How to Issue a 1099-C for Cancellation of Debt: Codes, Boxes, Deadlines

To issue a Form 1099-C for cancellation of debt, confirm that your organization is a required filer, that you canceled at least $600 of a single debtor’s obligation, and that a specific “identifiable event” has occurred; then collect the creditor and debtor identifying information, complete the seven numbered boxes on the form using the correct event code, deliver Copy B to the debtor by January 31, and file Copy A with the IRS by February 28 on paper or March 31 electronically.¹

Confirm You Have to File

Three conditions have to line up. First, your organization must be an “applicable entity.” That primarily means banks, credit unions, savings institutions, federal government agencies, and any organization with a significant trade or business of lending money. Finance companies and private lenders that regularly originate or acquire loans fall in this bucket too.¹

If your principal business is selling goods or services and you extend credit to customers as part of those sales, that credit alone does not make you a lending business. A retailer writing off an unpaid customer account generally does not have to file a 1099-C. A separate financing subsidiary of that retailer might.²

Second, the amount you canceled on a single obligation must be $600 or more. The threshold applies to the amount actually forgiven, not the original balance. Forgiving $500 on a $10,000 loan does not trigger a filing. You also cannot combine separate canceled debts from the same debtor to reach $600, unless the debts were split for the purpose of dodging the requirement.¹

Third, one of the IRS’s recognized “identifiable events” must have occurred. Cancellation alone is not enough; the event is what fixes the tax year and the legal basis. Document the date of the event when it happens rather than reconstructing it later.

The Eight Identifiable Event Codes

Box 6 on the form takes a single letter identifying why the debt was discharged. The code you pick tells the IRS the legal basis, and getting it wrong tends to generate correspondence for both you and the debtor.³

Code A — Bankruptcy. The debt was discharged under Title 11 of the U.S. Code.
Code B — Other judicial debt relief, such as a receivership, foreclosure proceeding, or similar court action.
Code C — The statute of limitations or deficiency period for collecting the debt has closed.
Code D — Foreclosure election by the creditor to treat the debt as discharged.
Code E — Debt canceled through a probate or similar proceeding.
Code F — Cancellation by agreement between creditor and debtor.
Code G — A creditor decision or policy to discontinue collection and write off the debt.
Code H — Actual discharge by the creditor before any of the events in A through G occurred.

Gather the Information Before You Open the Form

On the creditor side, you need your legal entity name, full address, telephone number, and Taxpayer Identification Number (usually your EIN). On the debtor side, you need their full legal name, current mailing address, and TIN — a Social Security Number for individuals, an EIN for businesses.

A missing or incorrect debtor TIN is the single most common reason filers get hit with a B-Notice from the IRS. To stay protected from penalties, request the TIN when the account is opened, and make up to two follow-up solicitations if you still don’t have it. Those follow-ups must be mailed by specific deadlines, generally December 31 of the year the account was opened and December 31 of the following year. Each mailed solicitation needs to include a Form W-9, a statement warning the debtor of a potential $50 penalty for not providing the TIN, and a return envelope.⁴

You’ll also need the date of the identifiable event, the total amount discharged, any interest component included in that amount, a short description of the debt (credit card, auto loan, mortgage), and whether the debtor was personally liable when the debt was created.

Fill Out the Form Box by Box

The creditor’s name, address, phone, and TIN go in the labeled filer section at the top. The debtor’s name, address, and TIN go in the recipient section. The numbered boxes carry the substance of the cancellation.³

Box 1 takes the date of the identifiable event. If you canceled the debt before any formal event and chose to report that earlier cancellation, use the date you actually canceled it.

Box 2 is the total amount discharged, including any accrued but unpaid interest that you’re treating as forgiven. This is the figure the IRS matches against the debtor’s return.

Box 3 breaks out the interest portion if you included it in Box 2. Separating it lets the debtor calculate how much of the canceled amount is actually taxable, since interest on personal debt that wouldn’t have been deductible generally is not treated as income when forgiven.

Box 4 is a short debt description: “Credit Card,” “Auto Loan,” “Mortgage.” If Box 7 is filled in because a foreclosure was involved, describe the property here as well.

Box 5 is a checkbox. Check it if the debtor was personally liable for repayment when the debt was created or at the time of the last modification.

Box 6 is the identifiable event code, a single letter from A through H.

