How to File Form 1099-C for Faster Processing
When applicable entities cancel or forgive a borrower’s debt, the IRS treats that forgiven amount as ordinary income to the debtor. That’s why they must file Form 1099-C anytime they discharge $600 or more, and an “identifiable event” occurs. If they miss it, they can be hit with Notice 972CG penalties that scale per form.
And yes penalties really do add up. For 2025 filings (returns due in 2026), the per-form amounts are $60 (≤30 days late), $130 (by August 1), $340 (after August 1 or not filed), and at least $680 per return for intentional disregard. You may be able to lessen the burden of penalty via “reasonable-cause relief,” but it’s not automatic.
If you think you need to file Form 1099-C, read on to find key details on how to file 1099-C that will help you keep the process smooth, easy, and fast!
Who Must File and When According to 1099-C Instructions (2026 Filing Year)
- You must file if you’re an applicable entity banks, credit unions, federal government agencies and listed components (for example, FDIC or NCUA), finance/credit card companies, and any organization whose significant trade or business is the lending of money (a defined term in the regs).
- Debt buyers must file if they meet that “significant trade or business of lending money” test.
- Organizations not engaged in lending may fall outside 6050P (and there are safe harbors).
- You must report for the calendar year in which an identifiable event happens.
| Code | When to Use |
|---|---|
| A | Debt discharged in bankruptcy (Title 11) |
| B | Debt becomes unenforceable in a receivership/foreclosure or similar court proceeding (non-bankruptcy) |
| C | Use this when either of the following is true:
• A final court judgment (appeals over) upholds the debtor’s statute-of-limitations defense, or |
| D | You elect foreclosure remedies that by law bar further collection (e.g., after power-of-sale) |
| E | Debt becomes unenforceable via probate or similar proceeding |
| F | Agreement/settlement cancels the debt for less than full consideration (e.g., short sale) |
| G | Creditor decision or defined policy to stop collection and cancel the debt |
| H | Other actual discharge that occurs before any of A–G |
The code you choose tells the IRS why you canceled, so getting it right matters.
- Two big timing notes for 2025 activity you will file in 2026 as per Form 1099-C deadlines:
- Furnish Copy B to the debtor by February 2, 2026
- File with the IRS by March 31, 2026, if e-filing
- Paper filing is permitted only if you are filing fewer than 10 total information returns for the year, or you have an approved hardship waiver (Form 8508)—otherwise, e-filing is required.
Note: There isn’t a special “30-days-from-event” rule to furnish Copy B. For 1099-C, the standard (statutory) recipient deadline is January 31 (or next business day in case of weekend or federal holiday) of the following year.
What to Put in Each Box
Box 1 Date of identifiable event
Box 2 Amount of debt discharged
For lending transactions, you are not required to report any amount other than the stated principal. For lending transactions, you are not required to report any amount other than the stated principal. Reporting interest is optional only if you include interest in Box 2, should you enter that interest separately in Box 3.
Box 3 Interest
Fill only if you’re separately stating interest that’s already included in Box 2.
Boxes 4–5 Debt description
Check Box 5 only if the borrower was personally responsible for the debt when it was first made—or, if the debt was later changed (refinanced/modified), when it was last changed.
Box 6 Identifiable event code (A–H)
Miscoding drives rejections and mismatches.
Box 7 Fair Market Value (FMV)
Complete this only when you’re using 1099-C to also cover the 1099-A details for a foreclosure, abandonment, or similar sale.
- Short sale: Enter the property’s appraised value as FMV
- Abandonment or deed-in-lieu: Enter the appraised value as FMV
- Foreclosure sale: Use the gross foreclosure bid as FMV
- In all other cases, do not fill Box 7
1099-C vs 1099-A simple rule:
When foreclosure/abandonment and cancellation occur in the same year, file Form 1099-C only and fill Boxes 4, 5, and 7 to satisfy the 1099-A details. If you still file both, leave Boxes 4, 5, and 7 blank on the 1099-C form (those property details belong to Form 1099-A).
A Fast, Pre-filing Compliance Checklist
1. Form W-9: Get the debtor’s TIN (use Form W-9) and make a reasonable effort to obtain the correct name/TIN.
(IRS TIN Matching does not cover Form 1099-C filers you may request a W-9, but the debtor isn’t required to certify under penalties of perjury. However, there’s a $50 IRS penalty on the debtor for failing to furnish a TIN.)
2. Threshold trigger: Confirm the $600 per-debtor, per identifiable event threshold do not combine multiple cancellations to reach $600 (unless done to evade reporting).
3. Date: Pin down the identifiable event date (for Box 1) from your records (e.g., bankruptcy order, charge-off, foreclosure/abandonment).
4. Co-debtors: For joint and several liabilities on debts ≥ $10,000 incurred after 1994, report the entire canceled amount on each debtor’s 1099-C. For debts before 1995 or < $10,000 (post-1994), file only for the primary (first-named) debtor. If the debtors are a married couple at the same address and nothing has changed, one form may be filed. Don’t “split” jointly liable balances.
5. FMV support (Box 7): When property is involved and you’re filing a combined 1099-C/1099-A, retain appraisals/BPOs. Generally, use the gross foreclosure bid as FMV and use appraised value for deeds-in-lieu or short sales.
6. Backup withholding: This applies to payments you make (not to the cancellation itself). If the payee didn’t furnish a TIN, or you’re notified of an incorrect TIN or notified payee underreporting, backup withholding applies at 24% and is reported on Form 945.
How to File Form 1099-C (Step-by-step)
1. Payer info: Enter your legal name, EIN, and address.
- If your TCC role is Issuer, the EIN on the TCC application must match the issuer’s EIN on the form.
