What is a cancelled debt on a 1099-C?
If the lender can’t collect the remaining debt from you, it may cancel the debt, which means the remaining $6,000 is reported on Form 1099-C. This amount is generally considered taxable income . Canceled debt counts as income in most cases, which means it must be reported to the IRS. What Information Is on Form 1099-C?
What should I do if I received a Form 1099-C?
If you received a Form 1099-C showing incorrect information, contact the creditor to make corrections. For example, if the creditor is continuing to try to collect the debt after sending you a Form 1099-C, the creditor may not have canceled the debt and, as a result, you may not have income from a canceled debt.
How do I report canceled debt on my tax return?
If you receive Form 1099-C, you must report the amount on your income tax return on the "Other income" line of your Form 1040 or 1040-SR. Note that you must include the canceled debt in your income even if it’s less than $600 and you don’t receive Form 1099-C. 2