Form 1099-C - Cancellation of Debt

If you have determined that debt was canceled, but you did not (and do not expect to) receive a Form 1099-C, you may still have cancellation of debt income. To determine whether you have cancellation of debt income, or if you have received a Form 1099-C, complete the Cancellation of Debt topic.

To access this section within TaxAct®:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then select Federal.
  2. Click Other Income in the Federal Quick Q&A Topics menu to expand the category and then click Cancellation of Debt (Form 1099-C)
  3. Click New Copy of Form 1099-C (Desktop users click Add) to create a new copy of the form or click Review to review a form already created
  4. The program will proceed with the interview questions for you to enter or review the appropriate information

Note. On the screen titled Cancellation of Debt - Form 1099-C Information, enter the information from Form 1099-A as follows:

  • Enter Box 1 (1099-A) in Box 1 (1099-C)
  • Generally, enter Box 2 (1099-A) in Box 2 (1099-C). However, if the amount of debt canceled is different from the amount reported in Box 2 of your 1099-A, enter the amount of debt actually canceled. Your lender can tell you this amount.
  • Enter any accrued interest that was canceled in Box 3 (1099-C). However, make sure that this amount is included in the amount you enter in Box 2 (1099-C). Ask your lender if any interest was canceled.
  • Enter Box 4 (1099-A) in Box 7 (1099-C)
  • Enter Box 5 (1099-A) in Box 5 (1099-C)

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. You would need to select Yes on the screen titled Cancellation of Debt - Summary, if you would like to review Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

The next step is to compute any potential gain or loss. You must do this whether or not any debt was canceled.

Related Links