A 1099-C form is used during the tax filing season. It is used for the purpose of cancelling debt. When a debt of over $600 is cancelled, it is considered part of your yearly income. You will then owe taxes on this income, just like your other wages and earnings.
Most canceled debts will need to be included when filing yearly taxes. There are a few exceptions. Debts that are cancelled through bankruptcies do not need to be included on this form. Certain loans related to your primary residence may also be excluded from taxing.
You may receive a 1099-C form from a financial institution or bank due to repossession, foreclosure, or loan modification. If you do not receive a 1099-C but you have cancelled a debt during the tax year, fill out a form on your own to be safe.
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