Instructions for Forms 1099-A and 1099-C Checklist –
2014 Tax Year
The 2014 tax year presents unique reporting challenges for filers who must complete Forms
1099-A and 1099-C. These IRS forms document the acquisition or abandonment of secured property and the cancellation of debt for applicable entities under Section 6050P of the Internal
Revenue Code.
Filers must understand the retroactive extension of the Mortgage Forgiveness Debt Relief Act, which expired on December 31, 2013. Congress passed the Tax Increase Prevention Act of
2014, signed into law on December 19, 2014, retroactively extending the exclusion through
December 31, 2014. This timing created uncertainty during most of 2014 regarding whether canceled mortgage debt would qualify for tax exclusion.
Understanding Form 1099-C Reporting Requirements
Applicable entities must file Form 1099-C for each debtor when debt cancellation meets specific criteria established under Treasury Regulation section 1.6050P-1. You must report the cancellation of debt when you canceled $600 or more owed by a single debtor, and an identifiable event has occurred.
Financial institutions, credit unions, federal agencies, and organizations whose significant trade involves lending money must comply with these requirements. The discharge of indebtedness triggers reporting obligations regardless of whether the debtor must report the canceled amount as taxable income on their income tax return.
Steps to Complete Forms 1099-A and 1099-C (2014)
Step 1: Verify Reporting Threshold for Form 1099-C
Determine whether cancellation of debt meets the minimum reporting requirement for your entity type. Form 1099-C must be filed for each debtor for whom you canceled a debt of $600 or more if you are an applicable entity and an identifiable event has occurred. This threshold applies consistently across all qualifying debt cancellations during the 2014 tax year.
Step 2: Confirm Property Acquisition Date for Form 1099-A
Identify the exact date when you acquired an interest in secured property or first knew the borrower had abandoned the property. The 2014 instructions require precision when reporting loans secured by real property to ensure accurate tax reporting. Document whether the property served as the debtor’s principal residence, rental property, or business asset because this classification affects how the debtor reports the transaction.
Step 3: Apply Mortgage Forgiveness Debt Relief Act Exclusion Parameters
Review whether the debt qualifies for exclusion under the Mortgage Forgiveness Debt Relief Act for principal residence indebtedness. The Act expired on December 31, 2013, but was retroactively extended through December 31, 2014, by the Tax Increase Prevention Act of 2014, enacted on December 19, 2014.
Debt qualifies when proceeds were used to buy, build, or substantially improve a qualified principal residence and the debt was secured by that residence. Determine if the canceled debt meets these criteria before completing Box 2 on Form 1099-C with the discharge amount.
- Code A applies to discharge in bankruptcy under Title 11 of the United States Code.
- Code B designates cancellation, making debt unenforceable in receivership, foreclosure,
- Code C indicates the statute of limitations expiration upheld by a final court judgment.
- Code D marks foreclosure remedies that extinguish collection rights by law.
- Code E shows cancellation under probate or similar proceedings.
- Code F represents discharge under creditor-debtor agreements for less than full
- Code G documents discharge based on the creditor’s defined policy to discontinue
- Code H applies to the expiration of the 36-month nonpayment testing period for certain
- Code I covers other actual discharge before an identifiable event occurs.
Step 4: Classify Debt Discharge Type According to 2014 Guidance
Categorize the debt cancellation event using the appropriate identifiable event code required in
Box 6 of Form 1099-C. The 2014 instructions define nine specific identifiable events that trigger reporting requirements for applicable entities under Section 6050P.
Select the correct event code corresponding to how the debt was discharged: or similar proceedings. consideration, including short sales. collection activity. financial institutions.
Step 5: Document Fair Market Value Assessment
Record the fair market value of the property at the time of acquisition or discharge as required in
Box 4 of Form 1099-A or Box 7 of Form 1099-C. The 2014 instructions require this value for calculating net forgiveness amounts that debtors report as other income on Form 1040.
Use appraisal reports, comparable sales data, or other reasonable valuation methods acceptable under 2014 guidance for determining fair market value. For foreclosure or execution sales, the gross foreclosure bid price generally represents fair market value under Treasury
Regulation standards.
Step 6: Verify Filer Identification and TIN Accuracy
Confirm the filer’s complete legal name, current mailing address, and correct taxpayer identification number before submitting forms to the Internal Revenue Service. The 2014 instructions require accurate TIN matching for both filer and recipient to prevent processing delays and potential penalties. Verify that the TIN matches IRS records to avoid rejection or misfiling that could trigger backup withholding requirements.
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Step 7: Assemble Required Attachments and Supporting Documentation
Gather all property-related documents, including settlement statements, loan modification agreements, foreclosure notices, and property appraisals for the 2014 tax year. The 2014 instructions require documentation supporting fair market value claims and identifiable event classifications for IRS review. Retain copies for filer records for at least four years from the filing due date and provide copies to the recipient if required under applicable regulations.
Coordinating Forms 1099-A and 1099-C
When you cancel debt and acquire secured property during the same calendar year, you may file Form 1099-C only to satisfy both reporting requirements. You meet Form 1099-A filing obligations by completing Box 4, Box 5, and Box 7 on Form 1099-C with property description, personal liability status, and fair market value.
Box 2 on Form 1099-C requires you to enter the total amount of debt discharged from all sources. This amount cannot exceed the total debt minus any amounts you received through settlement agreements, foreclosure sales, or short sales that partially satisfied the obligation.
Include the stated principal but not accrued interest unless you choose to report interest as part of the canceled debt in Box 2, which requires separate disclosure in Box 3.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
