A 1099-C is an IRS form a creditor files when it cancels, forgives, or discharges $600 or more of your debt. The forgiven amount, shown in Box 2, is generally treated as taxable income unless you qualify for an exclusion like insolvency or bankruptcy, which you claim on Form 982.

What does it mean when you get a 1099-C?

It means a lender has officially written off $600 or more of debt you owed and reported the forgiven balance to the IRS. You'll typically receive one after a settled credit card account, foreclosure, repossession, or loan discharge. The IRS gets a matching copy, so the amount is expected to appear on your tax return unless an exclusion applies.

How does a 1099-C affect my tax return?

Canceled debt on a 1099-C is generally added to your taxable income for the year of the event in Box 1, which can raise your tax bill or shrink a refund. You report the Box 2 amount on your return unless you qualify to exclude it — for example through insolvency, bankruptcy, or qualified principal-residence debt — using IRS Form 982.

How much tax will I pay on a 1099-C?

There's no flat 1099-C tax rate. Canceled debt is taxed as ordinary income at your marginal rate, so the cost depends on your bracket — roughly 10% to 37% of the Box 2 amount federally, plus any state tax. If you were insolvent or in bankruptcy when the debt was canceled, you may owe nothing on it after filing Form 982.

what is the difference between a 1099-c and a 1099-a

A 1099-C reports debt that has been canceled or forgiven, which is potentially taxable income. A 1099-A reports the acquisition or abandonment of secured property, like a foreclosure, where the underlying debt may still exist. A single event such as a foreclosure can sometimes generate both forms.

what happens if i don't report a 1099-c

The IRS receives its own copy, so ignoring a 1099-C usually triggers an automated notice (CP2000) proposing additional tax, plus interest and possible penalties on the unreported canceled debt. If you believe the amount is wrong or excludable, address it on your return rather than leaving it off entirely.

Tax

Form 1099-C

Form 1099-C, Cancellation of Debt, is an IRS information return a creditor files when it cancels, forgives, or discharges $600 or more of your debt. Box 2 reports the canceled amount, which the IRS generally treats as taxable income unless an exclusion (such as bankruptcy or insolvency) applies.

A creditor must file Form 1099-C once it cancels $600 or more of a debt — and furnish your copy by January 31.

Source: IRS — About Form 1099-C

Written & maintained by the Granite team · Last updated June 2026

Overview

Form 1099-C reports debt that a lender has wiped off its books. When a creditor cancels, forgives, or discharges $600 or more you owed, the IRS considers that forgiven balance as if it were income you received, so the creditor files a 1099-C to report it. Common triggers include settled credit card balances, foreclosures, repossessions, student loan forgiveness, and debts written off after a statute of limitations expires.

The creditor (a bank, credit card issuer, collection agency, or other lender) is the filer and must furnish Copy B to you, the debtor, by January 31 and file Copy A with the IRS. Don't confuse it with Form 1099-A (acquisition or abandonment of secured property), where the debt may still exist. Cancellation-of-debt income is taxable unless you qualify for an exclusion you claim on Form 982.

When you’ll get your Form 1099-C

You settled a credit card or loan balance for less than you owed
A lender wrote off an unpaid debt of $600 or more
Your home was foreclosed on or you completed a short sale
A vehicle or other secured property was repossessed and the deficiency forgiven
Student loans or other debt were forgiven or discharged
A debt aged past its statute of limitations and the creditor stopped collecting

What’s on your Form 1099-C

These are the fields Granite reads and extracts automatically the moment you upload one.

Creditor / Filer name: The lender, bank, or collection agency that canceled the debt and filed the form.
Debtor name: You — the person whose debt was forgiven, exactly as printed on the form.
Box 1 — Date of identifiable event: The date the debt was officially canceled or discharged; this fixes the tax year the income is reported in.
Box 2 — Amount of debt discharged: The dollar amount forgiven. This is the headline figure the IRS may treat as taxable income.
Box 3 — Interest included: How much of Box 2 is unpaid interest, if any, rather than principal.
Box 4 — Debt description: What the debt was, e.g. a credit card account, mortgage, or auto loan.
Box 5 — Debtor personally liable: Checked if you were personally responsible for repaying the debt; this affects how any gain or loss is figured.
Box 6 — Identifiable event code: A single letter explaining why the debt was canceled (A=bankruptcy, C=statute of limitations, D=foreclosure election, F=settlement, G=creditor stopped collecting, H=expiration of the nonpayment testing period or other).

How long to keep it

At least 7 years

Keep it for the standard 3-year audit window plus a buffer, since the IRS has up to 6 years to challenge a return that understates income by more than 25% — and canceled debt is exactly the kind of income people forget to report. If you excluded the amount via insolvency or bankruptcy on Form 982, keep the 1099-C and your supporting solvency worksheet for as long as that return stays open.

How Granite handles your Form 1099-C

Drop your 1099-C into Granite and it reads the form, pulls out the creditor, the Box 2 amount discharged, the Box 1 event date, and the Box 6 reason code, then files it into your tax-year collection automatically. It links the debt to the creditor as a business entity, so every form from that lender sits together. Search "cancellation of debt" or the creditor name and it surfaces instantly — no folder digging when you reconcile the amount against your return.

FAQ

Form 1099-C: common questions

what is a 1099-c: A 1099-C is an IRS form a creditor files when it cancels, forgives, or discharges $600 or more of your debt. The forgiven amount, shown in Box 2, is generally treated as taxable income unless you qualify for an exclusion like insolvency or bankruptcy, which you claim on Form 982.
What does it mean when you get a 1099-C?: It means a lender has officially written off $600 or more of debt you owed and reported the forgiven balance to the IRS. You'll typically receive one after a settled credit card account, foreclosure, repossession, or loan discharge. The IRS gets a matching copy, so the amount is expected to appear on your tax return unless an exclusion applies.
How does a 1099-C affect my tax return?: Canceled debt on a 1099-C is generally added to your taxable income for the year of the event in Box 1, which can raise your tax bill or shrink a refund. You report the Box 2 amount on your return unless you qualify to exclude it — for example through insolvency, bankruptcy, or qualified principal-residence debt — using IRS Form 982.
How much tax will I pay on a 1099-C?: There's no flat 1099-C tax rate. Canceled debt is taxed as ordinary income at your marginal rate, so the cost depends on your bracket — roughly 10% to 37% of the Box 2 amount federally, plus any state tax. If you were insolvent or in bankruptcy when the debt was canceled, you may owe nothing on it after filing Form 982.
what is the difference between a 1099-c and a 1099-a: A 1099-C reports debt that has been canceled or forgiven, which is potentially taxable income. A 1099-A reports the acquisition or abandonment of secured property, like a foreclosure, where the underlying debt may still exist. A single event such as a foreclosure can sometimes generate both forms.
what happens if i don't report a 1099-c: The IRS receives its own copy, so ignoring a 1099-C usually triggers an automated notice (CP2000) proposing additional tax, plus interest and possible penalties on the unreported canceled debt. If you believe the amount is wrong or excludable, address it on your return rather than leaving it off entirely.

Sources

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