Form 1099-A: Acquisition or Abandonment of Secured Property (2017)

What the Form Is For

Form 1099-A is an informational tax document that lenders send to both you and the IRS when something happens to property that secured a loan. Think of it as a notification that your lender either took back the property (through foreclosure or repossession) or knows that you've abandoned it—meaning you walked away and stopped making payments without officially transferring ownership.

The form doesn't mean you automatically owe more taxes, but it does mean the IRS needs to know about the transaction because it might affect your tax situation. The property in question could be real estate like your home, investment property, or even tangible personal property like a car or business equipment—as long as it wasn't used solely for personal purposes.

Here's what's important to understand: you don't file this form yourself. Your lender files it with the IRS and sends you a copy. You'll use the information on the form to complete your own tax return and determine if you have reportable income or a deductible loss from the transaction.

IRS Form 1099-A Instructions 2017

When You’d Use It

Filing Deadlines, Late, and Amended Returns

For Lenders (Filing Requirements)

Lenders must file Form 1099-A with the IRS by February 28, 2018 for paper filing, or April 2, 2018 if filing electronically. They must furnish your copy (Copy B) by January 31, 2018. The form must be filed for the calendar year in which the acquisition or abandonment occurred—so if your foreclosure happened in 2017, the lender reports it on their 2017 Form 1099-A.

For Borrowers (Using the Form)

As a borrower, you'll receive your copy by late January following the year of the foreclosure or abandonment. You'll use this information when preparing your 2017 tax return, which is due April 15, 2018 (or October 15, 2018 if you file for an extension). Even if you don't receive the form, you're still responsible for reporting any taxable income or loss from the transaction.

Amended Returns

If you discover errors after filing your return, you may need to file an amended return using Form 1040X. Common reasons include receiving a corrected 1099-A showing different property values or debt amounts, or realizing you incorrectly calculated your gain or loss. The IRS generally allows three years from your original filing date to amend.

If You Don't Receive Your Form

Contact your lender if you haven't received Form 1099-A by early February. If you still don't get it by February 15, call the IRS at 1-800-829-1040 for assistance.

IRS Publication 4681 (2017)

Key Rules for 2017

1. Property Types That Require Reporting

Lenders must report on real property (like homes or land), intangible property, and tangible personal property held for business or investment. However, no reporting is required for tangible personal property held only for personal use (like your personal car) or property located outside the United States if you're an exempt foreign person.

2. The $600 Threshold

While Form 1099-A itself doesn't have a dollar threshold, if your lender also canceled debt of $600 or more in the same calendar year, they might file Form 1099-C (Cancellation of Debt) instead, which satisfies both reporting requirements when boxes 4, 5, and 7 are completed.

3. Personal Liability Matters

Box 5 on the form indicates whether you were personally liable for the debt. This checkbox is crucial because it determines how you calculate your tax consequences. If you were personally liable (recourse debt), the canceled portion of your debt may be taxable income. If you weren't personally liable (non-recourse debt), you generally calculate gain or loss differently.

4. Principal vs. Interest

The form reports only the unpaid principal balance of your debt—not accrued interest, late fees, or foreclosure costs. This keeps the reporting straightforward and focuses on the actual loan amount.

5. Multiple Borrowers

If you co-borrowed with someone else (like a spouse or business partner), each borrower typically receives their own Form 1099-A showing the full debt amount. For debts of $10,000 or more incurred after 1994, each jointly and severally liable borrower receives a separate form.

6. Abandonment Definition

The IRS considers property “abandoned” when objective facts indicate you intended to permanently discard it. Lenders have “reason to know” of abandonment based on circumstances—for example, if the property is vacant, utilities are disconnected, and you've stopped all communication.

Step-by-Step Guide (High-Level Process)

Step 1: Review Box 1 (Date of Acquisition or Abandonment)

This shows when the lender acquired the property or first knew it was abandoned. This date determines which tax year the transaction falls into and when you calculate fair market value and outstanding debt.

Step 2: Check Box 2 (Balance of Principal Outstanding)

This is the unpaid principal on your original loan at the time of acquisition or abandonment. It does not include interest, penalties, or foreclosure costs—just the core loan amount you owed.

Step 3: Examine Box 4 (Fair Market Value of Property)

For foreclosures or similar sales, this typically shows the gross foreclosure bid price (what the property sold for at auction). For abandonments or voluntary conveyances, it shows the appraised value. This number is critical for calculating gain or loss.

Step 4: Look at Box 5 (Personal Liability Checkbox)

If checked, you were personally liable for repaying the debt (recourse debt). If unchecked, you weren't personally liable (non-recourse debt). This changes your tax calculation significantly.

Step 5: Note Box 6 (Property Description)

For real property, this typically includes the street address. For personal property, it includes the type, make, and model (like “Car—2013 Honda Accord”).

Step 6: Calculate Your Tax Consequences

Compare the fair market value (Box 4) to your adjusted basis in the property and the debt canceled. If Box 5 is checked and the debt exceeds the fair market value, you may have cancellation of debt income. If Box 5 is unchecked, calculate gain or loss as if you sold the property for the debt amount.

Step 7: Report on Your Tax Return

Use the information to complete the appropriate forms on your tax return. For foreclosures on a main home, you might need Form 982 and Schedule D. For business or rental property, use Form 4797. Consult IRS Publication 4681 for detailed guidance.

