Receiving a 1099-C form from the IRS can be confusing and concerning, especially if you’re unfamiliar with what it means. This form is issued when a creditor cancels or forgives a debt of $600 or more, and the IRS considers this canceled debt as taxable income. Here’s a guide to help you understand your options and navigate this situation.

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Step 1: Understand the 1099-C Form

The 1099-C, “Cancellation of Debt,” reports the amount of debt forgiven by a creditor. Common scenarios include canceled credit card balances, foreclosure deficiencies, or settled debts. The amount listed in Box 2 represents the debt forgiven, which the IRS typically treats as taxable income.


Step 2: Verify the Information

Before taking any action:

  1. Check for Errors: Confirm that the creditor’s name, the forgiven amount, and your personal information are correct.
  2. Ensure the Debt is Valid: If you believe the debt was never yours or was previously paid, contact the creditor immediately to resolve the discrepancy.

Step 3: Determine If You Qualify for Exclusions

Certain situations may exempt you from paying taxes on forgiven debt:

  • Insolvency: If your total liabilities exceed your total assets at the time the debt was canceled, you may qualify for exclusion. File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, with your tax return.
  • Bankruptcy: Debts discharged through bankruptcy are not taxable.
  • Other Exemptions: Student loans forgiven under certain programs or qualified farm or business property may also be excluded.

Step 4: Report the Income

If no exclusion applies, you must report the forgiven debt as “Other Income” on your tax return. Include the 1099-C details to ensure compliance and avoid penalties.


Step 5: Seek Professional Assistance

The Ramos Law Firm can assist with resolving issues with 1099-C. Please contact us at (214) 556-2300.

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Today, we’re releasing our third Snapshot of Complaints Received from Servicemembers, Veterans and their Families. The report details the data and trends from consumer complaints we’ve received from members of the military community since July 2011.

Here are just a few highlights:

  • Debt collection complaints have continued to rise since our last report, and now make up 39 percent of total complaints. It is our largest category of complaints from the military community.
  • Credit reporting remains a top category of concern. 72 percent of these complaints are about incorrect information on credit reports. This remains a significant issue for the military community, one that we highlighted earlier this year.
  • Student loans are another concern. 49 percent of these complaints are about problems dealing with a lender or servicer. In these complaints, we continue to see long-standing trends, such as servicemembers complaining about not being provided their Servicemembers Civil Relief Act rights.

This year our report also highlights our outreach efforts that allowed us to connect with thousands of members of the military community, as well as three of our enforcement actions that recovered millions of dollars for affected consumers, primarily servicemembers, veterans, and their families. These figures represent the positive impact of the work we continue to do on behalf of those who serve.

Problems with account services

Basic account servicing stands out as a significant area of concern for servicemembers. Most consumers can call their financial institution, visit a branch, or connect online to try and get the help they need to maintain their account. Unfortunately, for military personnel and their families, the realities of military life, including deployments, frequent moves, and a high operational tempo, can sometimes make access to those services extremely challenging.

We found that servicemembers were often subject to a variety of account maintenance or penalty fees, as well as account-access restrictions, which were triggered due to aspects of their military service.

These problems raise concerns that financial institutions may not have a true understanding of the servicing needs of their military customers and may lack proper procedures and protections for them. Detailed examples of servicemember experiences can be found in Section II of the report.

Check out the snapshot to learn more.

We’re listening

As always, if you have a problem with a consumer financial product that you can’t resolve on your own; or if you know someone in that situation, please remember that you can submit a complaint online or by calling (855) 411-2372. We make your voice heard.

Consumer Financial Protection Bureau