed on and had received a 1099-a back in 2010 for that property, since then I just received yesterday a 1099-c for the same property… how do I report this on my taxes??
    box 2 has 7440
    box 3 has 0.00
    box 4 says Mortgage
    Box 5 is not checked
    Box 6 doesn’t have a code
    Box 7 says FMV 0
    since the house went back to the bank and has since resold as a short sale… how do I enter it…. I was told I have to but when I enter it into my tax software it kicks it out saying I am not responsible for it; so it automatically gets removed

  • Amanda

    I am so lost! My husband owned a house before we married. Then lived in for 6 years market took a dive tried to sell it owed $129k on it and not one person would buy it so we were approved for a short sale at least he thought so we tried selling it in 2012 for less than owed on the market almost a year and the offers were coming in between $40-$60k so finally received the highest offer at $80k and the bank denied their offer countered at $115k no one in there right mind would buy it for that so we gave up and asked how to do the deed In lieu theRe Wes two banks an 80% and a 20% loan to agree the 80% agreed the 20% said no so they just foreclosed. The bank tried to sell it and ending up getting $85k for the house. We received a form 1099-A that year in 2013. Nothing from the 20% bank though. They said it was discharged 2 months before the foreclosure and never heard a word again until now 2016. We received a 1099-c for the 20% loan with you guessed it a brand new date August 2015. And a day later we received a letter saying the account is settled in full with a October 2015 date. These dates are what matter August 2015 we had some money
    $9k no debt besides a new mortgage and we used our savings we had so we paid to contractors two weeks later. October 2015 we had $650 no debt besides a new mortgage in our savings and feb 2013 we had $50k in debt on top of the mortgage and nothing in savings. We feel cheated on this because no one ever said it was to be paid they took the house and we were homeless essentially house hopping until we could afford to rent again. What do we do were angry because to pay tax on $20k means we’re in a lot of trouble had this not came up we would of received a refund for a couple hundred dollars.

    How do we fight the date to get the 2013 date or at least the October date on the letter? We just do not want the August 2015 date we don’t know why they reported this 3 years later when we finally bounced back from that nightmare is this legal? And we reported the 1099-a form from the 80% back in 2013 tax return

  • Tamye Crary

    Reply to earlier question.I live in Indiana. Defaulted on mortgage. They sold mobile home.it was in 2006
    We got a 1099c this February 2016 cancellation of Debt. That reads as follows. (1)7/30/16 (2)18654.65 (3)1098.67 (4)mortgage (5)yes we are. (6)G (7) G does this help with info?

  • Trudy

    Good morning Gary: your a popular man. I just received a 1099C on a primary residence that I vacated in 2011 due to harrassment by mortgage company, it was a modular home in a park and I could not get anyone to refinance it at the time I was having issues. I moved out and the park it was in bought it from Greentree. I heard no more about it. Yesterday I received a 1099C in the mail from DITECH, (formerly Greetree). It states on the 1099C that Bankruptcy was filed. I never filed Bankruptcy on the home. There was a bankrupcy in 2005, but the home was reaffirmed. Where do I start? I have already filed my taxes this year, and I am in the middle of getting a USDA home loan that is income based, closing soon. a $52,000.00 added income will knock me out of that! HELP.

    Any advice is appreciated
    thank you for this blog and answering questions

    • Hi Trudy. Sounds like a disconnect somewhere. Not a big deal except it will affect purchase of the new home. You’ll have to file the 1099-C on an amended return. I’m not sure how I could treat that for Form 982 without more info.

  • Jenny

    We have not received a 1099-C after our short sale back in March of 2015. Wells Fargo tells me that we will not receive one, due to the fact that it was a FHA loan. It was a multi-family that was also our primary residence. We rented the other unit for income. Do we have to pay taxes on part of the debt forgiven since it was a multi-family?

  • Todd West

    Hi, Gary… My question is about a deed-in-lieu of foreclosure… My wife and I filed for chapter 7 bankruptcy in 2005 in which our mortgage on our residence was to be reaffirmed, however, it wasn’t before the case was discharged… My wife and I continued to live in the house and made voluntary payments which was agreeable to the bank… In 2008, we purchased another home and moved, maintaining the original home as a rental property… In 2015, we transferred the rental house to the bank in a deed-in-lieu… I’ve received a 1099-A for this transaction, but no 1099-C… I’m not sure how to proceed with my taxes for 2015… Is this going to be taxable even though the debt was discharged? (The principal balance is almost $30,000 higher than the listed FMV)

    • Hi Todd. You’d report the sale of the property to the IRS on Form 4797. Please you’d have the final Schedule E with possible prior disallowed losses, if any, from Form 8582. You’ll deal with the 1099-C when it arrives.

  • Iris


    I already filed my 2015 taxes and I recently received a 1099-C. However, This debt was for a second mortgage for a property that went foreclosure on 2008-2012 not quite sure since the property was abandoned. What do I do now? The amount on 1099-C is incorrect, the mortgage amount was 32,989 and the lender sent amount of debt discharged for $66,722.44. I don’t know what to do now….. Please advise

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>