Form 1099-A: Acquisition or Abandonment of Secured Property (2020) – A Complete Guide
Losing a home or property to foreclosure or abandonment is stressful enough without the added confusion of tax forms. If you've been through a foreclosure, repossession, or abandoned property secured by a loan in 2020, you likely received IRS Form 1099-A. This guide explains what this form means, why it matters for your taxes, and how to handle it correctly.
What the Form Is For
Form 1099-A is an information return that lenders must send to the IRS—and to you—when they acquire property that secured a loan, or when they have reason to believe you abandoned that property. Think of it as the IRS's way of tracking what happened to property that was tied to a debt.
This form typically comes into play in three scenarios: foreclosure (where the lender takes the property through legal proceedings), repossession (such as a car being taken back), or abandonment (where you walked away from the property). The form doesn't determine whether you owe taxes, but it provides crucial information you'll need to calculate any potential gain or loss on your tax return.
The form reports two key numbers: the outstanding loan balance (principal only, not interest or fees) and the fair market value of the property on the date it was acquired or abandoned. You'll use these figures to determine if the property transfer resulted in taxable income, which can happen in two ways—through a gain on the "sale" of the property or through cancellation of debt income if the lender later forgives part of what you owed IRS.gov.
When You'd Use It (Including Late and Amended Filings)
Regular Filing Timeline: If you're a lender who needs to file Form 1099-A for 2020, you should have filed it with the IRS by March 1, 2021 (paper filing) or March 31, 2021 (electronic filing). You must also provide a copy to the borrower by January 31, 2021 IRS.gov.
Late or Corrected Returns: Made a mistake or missed the deadline? You can file a corrected Form 1099-A if you discover errors after the original filing. Mark the "CORRECTED" box on the new form and file it as soon as possible. Common errors include wrong acquisition dates, incorrect loan balances, mistaken fair market values, or errors in indicating whether the borrower was personally liable for the debt. Contact the IRS Information Returns Branch immediately if you need to correct a form—penalties can apply for late or incorrect filings, ranging from $50 to $280 per form depending on how late you file IRS.gov.
Extensions: Lenders can request an automatic 30-day extension by filing Form 8809 by the original due date. Under hardship conditions, an additional 30-day extension may be available. However, extensions must be requested proactively—they're not granted automatically.
Key Rules for 2020
Several important rules governed Form 1099-A for tax year 2020:
Who Must File: Lenders must file if they lend money in connection with their trade or business and acquire an interest in property securing the debt, or have reason to know the property was abandoned. You don't need to be in the lending business—this applies to anyone who makes secured loans as part of their business activities, including banks, credit unions, federal agencies, and even governmental units IRS.gov.
$600 Threshold Matters: If the same lender cancels $600 or more of debt in the same calendar year as the foreclosure or abandonment, they can file just Form 1099-C (Cancellation of Debt) instead of both forms. The 1099-C includes specific boxes (4, 5, and 7) that satisfy the 1099-A reporting requirement.
Property Types: The form is required for real property (like homes), intangible property, and tangible personal property used in trade, business, or investment. You don't need to file for purely personal-use items like a personal car—unless it was partly used for business or investment purposes.
Personal Liability Matters: Box 5 on the form indicates whether you were personally liable for the debt. This distinction is critical because it affects how you calculate your tax consequences. With recourse debt (personally liable), your amount realized is the fair market value of the property. With nonrecourse debt (not personally liable), your amount realized is the entire debt amount IRS.gov.
Step-by-Step (High Level)
For Borrowers (Receiving the Form)
- Verify the Information: When you receive Form 1099-A, check all boxes carefully for accuracy—especially the date of acquisition/abandonment (Box 1), outstanding loan balance (Box 2), fair market value (Box 4), and whether you were personally liable (Box 5).
- Understand Your Tax Obligations: You must report the property transfer as a "sale" on your tax return, even though you didn't actually sell it in the traditional sense. Calculate your gain or loss using the information on the form.
- Determine Amount Realized: If Box 5 is checked (you were personally liable), your amount realized equals the fair market value in Box 4. If Box 5 is NOT checked (nonrecourse debt), your amount realized is the full loan balance from Box 2.
- Calculate Gain or Loss: Subtract your adjusted basis in the property (generally what you paid for it, plus improvements, minus depreciation) from your amount realized. Report this on Schedule D and Form 8949 for personal property, or Form 4797 for business property.
- Watch for Form 1099-C: If you receive both forms for the same property, you may have additional cancellation of debt income to report. The debt forgiveness may be taxable unless you qualify for an exclusion (such as bankruptcy, insolvency, or the qualified principal residence exclusion that was available for certain foreclosures) IRS.gov.
For Lenders (Filing the Form)
- Identify When Filing is Required: File when you acquire an interest in secured property or know (or have reason to know) property was abandoned.
- Determine Abandonment: An abandonment occurs when objective facts show the borrower permanently discarded the property. You're deemed to know about abandonment based on reasonable inquiry. If you plan to foreclose within 3 months of suspected abandonment, you can wait to report until the foreclosure date.
- Complete the Form Accurately: Report the borrower's information, date of acquisition/abandonment, outstanding principal balance (not interest or fees), fair market value (usually the gross foreclosure bid price), and whether the borrower was personally liable.
- File Timely: Submit to the IRS by March 1 (paper) or March 31 (electronic) of the following year, and provide the borrower a copy by January 31.
Common Mistakes and How to Avoid Them
Mistake #1: Wrong Acquisition/Abandonment Date
Use the actual date title or possession transferred. For foreclosures with redemption periods, use the later of the sale date or when the redemption right expires. For third-party purchases at foreclosure sales, the property is treated as abandoned on the sale date.
