How to File a 1099-C: Boxes, Deadlines, and Corrections

To file a 1099-C, confirm your organization is an “applicable entity” that canceled $600 or more of a debtor’s obligation through an identifiable event, gather the debtor’s taxpayer ID and the cancellation figures, complete Boxes 1 through 7 on Form 1099-C, furnish Copy B to the debtor by January 31, and transmit the return to the IRS by the last day of February on paper or by March 31 electronically. Filing 10 or more information returns of any type in the year forces you onto electronic filing. Miss a deadline or send a form with a wrong TIN and the penalty runs from $60 to $340 per return.¹

Confirm You Actually Have to File

Only certain creditors are required to file. The tax code calls them “applicable entities,” and if you don’t fit one of the categories, forgiving a debt does not create a 1099-C obligation. A parent writing off a personal loan to a child, for example, files nothing.

The categories that must file:²

Financial institutions — banks, trust companies, savings and loan associations, and credit unions.
Federal government agencies, courts, instrumentalities, and government corporations, including the FDIC, NCUA, and U.S. Postal Service.
Subsidiaries of financial institutions that are subject to federal or state regulatory supervision because of the affiliation.
Any business whose significant trade or business is lending money on a regular and continuing basis — finance companies, credit card issuers, and similar lenders.

The last group catches organizations that don’t think of themselves as lenders. If regular lending is core to what you do, you’re in.

The $600 threshold is measured per debtor for the calendar year, not per individual transaction.³

The Cancellation Must Be an Identifiable Event

You don’t file a 1099-C because someone in collections gave up. You file because the debtor’s legal obligation to repay ended in one of eight specific ways. Pick the code that fits and enter it in Box 6:⁴

Code A — discharge in a Title 11 bankruptcy.
Code B — a receivership, foreclosure, or similar non-bankruptcy court proceeding renders the debt unenforceable.
Code C — the statute of limitations expired, but only if the debtor raised the defense and a court upheld it in a final, unappealable judgment.
Code D — the creditor exercised a foreclosure remedy (such as a power-of-sale clause) that under local law permanently bars pursuit of the balance.
Code E — a probate or similar proceeding makes the debt unenforceable.
Code F — a settlement agreement cancels the debt for less than full balance, including short sales.
Code G — the creditor’s written policy or established business practice cancels the debt after a defined period of nonpayment.
Code H — some other actual discharge before any of the above events occurred.

The code has to match what actually extinguished the debt on the date you enter in Box 1.

Gather the Information Before You Open the Form

Chasing down a debtor’s correct taxpayer ID after you’ve started filing is where most of the trouble comes from. Assemble everything first.

Debtor and Creditor Details

You need the debtor’s full legal name, current mailing address, and taxpayer identification number — usually a Social Security number for individuals, an EIN for businesses. Your organization’s name, address, and TIN go in the payer block at the top.

Verify the debtor’s name-and-TIN combination through the IRS TIN Matching service before you file. It’s free and available as either an interactive one-at-a-time lookup or a bulk submission. Your organization has to be registered on the IRS Payer Account File database to use it.⁵ A wrong or missing TIN on a filed return can cost up to $340 per form for returns due in 2026.¹

Financial Figures

You need the total amount canceled and, if the debt was secured by property, the fair market value of that property at the time of the cancellation event. The canceled amount includes principal plus any forgiven accrued interest. Know the interest figure upfront — it goes in its own box, but the totals have to reconcile.

The Event Date

Use the date the legal obligation actually ended. Not the date someone in your office decided to write it off. That date drives which tax year the cancellation belongs to.

Complete Boxes 1 Through 7

Box 1 — Date of Identifiable Event

Enter the date the cancellation event occurred. For a policy-based automatic cancellation after a set nonpayment period, use the date that period expired. For a negotiated settlement, use the effective date of the agreement.

Box 2 — Amount of Debt Discharged

Total canceled debt, defined as the total debt minus any amount the creditor received in satisfaction of it, whether from a settlement payment, foreclosure sale, short sale, or other source.⁴ If a borrower owed $150,000, the property sold at foreclosure for $120,000, and the creditor forgave the remaining $30,000, Box 2 shows $30,000.

Box 3 — Interest if Included in Box 2

If any of Box 2 is forgiven accrued interest, report that interest amount here. The IRS wants the interest component broken out so the tax treatment can be sorted separately.

Box 4 — Debt Description

A short description of the original obligation: “Mortgage,” “Credit Card,” “Auto Loan,” “Business Line of Credit.” Specific enough that the debtor recognizes the account.

Box 5 — Fair Market Value of Property

Complete this box only when the debt was secured by property and a foreclosure, repossession, or abandonment occurred. Enter the fair market value. The debtor needs this figure to calculate any gain or loss on the property disposition.

Box 6 — Identifiable Event Code

Enter the single letter A through H that matches the event on the Box 1 date.

