A financial institution or any business that cancels a borrower’s debt must report that cancellation to the IRS using Form 1099-C.
This guide breaks down the filing process for you. You will learn when you must issue Form 1099-C, the event codes, how to calculate the amount of debt forgiven, and the filing deadlines. You will also get a pre-filing checklist and a simple box-by-box walkthrough as part of our payer’s guide to filing Form 1099-C.
Explaining what is Form 1099-C and why reporting cancelled debt matters?
Form 1099-C reports $600 or more of canceled (forgiven) debt when an identifying event happens such as bankruptcy, court-ordered cancellation, expired statute of limitations, foreclosure laws, death or probate, and others.
If you are an applicable financial entity such as a bank, or even a government entity who can cancel debt, you must file Form 1099-C.
If you don’t file, or you file late, the IRS can charge penalties of up to $340 per form or even up to $680 per form for intentional disregard. Filing on time keeps you compliant and clearly tells the borrower (recipient) how much debt was canceled so they can report it correctly on their tax return.
Who files Form 1099-C?
Form 1099-C is filed by any financial entity where lending is a main part of their business model such as banks, credit unions, credit-card issuers, mortgage lenders/servicers, federal or state agencies.
If you’re an applicable entity and you cancel $600+ of a borrower’s debt, you must file a Form 1099-C per loan in the year the event occurred.
Form 1099-C Filing Deadlines
You must always report the cancellation of the debt in the calendar year it occurred.
- Send copies to recipients: February 2, 2026 (Original deadline: January 31*)
- E-file with the IRS: March 31, 2026
- Paper file: February 28, 2026
*If the deadline falls on a weekend or a holiday, the date moves to the next business day.
Pre-filing Checklist For Form 1099-C
- Always confirm the borrower’s name and TIN by collecting Form W-9 from them.
- Keep a note of the event date. This could be the date of bankruptcy discharge, foreclosure sale, settlement date, policy decision, etc.
- Calculate the sum of the principal, interest, and fees still owed on that event date.
- Store statements, court papers, and internal memos for up to four years for audit purposes.
Tip: If the TIN is missing or incorrect, request a Form W-9 from the recipient. Do not forget to document your reasonable-cause efforts.
How To Report Cancelled Debt on Form 1099-C: A Box-By-Box Guide
- Box 1: Enter the date the debt was canceled.
- Box 2: Enter the total amount canceled (including debt principal + interest if it was included in the account balance).
- Box 3: Enter the interest included in Box 2 or leave it blank if there is no interest.
- Box 4 (Optional): Include a short description of the debt.
- Box 5: Check this box only if the debtor was personally liable.
- Box 6: Enter the identifiable event code (Codes A-H).
List of All The Identifiable Event Codes For Form 1099-C
When filing Form 1099-C, make sure to choose the correct identifiable event code to indicate the type of cancelled debt:
- Code A: If the debt was erased because of bankruptcy.
- Code B: If the court cancelled the debt.
- Code C: If the statute of limitations expired.
- Code D: If foreclosure laws wiped out the debt.
- Code E: If the debt was cancelled due to a probate or similar proceedings.
- Code F: If there was an agreement to cancel part of the debt.
- Code G: If the lender’s policy chooses to discontinue collection and discharge the debt.
- Code H: For any other discharges that do not apply to any of the above events.
E-filing Form 1099-C: Step-by-step filing process
Step 1: Upload your data
Import data using our one-click upload from Excel, CSV, or via API and automatically format the data for IRS-ready submission.
Step 2: Validate uploaded data
Use our built-in validations to catch bad dates, missing codes, and TINs.
Step 3: Enter payer & borrower information
For the payer section, enter the business name, address, and EIN exactly as they appear on Form 1096 (if using paper).
For the borrower details, enter the Name and TIN.
Step 4: Deliver & Submit
Deliver Copy B to the Borrower and submit Copy A to the IRS.
Step 5: Fulfill any state filing obligations
1099Online automatically forwards Copy A to the state agency through the CF/SF program.
Common errors & rapid remedies
| Error | How to fix it? |
|---|---|
| Using the wrong event date | File a corrected form with the true event date |
| Combined many loans in one form | Void the error and file one form per loan |
| Filed an amount under $600 | Mark the form as a VOID and file a new form |
| Wrong event code | File a corrected form with only the right code |
Real-life use cases for Form 1099-C
| Scenario | |
|---|---|
| $15,000 credit-card debt wiped in bankruptcy on 10-Oct-2025 | Report the date of event and the amount. Use Code A to indicate bankruptcy |
| Car repossessed and $4,800 balance forgiven on 01-Dec-2025 | Report the date of the event and the amount. Use Code B to indicate foreclosure/repossession or similar proceeding |
| Mortgage workout forgives $50,000 on 05-Jun-2025 | Report the date and amount. Use Code E to indicate that it is a discharge in probate or similar proceeding |
| No pay since 2019 and lender forgives debt on 15-Dec-2025 | Report the date and use Code F to indicate that there is an agreement to cancel for less than full amount |
| FEMA cancels $8,000 disaster loan on 20-Aug-2025 | Report the date and amount. Use Code G to show that the agency decided to discontinue collection |
| Co-signer released the debt but the borrower still owes | Report the release date, the forgiven amount linked to that release and use Code E if the discharge aligns with a probate-like proceedings. |
FAQs
1. Do I file 1099-C if the forgiven amount is under $600?
No, unless you withheld backup taxes. If withholding ever applied, follow the rules for reporting and keep your records.
2. Does borrower insolvency change my 1099-C filing duty?
No, you still have to. The borrower may address insolvency on Form 982 if they qualify.
3. Can I combine several loans on one Form 1099-C?
No, it’s one loan, one form.
4. What if payments arrive after filing 1099-C?
Keep collecting. You typically don’t amend just because you received later payments.
5. How long must I keep records?
Keep everything for four years from the filing date.
6. What if the IRS rejects my 1099-C e-file?
The system shows the exact error. Fix it and retransmit — no extra cost for the retry.
E-file Form 1099-C to report cancelled loans and stay compliant with IRS reporting rules.