In most circumstances, when a Federal Government agency, financial institution, or credit union cancels or forgives a debt of $600 or more, you will receive Form 1099-C, Cancellation of Debt. The amount of canceled debt appears in Box 2. Other important information may appear in additional boxes, such as:
- Box 1 – Date of identifiable event
- Box 3 – Interest included in the canceled amount
- Box 4 – Description of the debt
- Box 5 – Whether you were personally liable for repayment
- Box 6 – Identifiable event code (reason for cancellation)
- Box 7 – Fair market value of property (if applicable)
Creditors must issue Form 1099-C (when required) by January 31 of the year following the cancellation.
Generally, if a debt you owe is canceled or forgiven (other than as a gift or bequest), the canceled amount must be included in your income. In certain situations—such as insolvency, bankruptcy, qualified principal residence indebtedness, or certain business, farm, or student loan discharges, you may be able to exclude some or all of the canceled debt from income. The TaxAct program will guide you through these exclusions. If an exclusion applies, Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, may be required.
Follow the steps below to enter your Form 1099-C information in the TaxAct program.
NOTE: You may use the same steps if you determined that a debt was canceled but you did not (and do not expect to) receive a Form 1099-C.
If you received both Form 1099-A and Form 1099-C for the same debt, generally you will enter only the Form 1099-C in TaxAct. Receiving a 1099-C does not always mean the lender has permanently forgiven the debt—contact the lender if you believe the form was issued in error.
Online
Dashboard
- From within your TaxAct return, click Income.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click the Explore More drop-down.
- Click Add beside Canceled Debt 1099-C.
- Complete the rest of the interview process.
Classic
- From within your TaxAct return, click Federal.
- On smaller devices, click the menu at the top left corner of your screen, then make your selection.
- Click the Other Income drop-down, then click Cancellation of Debt (Form 1099-C).
- Complete the rest of the interview process.
Desktop
- From within your TaxAct return, click Federal.
- Click the Other Income drop-down, then click Cancellation of Debt (Form 1099-C).
- Complete the rest of the interview process.
How TaxAct Handles the Entry
The TaxAct program computes your cancelled debt income and determines where it must be reported on your return. For non-business canceled debt, the amount generally appears on Schedule 1 (Form 1040), Line 8c. Canceled business-related debt will flow to the appropriate business schedule (Schedule C, E, or F).
If you may qualify for an exclusion, you will be prompted to review Form 982 after completing the 1099-C entries. TaxAct will populate Form 982 based on your responses.
1099-A Details
If you only received Form 1099-A, or you must use information from Form 1099-A to complete your Form 1099-C entry, follow these guidelines:
- Enter Box 1 (1099-A) in Box 1 (1099-C).
- Generally, enter Box 2 (1099-A) in Box 2 (1099-C). If the actual canceled-debt amount differs, enter the amount the lender confirmed as canceled.
- Enter any accrued interest canceled in Box 3 (1099-C) and ensure it is included in the amount entered in Box 2.
- Enter Box 4 (1099-A) in Box 7 (1099-C).
- Enter Box 5 (1099-A) in Box 5 (1099-C).
If the debt involved property (such as a foreclosure or repossession), you may also have a gain or loss from the disposition of the property in addition to cancellation-of-debt income. The program will guide you through any required entries.
Forms Limit
The TaxAct program supports the entry of up to ten (10) Forms 1099-C. If you have more than ten to enter, you will need to group your forms according to the nature of the canceled debt. Once the forms are grouped, you can enter the combined amounts on one or more Forms 1099-C.
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