Box 7 — Fair Market Value Was Determined

If Box 5 has a value, check the appropriate box or briefly describe the property (“Single Family Residence,” “Commercial Equipment”) to give the IRS and the debtor context for the valuation.

Deadlines and How to Send It In

Two separate deadlines apply to every 1099-C: one for the debtor’s copy, another for the IRS filing.

Debtor Copy — January 31

Furnish Copy B to the debtor by January 31 of the year following the cancellation. For 2025 cancellations, the 2026 deadline is February 2, 2026, because January 31 falls on a Saturday.⁶ Mail it to the debtor’s last known address, or deliver it electronically if the debtor has given written consent.

Electronic Filing — March 31

Electronic returns are due March 31. If your organization files 10 or more information returns of any type combined during the year, you must file electronically.⁷ The old 250-return threshold dropped to 10 under Treasury Decision 9972, so most organizations that produce even a modest volume of 1099s now fall inside the mandate.

The IRS runs two free electronic systems. The Information Returns Intake System (IRIS) is the newer web-based portal. You can enter returns manually or upload a CSV, e-file up to 100 returns per submission, and download copies for the debtors. IRIS requires a five-digit Transmitter Control Code.⁸ The older FIRE system is still open for filers who format files to IRS Publication 1220 specifications. High-volume filers can use IRIS Application-to-Application (A2A), which handles submissions up to 100 MB at a time.

Paper Filing — Last Day of February

Paper returns are due the last day of February. For 2026 that becomes March 2, because February 28 falls on a Saturday.⁶ Paper filers must include Form 1096, the transmittal form, showing the totals for the batch.⁹ Use a separate Form 1096 for each type of 1099 in the transmission.

If You Need More Time

File Form 8809 for an automatic 30-day extension of the IRS filing deadline. No justification is required for the first extension, and it can go in through IRIS, FIRE, or on paper to the IRS center in Ogden, Utah. Form 8809 has to be submitted by the original due date. A second 30-day extension is available but is not automatic — you must explain why you need more time.¹⁰ Note that Form 8809 covers the IRS filing, not the January 31 debtor deadline.

Fixing a Mistake After Filing

For the common errors — wrong dollar amount, wrong event code, wrong checkbox — prepare a new 1099-C with the correct information, check the CORRECTED box at the top, and submit it with a new Form 1096. Do not include a copy of the original incorrect return.⁶

A wrong TIN or wrong debtor name is a two-step fix. First, file a corrected return that zeros out the original incorrect entry. Then file a second new return with the right information. The IRS General Instructions for Certain Information Returns lay out the two error types step by step. Furnish corrected copies to the debtor as well. Adding a date next to the CORRECTED checkbox helps if multiple corrections come through on the same account.

Penalties for Late or Wrong Filings

Under Section 6721, penalties for failing to file correct information returns on time run on a tiered schedule. For returns due in 2026:¹

$60 per return if corrected within 30 days of the due date.
$130 per return if corrected after 30 days but by August 1.
$340 per return if filed after August 1 or not filed at all.
$680 per return for intentional disregard, with no annual cap.

Annual maximums scale with organization size. Businesses with average annual gross receipts above $5 million face a cap of $4,098,500 at the highest tier. Smaller businesses have a $1,366,000 cap.¹¹ These figures are inflation-adjusted every year.

Reasonable-cause relief is available if you can show you acted responsibly before and after the failure — requesting extensions where possible, working to prevent foreseeable problems, and correcting errors as fast as you could. First-time filers and organizations with a clean compliance history have a better shot.¹²

A Note on the Debtor Side

Once Copy B lands in the debtor’s mailbox, the reporting question shifts to them. The canceled amount is generally taxable ordinary income unless an exclusion under Section 108 applies (bankruptcy, insolvency, qualified principal residence indebtedness, qualified farm indebtedness, or qualified real property business indebtedness), in which case the debtor files Form 982 with their tax return.¹³ That’s the debtor’s problem to work out, but expect questions from recipients who don’t understand why a canceled debt shows up as income.

1
Internal Revenue Service. Information Return Penalties
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Internal Revenue Service. Instructions for Forms 1099-A and 1099-C
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Internal Revenue Service. About Form 1099-C, Cancellation of Debt
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Internal Revenue Service. Instructions for Forms 1099-A and 1099-C
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Internal Revenue Service. Taxpayer Identification Number (TIN) Matching
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Internal Revenue Service. General Instructions for Certain Information Returns (2025)
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Internal Revenue Service. Topic No. 801, Who Must File Information Returns Electronically
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Internal Revenue Service. E-File Information Returns With IRIS
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Internal Revenue Service. About Form 1096, Annual Summary and Transmittal of U.S. Information Returns
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Internal Revenue Service. Application for Extension of Time to File Information Returns (Form 8809)
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Internal Revenue Service. Revenue Procedure 2024-40
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Internal Revenue Service. Penalty Relief for Reasonable Cause
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Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not?