Box 7 is the fair market value of secured property, completed only when a foreclosure or abandonment occurred in the same calendar year as the cancellation. This is usually the gross foreclosure bid price.

When Foreclosure Is Also in Play

If you cancel a debt of $600 or more in connection with a foreclosure or abandonment of secured property in the same calendar year, you get a choice. File only the 1099-C and skip Form 1099-A, so long as you complete Boxes 4, 5, and 7 on the 1099-C. Or file both forms and leave Boxes 4, 5, and 7 on the 1099-C blank to avoid double-reporting. If the two events fall in different calendar years, file each form in the year its event occurred.⁵

When More Than One Debtor Is Liable

For debts of $10,000 or more incurred after 1994 with debtors who are jointly and severally liable, file a separate 1099-C for each debtor showing the full canceled amount. Joint and several liability is presumed unless you have clear and convincing evidence otherwise. For debts under $10,000, or debts incurred before 1995, file only for the primary or first-named debtor.⁵

If you know or have reason to believe the debtors were married and living at the same address when the debt was incurred, and nothing suggests that has changed, one 1099-C is enough. You also don’t need to file a 1099-C when you release one debtor from a joint obligation while the remaining debtors stay liable for the full amount.⁵

Bankruptcy Discharges Are Different

If a debt is discharged in a Title 11 bankruptcy case, you generally don’t file a 1099-C unless your records show the debt was incurred for business or investment purposes. Consumer debts wiped out in bankruptcy, such as credit cards, medical bills, and personal loans, typically don’t get reported.²

When a bankruptcy-related debt does require reporting because it was business or investment debt, report it for the later of two dates: the year the discharged amount can first be determined, or the year the bankruptcy court actually discharged it.²

Deadlines and How to File

Copy B goes to the debtor by January 31 of the year after the cancellation. Keep Copy C in your files. For 1099-C, the IRS requires you to retain copies or the ability to reconstruct the data for at least four years from the due date, longer than the standard three-year retention window for most other information returns.⁶

Copy A goes to the IRS on a separate schedule. Paper filers have until February 28; electronic filers have until March 31. Paper filers also include Form 1096, the transmittal that summarizes the batch.¹

Watch the e-file threshold. If you file 10 or more information returns of any type during the year, the IRS requires electronic filing. The count combines everything: W-2s, 1099-NECs, 1099-INTs, 1099-Cs, all of it. You can e-file through the IRS FIRE system, which requires formatting software, or through the newer IRIS portal, which does not.⁷

Fixing a Filed Form

Wrong amount, wrong TIN, wrong event code — file a corrected return using the same Form 1099-C with the “CORRECTED” box checked and the accurate information filled in. Paper filers submit the corrected form to the IRS with a new Form 1096. Electronic filers submit through the same system they used originally. Send a corrected Copy B to the debtor as well so they can amend their return if needed.

If a debtor contacts you claiming the amount is wrong, verify against your records and correct it if warranted. Where a debtor disputes the form and the creditor refuses to correct it, the IRS expects the debtor to report the amount shown and attach an explanation of the disagreement to their return.⁸

Penalties

Per-return penalties for late, incorrect, or missing filings add up quickly. For returns due in 2026:⁹

Filed up to 30 days late: $60 per return
Filed 31 days late through August 1: $130 per return
Filed after August 1 or not at all: $340 per return
Intentional disregard: $680 per return with no annual cap

Separate penalties apply, on the same dollar tiers, for failing to furnish a correct Copy B to the debtor on time. Annual caps exist and are lower for small businesses with average annual gross receipts of $5 million or less. There is no cap at all for intentional disregard.⁹

Whether the debtor ultimately owes tax on the canceled amount is between them and the IRS; exclusions for insolvency, bankruptcy, and certain other categories are claimed on Form 982 filed with their return.¹⁰ Your role stops at reporting the cancellation accurately, but a wrong figure in Box 2 or a wrong code in Box 6 can make it much harder for the debtor to claim an exclusion they’re entitled to, and that is the fastest way to generate the disputes you’d rather not handle.

1
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. Form 1099-C, Cancellation of Debt
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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. General Instructions for Certain Information Returns
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Internal Revenue Service. General Instructions for Certain Information Returns
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Taxpayer Advocate Service. I Have a Cancellation of Debt or Form 1099-C
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Internal Revenue Service. Information Return Penalties
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Internal Revenue Service. Instructions for Form 982