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IRS Form 1099-C, Cancellation of Debt

What is IRS Form 1099-C?

IRS Form 1099-C

IRS Form 1099-C, Cancellation of Debt, is used by a lender to report canceled or forgiven debt of $600 or more. Canceled debt is the amount of loan that the borrower is no longer required to pay. Debt may include principal, interest, fees, penalties, administrative costs, and fines. The lender may cancel the entire debt or any component of debt, such as whole or part principal, fees, interest, or any other amount. Since mortgage transactions are lending transactions, only the principal amount that has been canceled is reported in Form 1099-C. Bankruptcies, foreclosures, and settlements (deed-in-lieu) are common ways in which borrower’s debt may be canceled.

The lender has to prepare three copies of Form 1099-C: Form A, Form B, and Form C. Form A is provided to the IRS, Form B is provided to the borrower, and Form C is retained by the lender for its records. The form is generally issued by the default management group within the Servicing department of the lender. Alternatively, the lender may have a separate regulatory reporting or Tax/IRS reporting group within its Servicing department.

Institutions Required to File Form 1099-C

Form 1099-C needs to be filed by federal government agencies, financial institutions and any other organization whose significant trade or business is the lending of money. Included are domestic banks, credit unions, trust companies, and building and loan or savings and loan associations.


Contents of Form 1099-C

  1. CREDITOR'S name, street address, city, state, ZIP code, and telephone number: This is usually the original lender or the servicer’s contact information. IRS requires the telephone number to be a central number for all canceled debts. At this number a person may be reached who will ensure the borrower is connected with the correct department.
  2. CREDITOR'S federal identification number: Tax Identification Number (TIN) of the lender or servicer.
  3. DEBTOR'S federal identification number: Borrower’s Social Security Number (SSN) or Tax Identification Number (TIN). The TIN/SSN may be truncated to the last four digits.
  4. DEBTOR'S name: Borrower’s name. It will include names of both co-borrowers if they are spouses and staying at the same residence.
  5. Street address (including apt. no.): Address of the borrower.
  6. City, state, and ZIP code: Address of the borrower.
  7. Account Number: Account number is provided if the lender has multiple accounts for the borrower and for whom the lender is filing more than one Form 1099-C.
  8. Box 1. Date of Identifiable Event: Date when the debt is deemed to be canceled. In case of foreclosure, identifiable event occurs on the date of foreclosure sale.
  9. Box 2. Amount of Debt Discharged: The amount of canceled debt.
    1. In case of mortgage loans the principal amount is reported, irrespective of whether the loan is first lien, second lien, traditional mortgage loan, or a HELOC.
    2. The amount of debt discharged does not include any amount the lender receives in satisfaction of the debt by means of a settlement agreement, foreclosure sale, etc.
  10. Box 3. Interest if Included in Box 2: If interest is included in Amount of Debt Discharged (Box 2), then such interest amount is reported in Box 3. Box 3 would be blank for mortgage loans since only principal amount is reported in Box 2.
  11. Box 4. Debt Description: A description of the origin of the debt, such as mortgage loan.
  12. Box 5. Check Here if the Debtor was Personally Liable for Repayment of the Debt: An "X" is entered in the checkbox if the borrower is personally liable for the loans.
  13. Box 6. Identifiable Event Code: This field is used to enter a code to report the nature of the identifiable event. As of 2012, all codes are optional except for Code A - Bankruptcy. The complete list of codes is shown in the table below.
Code Type of Event
A Bankruptcy
B Other judicial debt relief
C Statute of limitations or expiration of deficiency period
D Foreclosure election
E Debt relief from probate or similar proceeding
F By agreement
G Decision or policy to discontinue collection
H Expiration of nonpayment testing period
I Other actual discharge before identifiable event
  1. Box 7. Fair Market Value (FMV) of Property: This field has the FMV of the property if filing a combined Form 1099-C and 1099-A for a foreclosure, execution, or similar sale. Generally, the gross foreclosure bid price is considered to be the FMV. If an abandonment or voluntary conveyance to the lender in lieu of foreclosure occurred ("Deed-in-lieu"), then the appraised value of the property is considered as FMV.