Common Mistakes and How to Avoid Them

Mistake #1: Ignoring the Form Because You Had No Cash Transaction

Many borrowers assume that because they didn't receive money, they don't have taxable income. However, canceled debt is generally considered income.

How to Avoid: Always report transactions shown on Form 1099-A. Use Publication 4681 to determine if any exceptions apply (like insolvency or bankruptcy exclusions).

Mistake #2: Confusing Principal Balance with Total Debt

Box 2 shows only the principal—not the total you owed including interest and fees.

How to Avoid: Use the exact amount in Box 2 for your calculations, not numbers from your own records.

Mistake #3: Miscalculating Gain or Loss Based on Personal Liability

The calculation differs dramatically depending on whether Box 5 is checked.

How to Avoid:

If Box 5 is checked (recourse debt): You have two potential tax events—gain/loss from the deemed sale and possible cancellation of debt income.
If Box 5 is not checked (non-recourse debt): Calculate gain or loss as if you sold the property for the outstanding debt amount.

Mistake #4: Forgetting to Claim Exclusions

For tax years 2007–2017, qualified principal residence indebtedness up to $2 million may be excluded from income under the Mortgage Forgiveness Debt Relief Act.

How to Avoid: If the foreclosed property was your main home, research whether you qualify for the mortgage debt forgiveness exclusion using Form 982.

Mistake #5: Not Keeping Supporting Documentation

You'll need records of your original purchase price, improvements, selling expenses, and closing statements to accurately calculate your adjusted basis.

How to Avoid: Maintain files with your original mortgage documents, settlement statements, receipts for capital improvements, and the Form 1099-A itself for at least four years after filing.

Mistake #6: Assuming Personal-Use Property Losses Are Deductible

Losses on property held for personal use (like your primary residence used solely as a home) are not tax-deductible, even though gains may be taxable.

How to Avoid: Understand that tax treatment isn't symmetrical. While you can't deduct losses on personal-use property, you may owe tax on gains or canceled debt.

What Happens After You File

Immediate Processing

Once you file your tax return including the Form 1099-A information, the IRS will process it along with your other income and deductions. Their systems automatically match the form you received against what the lender reported to verify consistency.

IRS Matching Program

The IRS uses automated systems to match information returns like Form 1099-A with taxpayer returns. If you fail to report the transaction, or if the numbers don't match what your lender reported, you may receive an automated notice (typically a CP2000) proposing additional tax, interest, and penalties.

No Immediate Contact (Usually)

If you correctly report the information and your return is accepted, you likely won't hear anything further about the Form 1099-A. The IRS has three years from your filing date to audit returns, though this extends to six years if they suspect you substantially understated income.

Possible Outcomes

No Tax Owed: If you qualify for exclusions (like the principal residence exclusion or insolvency exception), you may owe no additional tax on canceled debt.
Tax Liability: If you have cancellation of debt income or a taxable gain, you'll owe tax at your ordinary income rates (for canceled debt) or capital gains rates (for gains on the sale).
Refund: In rare cases where you had a loss on business or investment property, you might receive a refund if the loss creates a net operating loss.

Long-Term Credit Implications

While Form 1099-A itself doesn't directly affect your credit score, the underlying foreclosure or abandonment will be reported to credit bureaus and can significantly impact your credit for up to seven years.

Record Retention

Keep your Form 1099-A and all supporting documentation for at least four years after the due date of your return. If you claimed a loss or exclusion, keeping records indefinitely is wise in case of future questions.

FAQs

Do I have to pay taxes on a foreclosure if I didn't make any money?

Not necessarily. Whether you owe taxes depends on several factors: (1) whether you had a gain on the deemed sale of the property, (2) whether any debt was canceled and you were personally liable, and (3) whether any exclusions apply.

What's the difference between Form 1099-A and Form 1099-C?

Form 1099-A reports the acquisition or abandonment of secured property, while Form 1099-C reports the cancellation of $600 or more of debt. Often, both events happen simultaneously—the lender forecloses and cancels the remaining debt.

I received Form 1099-A but the property values seem wrong. What should I do?

Contact your lender immediately and request a corrected Form 1099-A. Lenders can issue corrected versions marked “CORRECTED.”

Does Form 1099-A apply to investment properties and rental properties?

Yes. It applies to any property that secured a loan, including investment real estate, rental properties, and business property.

I voluntarily gave my property back to the lender through a deed-in-lieu of foreclosure. Will I still get a Form 1099-A?

Yes. Voluntary conveyances in lieu of foreclosure are treated the same as involuntary foreclosures for Form 1099-A purposes.

Can I avoid paying taxes if I was insolvent when the foreclosure happened?

Possibly. You may exclude canceled debt income if your total debts exceeded your total assets immediately before the cancellation. You must complete Form 982 to claim this exclusion.

What if my spouse and I were both on the loan but only one of us received Form 1099-A?

If you were jointly and severally liable for a debt of $10,000 or more, each of you should receive a separate Form 1099-A. Contact your lender if only one copy was sent.

Additional Resources

This guide is for informational purposes and based on 2017 tax law. For specific tax advice regarding your situation, consult a qualified tax professional or CPA.