What Form 1099-A (2019) Is For
Form 1099-A (2019) is an official Internal Revenue Service (IRS) tax form used to report the acquisition or abandonment of secured property when a borrower defaults or voluntarily gives up the property securing a loan. When a lender forecloses, repossesses, or becomes aware that the borrower has abandoned real property or business assets, this form documents the transaction details for tax reporting.
It records the fair market value, outstanding loan balance, and date acquired, allowing both the borrower and the IRS to determine the resulting taxable gain or loss. Need help with IRS reporting or responding to a notice? Start your case review with our team today.
When You’d Use Form 1099-A (2019)
- Foreclosure sale: When a lender forecloses on real property and acquires legal ownership, the event must be reported to the Internal Revenue Service as either an acquisition or abandonment of the property.
- Abandonment of secured property: When you permanently vacate property with no intention to return, the financial institution must file Form 1099-A to reflect the abandonment of secured property.
- Deed instead of foreclosure: When you voluntarily transfer the property to the lender in full or partial satisfaction of the debt, the transaction qualifies as a lender’s acquisition.
- Business or investment property disposition: When tangible personal property or real property held for business or investment purposes is repossessed or surrendered, the reporting requirement applies under IRS rules.
- Late or corrected filings: When a corrected form is needed, the lender must issue an updated Form 1099-A within the same calendar year or before the next tax season to ensure accuracy.
If you’re facing a tax balance after a foreclosure or property abandonment, you may qualify for various tax payment plan options to help you resolve what you owe.
Key Rules or Details for the 2019 Tax Year
Lenders and borrowers must follow several important rules for Form 1099-A (2019) to ensure accurate tax reporting and compliance with IRS requirements:
- Reporting Requirement: A lender must file Form 1099-A when it acquires or becomes aware of abandoned property securing a loan, even if the outstanding debt is minimal or fully paid off.
- Recourse Loan vs. Nonrecourse Loan: If the borrower is personally liable for repayment, the property’s fair market value is used to determine taxable gain or loss; if not, the entire loan balance becomes the amount realized.
- Form 1099-C Coordination: When debt is canceled in the same calendar year, the lender may issue Form 1099-C instead of Form 1099-A to report the canceled debt and the property’s fair market value.
- Fair Market Value Determination: The fair market value (FMV) is generally based on the foreclosure sale price or a professional appraisal conducted when the lender acquired the property.
- Partial Satisfaction of Debt: When a borrower transfers property for full or partial satisfaction of the remaining debt, the transaction remains taxable and reportable.
Failing to report your property disposition could lead to IRS notices or unfiled individual returns, which must be resolved to stay compliant.
Step-by-Step (High Level)
Following these steps helps ensure you correctly handle Form 1099-A (2019) during tax season:
- Review the form carefully: Confirm that the principal outstanding, date acquired, and the property’s fair market value are correct before using the information on your tax form.
- Determine the property type: Identify whether the property is real property, tangible personal property, or intangible property, since each category has unique tax rules.
- Confirm liability status: Check whether the borrower is personally liable for repayment; this affects how to calculate gain or loss and whether canceled debt is taxable.
- Calculate gain or loss: Subtract the adjusted basis (the original purchase price plus improvements minus depreciation) from the fair market value or loan balance to find your taxable gain or loss.
- Check for canceled debt: If the lender cancels the remaining debt, report canceled debt as ordinary income unless exclusions such as qualified principal residence indebtedness apply.
- Report correctly on your tax return: Use Schedule D for personal-use property or Form 4797 for business property, ensuring that you follow IRS reporting requirements for each property’s status.
- Maintain accurate documentation: Keep records such as the lender’s acquisition notice, proof of foreclosure costs, and prior-year debt statements for IRS verification, if needed.
If you prefer to have a tax professional represent you, setting up a Power of Attorney for tax matters can streamline communications with the IRS.
Common Mistakes and How to Avoid Them
Understanding these common mistakes can help prevent filing errors, reduce tax liability, and ensure compliance with IRS reporting requirements for Form 1099-A (2019):
- Ignoring the reporting requirement: Failing to report acquisition or abandonment can trigger an IRS notice; you must always include the disposition of the property on your tax return.
- Forgetting depreciation adjustments: If the property was used for business or investment purposes, reduce the adjusted basis by prior year debt-related depreciation to avoid overstating your loss.
- Using an incorrect fair market value: Use the fair market value (FMV) listed on Form 1099-A, unless you have clear and convincing evidence, such as an independent appraisal, showing a different value.
- Omitting canceled debt income: If the lender cancels any unpaid principal, report canceled debt as ordinary income unless you qualify for an exclusion such as qualified principal residence indebtedness.
Taxpayers who make mistakes may be eligible for IRS penalty abatement programs, reducing or removing penalties for reasonable cause.
What Happens After You File Form 1099-A (2019)
After you file Form 1099-A (2019), the Internal Revenue Service compares your return against the lender’s acquisition records to verify accuracy. If the figures reported do not match, you may receive a notice requesting clarification or adjustment. Keeping all supporting documentation, such as the property’s fair market value, the amount of debt canceled, and related loan statements, ensures that you can substantiate your filing.
If you receive a notice from the IRS after filing Form 1099-A, understanding the IRS collection process can help you respond appropriately.
FAQs
Do I have to report Form 1099-A (2019) if I did not owe the remaining debt?
Yes, even if no remaining debt exists, you must still report the lender-acquired property’s status on your tax return. The Internal Revenue Service uses this information to confirm the proper reporting of gain or loss from acquisition or abandonment.
Can Form 1099-A and Form 1099-C be issued in the same calendar year?
Yes, both may be issued if the lender forecloses on the property and later cancels the remaining debt in the same calendar year. In that case, ensure you do not double-report the transaction on your tax return.
How do I calculate gain or loss from Form 1099-A (2019)?
To calculate gain or loss, subtract your adjusted basis (original purchase price plus improvements minus depreciation) from the property’s fair market value or outstanding loan balance, depending on whether the loan was recourse or nonrecourse.
Does Form 1099-A apply to both personal and investment property?
Yes, Form 1099-A applies to personal property, business property, and investment property. The tax treatment depends on the property’s use, such as personal residence, business or investment debt, or real property used for business purposes.