Borrower's Consideration

Reporting Canceled Debt as Income

IRS considers canceled debt as income in the hands of the borrower and requires you to report the canceled debt on the "Other income" line of the Form 1040. In fact, you are required to report canceled debt even if it is less than $600. However, not all canceled debt is required to be reported. IRS Publication 4681 provides details of exceptions to reporting canceled debt on the 1040.

Record Retention

You should retain the Form 1098 for at least 3 years from the date when the return is due. Longer time periods may apply under specific circumstances such as when you do not file a return or file a fraudulent return. IRS Publication 17 provides general record retention guidelines. You should contact your tax preparer for guidance for your specific circumstances.

State laws may also require a longer retention periods.


Lender's Consideration

Due Dates for Filing Form 1099-C

Form 1099-C is filed in the year following the year in which the debt was canceled. The due dates are:

  1. Copy A of the Form 1099-C must be filed with the IRS by February 28. If filing electronically then the due date is April 1.
  2. Copy B of the Form 1099-C must be provided to the borrower by January 31.

Lender's Responsibility for Requesting TINs

You are required to make a reasonable effort to obtain the correct name and taxpayer identification number (TIN) or Social Security Number (SSN) of the borrower. Generally, you would obtain the SSN during application stage. If for some reason it is not available, then you must request the borrower's SSN before issuing the Form 1099-C.

Multiple Lenders

IRS requires that if the debt is owned by more than one lender, each lender must issue a Form 1099-C if that lender’s part of the canceled debt is $600 or more. You will be deemed to have met your filing requirements if a lead bank, fund administrator, or other designee prepares the form on your behalf. The designee may file a single Form 1099-C reporting the aggregate canceled debt or may file Form 1099-C for your part of the canceled debt.


Multiple Borrowers

Very often a mortgage loan has more than one borrower with each borrower jointly and severally liable for the debt. Loans with multiple borrowers where the debt is of $10,000 or more and was incurred after 1994, you are required to report the entire amount of the canceled debt on each borrower's Form 1099-C. For debts less than $10,000 or which were incurred before 1995, you must file Form 1099-C only for the primary borrower. If at the time of origination the borrowers were spouses living at the same address and subsequent to loan origination you have no information that these circumstances have changed then you may file only one Form 1099-C.


The IRS provides certain exceptions when the canceled debt is not required to be reported on the Form 1099-C. Learn more about the exceptions in the IRS publication Instructions for Forms 1099-A and 1099-C.

Record Retention

IRS requires you to maintain a copy of the Form 1099-C or be able to reconstruct the data for at least 4 years from the due date of the return.


Document Summary

IRS Form 1099-C, Cancellation of Debt
IRS Form 1099-C is used by a lender to report canceled or forgiven debt of $600 or more to the IRS and the borrowers.
Use in Mortgages
IRS considers canceled debt as income in the hands of the borrower. Form 1099-C provides the amount of canceled debt that the borrower needs to report on the "Other income" line of the Form 1040.
Other Names
IRS Cancellation of Debt Form
Provided By
Provided To
Borrower and IRS
Notarization Required
Signed By
Life Cycle Stage
  • Borrower should retain the Form 1098 for at least 3 years from the date the return is filed. Longer time periods may apply under State laws or other circumstances.
  • Lender must retain the form or be able to reconstruct the data for at least 4 years from the due date of the return.
Model Form
IRS Form 1099-C
Applicable Laws
Internal Revenue Code

Future Updates by IRS

IRS Form 1099-C webpage provides filing instructions, recent developments, and information about any future updates or developments affecting Form 1099-C.

Updated: Aug 29, 2013


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IRS Form 1099-C, Cancellation of Debt, is used by a lender to report canceled or forgiven debt of $600 or more.
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