1099-A vs. 1099-C

What is the difference between a 1099-A and 1099-C, and how will we know when our bank canceled our mortgage debt?

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Bill's Answer: Answered by Mark Cappel

A creditor is required to issue a 1099-A when a borrower abandons real or personal property. According to the IRS 1099-A instructions, "An abandonment occurs when the objective facts and circumstances indicate that the borrower intended to and has permanently discarded the property from use."

A 1099-A is not a notice of forgiveness. It is unclear to me what the purpose of a 1099-A is, other than to alert the IRS that at some point in the future the entity reporting the borrower's abandonment may issue a 1099-C.

A 1099-C is a notice to the IRS that the financial institution has forgiven or canceled a debt of $600 or more. See the IRS Instructions for Forms 1099-A and 1099-C and IRS Form 982 to learn more.

If the financial institution issues a 1099-C to you, then it has forgiven the debt and you must report the amount on the 1099-C as income. Fortunately, the Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude income from the discharge of debt on their principal residence. It includes the cancelation of the complete debt, or if the mortgage terms were renegotiated.

If the financial institution issues a 1099-C to you, it will probably not pursue you for the deficiency balance because it has deducted the loss on the loan from its taxes. However, there is no guarantee the financial institution will not pursue you for the deficiency balance and then later amend its tax returns. However, such a chain of events is unlikely.

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Comments (21)

PaDua M.
April 10, 2012
I had taken out two loans for my home which was foreclosed last year. I received a 1099 a & c from one institution and just a 1099a from the other. How do I go about filing with just one of the 1099c?
April 10, 2012
Follow the instructions you find in the IRS Form 982, or consult with an experienced tax preparation specialist, or contact the IRS directly.
Frasier K.
Asheville, NC  |  April 07, 2012
My husband and I sent a certified letter to our bank in May, 2010, informing them that we were forced to abandon the property for health reasons, and enclosed the keys. They waited several months before starting foreclosure and did not complete the process until August, 2011 when they bought back the property for $230,000 less than we paid for it. They resold the property in December, 2011 for $30,000 more than they paid. We finally received a 1099-A that says in Box 1 that they acquired the property in December, 2011 (which is incorrect; they purchased it in August) also ignoring that we abandoned the property via certified letter in 2010. Should we ask them to send a corrected 1099A for August, 2011 (when they purchased the property) or for May, 2010 when we notified them of the abandonment? If they ever forgive the debt, we would not qualify for the 2-year primary residence requirement if the December 2011 date is used.
April 10, 2012
A 1099A is intent to forgive, whereas a 1099C is the form showing actual forgiveness. I recommend that you speak with a tax professional who can help clarify which date can be used to determine the date of sale and the necessary time frame to qualify the house as your acceptable primary residence.
Jeff R.
Port Charlotte, FL  |  March 24, 2012
I have received a 1099A for tax year 2010 (foreclosure date Sept,2010) The bank sold the property July 2011. I did not receive a 1099C for 2011. Does the lending bank have a time limit for issue? (Mortgage amount $205K plus costs, sales price $38K)
Natalie S.
Phoenix, AZ  |  February 13, 2012
What happens if the lender NEVER sends you a 1099A or 1099C? I called and they said they have no tax record information on my account, so it seems there is nothing to send out.
February 13, 2012
The lender may not qualify as the type of business required to issue 1099-As or 1099-Cs. Or, the debt was less than $600. Or, the lender misplaced your files. Or, the lender is not complying with the law.
Gary M.
February 11, 2012
If I received a 1099 A from a lender for a foreclosure, do I need to show that on my taxes?
February 11, 2012
1099-A? No.

1099-C? Yes.