- If your TCC role is Transmitter, the issuer’s EIN on the form does not have to match the TCC EIN, but the issuer’s TIN and name must match IRS records.
2. Debtor details: Copy exactly from the W-9. For foreign addresses, follow IRS two-character country code conventions where applicable.
3. Boxes 1–4: Report as follows:
- Box 1: event date
- Box 2: amount canceled
- Box 3: interest amount (only if you included interest in Box 2)
- Box 4: a brief description of the debt
4. Box 6: Pick the correct event code (A–H) to match your internal charge-off/settlement reason.
5. Box 7: Enter FMV when foreclosure/abandonment occurs in the same year as cancellation.
6. E-file with IRIS: Use the Taxpayer Portal (key-in or CSV) or A2A (XML). A2A requires IRIS ATS testing.
7. Meet the deadlines of Form 1099-C for 2025 activity (filed in 2026):
- Furnish Copy B by February 2, 2026 (January 31 falls on a Saturday)
- E-file with the IRS by March 31, 2026.
Note: Paper filing is permitted only if you are filing fewer than 10 total information returns for the year in aggregate or have an approved hardship waiver.
8. Keep records for at least 4 years (including submission receipts and any corrected filings).
Common Mistakes (and Quick Fixes)
Missing/invalid TINs
Fix: Solicit a new Form W-9 and refile a CORRECTED 1099-C. Apply/Report any required backup withholding on Form 945 for reportable payments you make.
Wrong identifiable-event code (A–H)
Fix: File a CORRECTED 1099-C with the correct code in Box 6.
Filing both 1099-A and 1099-C for the same debt in the same year
Fix: If you already filed Form 1099-A in a same-year cancellation/foreclosure scenario, file a CORRECTED Form 1099-A using the Error Type 1 procedure.
Reporting net of interest/fees
Fix: Report the gross canceled amount in Box 2. If interest is included, also show it in Box 3. If you filed net, submit a CORRECTED 1099-C with Box 2 (gross) and (if applicable) Box 3 (interest).
Real-life Scenarios
| Scenario | Form(s) to file | Event code | Boxes to fill | Note |
|---|---|---|---|---|
| Credit card: $750 forgiven after 18 months unpaid | 1099-C | G (or F if settled) | 1, 2, 6 | Meets $600 debt-cancellation threshold; unsecured debt, so no 1099-A |
| Auto repo; $3,200 deficiency canceled — same year | 1099-C only | D (law bars deficiency) or F/G (agreement/policy) | 1, 2, 4, 5, 6, 7 | Box 7 only because 1099-C is covering 1099-A this year |
| Auto repo; $3,200 deficiency canceled — different years | 1099-A (repo year) then 1099-C (cancellation year) | D (or F/G for the cancellation) | 1099-A: property boxes; 1099-C: 1, 2, 6 | Don’t add 4, 5, 7 to the later 1099-C |
| Mortgage foreclosure; $65,000 deficiency canceled same year | 1099-C only | D (or F/G if waived by agreement/policy) | 1, 2, 4, 5, 6, 7 | 1099-C with 4, 5, 7 satisfies 1099-A |
| Doctor bill settled for $400 (<$600) | Usually no 1099-C | — | — | Most medical providers aren’t required filers under §6050P |
| Bankruptcy discharge of HELOC; $12,000 | 1099-C | A (bankruptcy) | 1, 2, 6 (add 4, 5, 7 if foreclosure also occurred that year) | Report for the later of the year when the discharged debt amount can first be determined or when the debt is discharged in bankruptcy. Enter that identifiable-event date in Box 1.
Furnish the recipient statement by January 31 (next business day if weekend/holiday) and file with the IRS by March 31 if e-filing. |
Special 2025 Landscape to Plan Around
Mortgage debt relief (main home): If mortgage debt on a principal residence is canceled by December 31, 2025 (or under a written agreement made by that date), you can generally exclude up to $750,000 ($375,000 if married filing separately). Unless the law is extended, cancellations after 2025 are taxable.
Student loans: Many student loan cancellations are federally tax-free for 2021–2025. For these covered discharges, lenders shouldn’t issue Form 1099-C. Outside those cases, normal 1099-C rules apply.
Bottom Line
Stay compliant with canceled-debt reporting rules: collect correct TINs, document the identifiable event date, use the proper 1099-C code, apply the $600 per-event threshold, and hit the filing and furnishing deadlines. With the 10-return e-file mandate in effect, submit through IRIS to avoid paper-filing penalties and transmit securely.
Also keep audit-ready files: retain support for the event and any FMV used, and e-file via software that connects to IRIS with a valid TCC and follows IRS e-file specs (Pub. 5717/5718).
FAQs
1. What triggers a 1099-C?
When a lender (or other applicable entity) cancels $600 or more of debt and it matches one of the IRS “identifiable events” (codes A–H).
2. corporate debtors get a 1099-C?
Yes. The debtor can be an individual or a corporation (or other entity) there’s no carve-out for corporations.
3. Should you split interest out?
It is optional. The IRS says that you’re not required to report interest, but if you include it in the total reported in Box 2, you must also show it separately in Box 3 of Form 1099-C.
4. When are both 1099-A and 1099-C needed?
Only if the foreclosure/abandonment and the cancellation happen in different tax years. If they happen in the same year, file 1099-C only and complete Boxes 4, 5, and 7.
5. Does the 10-return rule count corrected forms?
No, the e-file requirement under the 10-returns e-file mandate doesn’t apply separately to corrections i.e., it does not count corrected forms. However, your corrections must be e-filed if your originals had to be (or were) e-filed.
Start Secure 1099-C E-Filing with 1099Online Today