ANSWERS: 1
  • It is not uncommon for taxpayers to receive a 1099-C after they've already filed their returns. Although most filers make an effort to wait for all W-2's and 1099s before filing their returns, they don't expect to receive a 1099-C and don't know how to file it once it's received. This is because the 1099-C is a unique derivative of the 1099 series.

    Understanding 1099-C

    The first thing to understand about a 1099-C is that, unlike most 1099's, it is not an income statement. A 1099-C is a cancellation of debt. When a consumer stops paying on a debt, the company to which the debt is owed will sometimes forgive the debt. For example, credit card companies often contact cardholders who've stopped making payments and offer them the opportunity to settle their debt for less than is owed. Once the cardholder agrees to pay the reduced balance, the credit card company forgives the debt not paid by the cardholder and issues a 1099-C to both the taxpayer and the IRS. You may also receive a 1099-C if your home was foreclosed on or if it was sold for a loss.

    Amend Return

    Once you receive a 1099-C, you are required to include it on your return in the area designated for "other" income. If you failed to include the 1099-C on your original return, you will need to file an amended return. A 1040-X is the IRS form used to file an amended return and can be downloaded at IRS.gov. In the income section of the 1040-X, include the original amount as listed on your return in column A, the net change in column B (increase or decrease), and the correct amount in column C. Also, be sure to include your reason for filing the return in the "Explanation of Changes" section.

    Mail Return

    When you're done, mail your 1040-X to the IRS office responsible for processing returns in your area. If you are unsure which office processes returns for your region, refer to the 1040-X instructions (see Resources). The processing time frame for amended returns is eight to 12 weeks. If you have questions or concerns regarding your return, call the IRS at 1-800-829-1040.

    Source:

    Internal Revenue Service: Publication 4681

    Internal Revenue Service: 1099-C Instructions

    Resource:

    Internal Revenue Service: 1040X Instructions

    Internal Revenue Service: 1099-C Example

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