[Enigma]

Starting in tax year 2007, the IRS is requiring all creditors, CA's, and JDB who cancel your debt or part thereof to issue the TP a 1099-C.

If you have received one, was it accurate? If not, sue the entity that issued the 1099-C.

The IRC states:

A debt is any amount owed to you including stated principal, stated interest, fees, penalties, administrative costs, and fines. The amount of debt canceled may be all or only part of the total amount owed. However, for a lending transaction, you are required to report only the stated principal.

If the total debt forgiven included any amount other than the principal, you have damages and therefore a COA.

Use IRS Form 982 www.irs.gov/pub/irs-pdf/f982.pdf to reduce your tax liability.

[neil5623]

Hmmm. I received one for more than the cancelled debt. It was called "Non-Employee Compensation." Figured it was for what they paid me, which was more.

[Enigma]

Originally Posted by neil5623

Hmmm. I received one for more than the cancelled debt. It was called "Non-Employee Compensation." Figured it was for what they paid me, which was more.

In this case you should have been issued a 1099-MISC for the amount that was paid to you as a settlement and a 1099-C for the cancellation of the debt. Resulting effect would be (1099-Misc)-(1099-C) = Tax liability.