Form 1099-C Cancellation of Debt
If the amount of cancelled/forgiven debt is $600 or more, it is required for the creditor to issue a Form 1099-C lto the person(s) responsible for the loan.
If the amount of canceled debt is under $600, the creditor is not required to issue a Form 1099-C. However, the taxpayer may be required to report the cancelled debt as income regardless of the amount (ref Pub 4012 pg D-63).
Box 4 Debt description:
- The only type of cancelled/forgiven debt which is in-scope for AARP TaxAide is non-business credit card. Any/all other types of cancelled debt are Out of Scope.
Box 6 Identifiable event code
- Code A in this box means the taxpayer was bankrupt when the debt was cancelled and that makes the form Out of Scope.
- If the taxpayer was insolvent at the time the debt was cancelled, that also makes the form Out of Scope. The solvency/ insolvency status of the taxpayer would not be known by the preparer of the 1099-C, so there is no way to note it on the form. For that reason, the volunteer counselor must make the solvent/insolvent determination using a worksheet from Pub 4012 pg D-64. (Click on the link to display the worksheet so you can print it out and complete the entries. Be sure to give the completed worksheet to the taxpayer with his/her printed tax return.)