Form 1099-C - Cancellation of Debt

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:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Income in the Federal Quick Q&A Topics menu to expand, then click Cancellation of Debt (Form 1099-C).
  3. Click + Add Form 1099-C to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

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. Click 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).

Additional Information

If the debt is a nonbusiness debt, report the canceled amount on Schedule 1 (Form 1040) Additional Income and Adjustments to Income, 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 Form 1099-C instructions 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? topic if applicable in your situation.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.