See the links to IRS pages in the original answer above to learn more.
Jerry K.
Eagle Mountain, UT  |  January 23, 2012
My question relates to a personal loan made in 2008 to a non-relative and for which a signed promissory note was written. Scheduled payments were made on the loan until early 2011 when the borrower abandoned further payments and made no reply to a final demand payment letter with a specified date which was sent in mid-2011. As an individual lender, I have concluded that, due to the borrower's financial situation, the loan balance of $13000 will no longer be collectable. Am I able to declare cancellation of the remaining balance of debt and file a 1099-C in the name of the borrower? Thanks.
January 23, 2012
I am not a tax professional and don't have all the facts that I would need to offer a full opinion, but will share some thoughts.

As an individual lender (not an institution), you likely do not need to issue a 1099-C. The non-business bad debt can still be taken as a capital loss on Schedule D, but you should be absolutely sure that no collection of any part of the debt is expected. It would be wise to consult with a tax attorney to determine whether sufficient collection actions have been taken before writing off the loss.
April G.
Garner, NC  |  October 07, 2011
I received a 1099-A for 2010 from my mortgage lender. The "Date of lender's acquisition or knowledge of abandonment" in box 1 is 3/2/10. I called the mortgage company who told me they completed foreclosure on 8/25/10 and that there was a $0 Principal balance on the account. I asked did that mean my debt was forgiven, but the agent did not know. What should I expect next and does it sound like to you my debt has been forgiven?
October 07, 2011
The 1099-A is a maddening document, as I try to convey in the first two paragraphs of my original answer above. If anyone can offer a better explanation of the 1099-A's purpose, I welcome it in the comments below.

Consult with a tax preparation specialist or tax lawyer about filing a Form 982 with your 2010 tax return. Do it right away, as you can only use the Form 982 until October 15, 2011 for tax-year 2010.
Henry J.
Eagan, MN  |  August 30, 2011
When a 1099-c has been issued (on a credit card account) and the creditor (Chase in this case) later on upon doing a loan modification on the residence (mortgage also held by them)then demands the cancelled amount must be paid first before they will issue the loan how does the IRS handle Chase's "double dipping". Can Chase demand that the 1099-c be ignored ? Thank you for your answer.
August 31, 2011
I believe the IRS would require Chase to issue an amended 1099, so it did not get the benefit of the tax write-off and be able to collect on the debt, too.
Kempton P.
Poway, CA  |  February 09, 2011
If I receive a 1099-C for a non-mortgage debt, am I stuck with paying taxes on the amount listed? I can see that I would not be covered by the Mortgage Forgiveness Debt Relief Act. Please let me know, Bill, if there is something that I am missing. Thank you
February 09, 2011
You may or may not have to declare the forgiven debt as income. Look into the Form 982. This form can be used to avoid declaring forgiven debt as income, but you have to meet an IRS test for insolvency. I strongly recommend that you speak with a tax professional. Remember, your potential tax obligation is tied to the year the debt was forgiven and the 1099-C was issued. If you received the 1099 in 2010, then the Form 982 needs to be attached to the return that is due in April, 2011. If the debt was forgiven in 2011, make sure to discuss the Form 982 with your tax preparer in time to file your 2011 return in April, 2012.
Howell S.
February 18, 2012
What is the best thing to do if we did not received 1099C instead we just received 1099A? How can the lender forgive us from our debt?
February 19, 2012
The 1099-A is simply a notice from your creditor to the IRS that you abandoned the property. Receiving a 1099-A does not mean that the debt is forgiven. If the lender sends you a 1099-C, then the debt is forgiven and you must account for it on your tax return.
Howell S.
February 19, 2012
So if we did not received the 1099C, is that means that the lender will still be chasing us to pay?
February 19, 2012
A common misconception is that if a creditor issues a 1099-C that it can no longer pursue the debt. In most cases the creditor will not pursue the debt, but, if it chooses to it can. At that point, it can notify the IRS that it is revoking the 1099-C and pursue the debt.

In your case, all you can do is wait and see if there is a 1099-C forthcoming. If it is, make sure to properly account for it on your tax return.
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