When a debt is settled (IRS says, “forgiven”) for more than $600, you may receive a form 1099C that seems to say that you are going to have to pay more tax! Here’s what you need to do to have the “forgiveness” excluded as additional income:
Have you had a debt settled for less than you owe? If so, chances are pretty good that you also received a 1099-C for the amount of the “forgiven” debt amount. WHAT? How can that be possible?
If you have received a 1099-C, DON’T PAY THE ADDITIONAL TAX until you know your rights!
What is a 1099-C?
If you or a debt management company has successfully negotiated a settlement of your credit card debt, and the amount is over $600, you may receive a 1099-C.