Mistake #2: Including Interest, Fees, or Costs in Box 2
Box 2 should show only the outstanding principal balance of the original debt. Don't include accrued interest, foreclosure costs, late fees, or penalties—these inflate the number and cause calculation errors for borrowers IRS.gov.
Mistake #3: Incorrect Fair Market Value
For foreclosures, the gross foreclosure bid price is generally considered the FMV. For abandonments or voluntary conveyances where Box 5 is checked, enter the appraised value. Don't guess—use documented valuations.
Mistake #4: Wrong Box 5 Indication
Check whether the borrower was personally liable when the debt was created or last modified. This isn't about current circumstances—it's about the original loan terms. Getting this wrong causes major tax calculation errors for borrowers.
Mistake #5: Inadequate Property Description
Box 6 requires sufficient detail. For real property, include the full street address or section/lot/block information. For personal property, specify type, make, and model (e.g., "Car—2015 Honda Accord" not just "vehicle").
Mistake #6: Not Coordinating Forms 1099-A and 1099-C
If both debt acquisition and cancellation occur in the same year, file either both forms (leaving boxes 4, 5, and 7 blank on the 1099-C), or just the 1099-C with those boxes completed. Don't create conflicting information.
What Happens After You File
For Lenders
The IRS receives your Form 1099-A and matches it against the borrower's tax return. If you filed correctly and on time, you've fulfilled your reporting obligation. The IRS may contact you if there are discrepancies or if the borrower disputes the information. Keep copies of all filed forms and supporting documentation for at least 4 years—you must be able to reconstruct the data if audited IRS.gov.
For Borrowers
After receiving Form 1099-A, you must report the property disposition on your tax return. The form itself doesn't create a tax bill—it's just information. Your actual tax liability depends on whether you had a gain or loss on the property transfer and whether any debt was ultimately forgiven.
If the fair market value exceeded your remaining loan balance and you had substantial equity, you might actually have a loss (if your basis was higher than the FMV). Conversely, if you had depreciated the property or it appreciated significantly, you might have a taxable gain.
Many borrowers discover they qualify for exclusions that reduce or eliminate the tax impact. The qualified principal residence exclusion (for primary homes) can exclude up to $250,000 ($500,000 for married couples) of gain. The insolvency exclusion can eliminate cancellation of debt income if your debts exceeded your assets before the debt cancellation.
The IRS cross-checks your return against the 1099-A on file. Discrepancies trigger automated notices. If you disagree with the form's information, contact the lender immediately to request a corrected form before filing your return IRS.gov.
FAQs
1. Do I owe taxes just because I received Form 1099-A?
Not necessarily. The form reports information but doesn't determine your tax bill. You might have a loss rather than a gain, or you might qualify for exclusions. Calculate your actual tax liability using Publication 4681 or consult a tax professional.
2. What's the difference between Form 1099-A and Form 1099-C?
Form 1099-A reports the acquisition or abandonment of secured property—essentially the property transfer itself. Form 1099-C reports cancellation of debt—when the lender forgives part or all of what you owed. You might receive one, both, or just a 1099-C that covers both events.
3. I abandoned my property in 2020 but didn't receive Form 1099-A. What should I do?
If you abandoned property or had a foreclosure and haven't received a Form 1099-A (or 1099-C), you still must report the property disposition on your tax return. Calculate the amounts yourself using the property's fair market value at abandonment and the loan balance at that time. Document your calculations in case of IRS inquiry.
4. Can I avoid taxes on foreclosure of my primary residence?
Possibly. The qualified principal residence exclusion can shelter up to $250,000 ($500,000 married filing jointly) of gain from the sale of your main home. Additionally, debt forgiven on your principal residence between 2007-2020 might qualify for the Mortgage Forgiveness Debt Relief Act exclusion (later extended through 2020). See Form 982 and Publication 4681 IRS.gov.
5. What if the Form 1099-A shows incorrect information?
Contact the lender or creditor immediately and request a corrected Form 1099-A. They must file a corrected form with the IRS and send you a copy. Don't file your tax return with incorrect information—wait for the correction, or attach a detailed explanation to your return explaining the discrepancy.
6. I wasn't personally liable for the debt (nonrecourse loan). How does this affect my taxes?
With nonrecourse debt, your amount realized equals the full loan balance regardless of the property's fair market value. This often results in higher taxable income than recourse debt, where your amount realized is limited to the FMV. However, with nonrecourse debt, you generally don't have separate cancellation of debt income.
7. When does "abandonment" actually occur?
Abandonment occurs when objective facts show you intended to permanently discard the property. Simply being behind on payments isn't abandonment. The lender has "reason to know" of abandonment based on reasonable inquiry—for example, if the property is vacant, utilities are shut off, keys are surrendered, or you stated your intent to abandon. If foreclosure is expected within 3 months, reporting is delayed until the foreclosure occurs IRS.gov.
Additional Resources
- IRS Form 1099-A: https://www.irs.gov/forms-pubs/about-form-1099-a
- IRS Instructions for Forms 1099-A and 1099-C (2020): https://www.irs.gov/pub/irs-prior/i1099ac--2020.pdf
- IRS Topic 432: https://www.irs.gov/taxtopics/tc432
- IRS Publication 4681 (Canceled Debts, Foreclosures, Repossessions, and Abandonments): Available at IRS.gov
This guide provides general information based on 2020 tax rules. Individual circumstances vary, and tax laws change. Consult a qualified tax professional for advice specific to your situation.
