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 Cancellation of Debt, 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 report cancellation of debt in the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click in the top left corner of your screen, then click Federal).
  2. Click the Other Income dropdown, 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 edit a form already created (desktop program: click Review instead of Edit).
  4. Continue with the interview process to enter your 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.

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