If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C Cancellation of Debt. The amount of the canceled debt is shown in Box 2. Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income.
To enter the information from Form 1099-C in the TaxAct® program:
Based on your entries, the system will compute any canceled debt income. Under certain circumstances you may exclude the amount of canceled debt from your gross income. Select Yes on the screen titled Cancellation of Debt - Summary to review Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).
If the debt is a nonbusiness debt, report the canceled amount on IRS Schedule 1 (Form 1040), Line 8; if it is a business debt, report the amount on the appropriate business form. The TaxAct program will do this for you after you enter the information from Form 1099-C.
Refer to the instructions on the Form 1099-C you received for additional information that may apply to your specific tax situation.
Refer to IRS Publication 544 Sales and Other Dispositions of Assets, IRS Publication 334 Tax Guide for Small Business, or IRS Publication 525 Taxable and Nontaxable Income for additional information.
You may also wish to utilize the IRS's Interactive Tax Assistant Do I have cancellation of debt income on my personal residence?, if applicable in your situation.