Form 1099-A: Acquisition or Abandonment of Secured Property (2023)

What Form 1099-A Is For

Form 1099-A is an information return that lenders send to borrowers when property that secured a loan is either acquired by the lender (through foreclosure or similar process) or abandoned by the borrower. If you've lost a home to foreclosure, walked away from a property, or had a car repossessed, you'll likely receive this form.

The form exists because these events have important tax consequences. When you transfer property to a lender or abandon it, the IRS treats this as a "sale" of the property for tax purposes, even though you didn't pocket any cash. This means you may have taxable gain or loss that must be reported on your tax return. The lender reports information on Form 1099-A to help you—and the IRS—calculate what you owe.

According to the IRS, lenders must file Form 1099-A "for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned." This applies to real property (like homes), intangible property, and tangible personal property held for investment or business use—though not to personal-use items like cars held solely for personal purposes.

The form contains critical information: the date of acquisition or abandonment, the outstanding loan balance (principal only), the fair market value of the property, and whether you were personally liable for the debt. You'll use these numbers when filing your tax return to determine if you have reportable income or deductible loss.

When You’d Use Form 1099-A

Standard Timing (Including Late and Amended Forms)

Standard Timing: If you lost property to foreclosure or abandoned it during 2023, your lender must provide Form 1099-A to you by January 31, 2024. The lender must file it with the IRS by February 28, 2024 (for paper filing) or March 31, 2024 (for electronic filing).

The form is issued for the calendar year in which the lender acquired the property or first knew (or had reason to know) it was abandoned. According to IRS guidance, "An abandonment occurs when the objective facts and circumstances indicate that the borrower intended to and has permanently discarded the property from use." The lender has reason to know of abandonment based on all facts and circumstances. If the lender expects to start foreclosure within 3 months of learning about abandonment, reporting occurs when the property is actually acquired.

Late Forms: If your lender misses the January 31 deadline, you should still receive the form eventually—though the lender faces penalties. Under Section 6721, late-filing penalties range from $60 per form (if filed within 30 days late) up to $340 per form (if filed after August 1 or not filed at all). These penalties don't affect you directly, but they incentivize lenders to file on time.

Corrected Forms: If you receive a Form 1099-A marked "CORRECTED" in the checkbox at the top, the lender discovered an error in the original form. Common corrections include wrong loan amounts, incorrect fair market values, or errors in Box 5 (personal liability status). When you receive a corrected form, use the new information when filing your tax return. If you've already filed your return using the incorrect form, you may need to file an amended return (Form 1040-X) depending on how the correction affects your tax liability.

If your Form 1099-A contains information you believe is wrong, contact the lender immediately to request a correction. The IRS explicitly states: "If you receive a Form 1099-A or Form 1099-C containing incorrect information, contact the lender to make corrections."

Key Rules or Details for 2023

Several important rules govern Form 1099-A for the 2023 tax year:

Reporting Thresholds: Unlike many 1099 forms that have dollar minimums, Form 1099-A has no minimum threshold. The lender must file the form regardless of the loan amount if property securing the debt is acquired or abandoned.

Property Types Covered: The form covers real property (homes, land, buildings), intangible property, and tangible personal property held for investment or business. Notably, tangible personal property held purely for personal use (like a car used only for commuting) is exempt from reporting—though property held for investment or business use must still be reported.

Coordination with Form 1099-C: If your lender also cancels debt of $600 or more in the same calendar year as the foreclosure or abandonment, they may file only Form 1099-C (Cancellation of Debt) instead of both forms. The 1099-C will include property information in boxes 4, 5, and 7 that normally appears on Form 1099-A. This consolidation simplifies reporting when both events occur simultaneously.

Electronic Filing Mandate: A significant change affecting tax year 2023 is that lenders filing 10 or more information returns must file electronically. This threshold was reduced from 250 returns by Treasury Decision 9972 in February 2023, effective for returns filed after January 1, 2024. This means virtually all financial institutions now must e-file Form 1099-A.

Multiple Borrowers: For debts of $10,000 or more incurred after December 31, 1994, where multiple borrowers are jointly and severally liable, the lender must report the entire debt amount on each borrower's Form 1099-A. For smaller debts or those incurred before 1995, reporting only occurs for the primary (first-named) borrower.

Foreign Property Exception: No reporting is required if the secured property is located outside the United States and the borrower has furnished the lender a statement (under penalties of perjury) that they are an exempt foreign person—unless the lender knows the statement is false.

Step-by-Step (High Level)

Understanding Your Form 1099-A: A Step-by-Step Guide

When you receive Form 1099-A, here's what each section means and how to use it:

Box 1 – Date of Lender's Acquisition or Knowledge of Abandonment

This date determines which tax year you report the transaction. For acquisitions, it's generally when title transferred to the lender or when possession and ownership burdens shifted. For foreclosure sales with a redemption period, it's the later of the sale date or when your redemption right expired. For abandonments, it's when the lender knew or should have known you abandoned the property.

Box 2 – Balance of Principal Outstanding

This shows the unpaid principal on your original loan at the time of acquisition or abandonment. Critically, this includes only principal—not accrued interest or foreclosure costs. You'll use this amount to calculate whether you have cancellation of debt income (if the debt was cancelled) or to determine your "amount realized" for calculating gain or loss.

Box 3

This box is reserved for future use and remains empty.

Box 4 – Fair Market Value of Property

This is crucial for calculating your tax consequences. For foreclosure or execution sales, the IRS presumes the fair market value equals the gross sale proceeds unless there's clear and convincing evidence otherwise. For voluntary conveyances or abandonments where you were personally liable (Box 5 is checked), this shows the property's appraised value. If Box 5 is not checked, this box may be blank.

Box 5 – Was Borrower Personally Liable

If this checkbox is marked, you were personally liable for the debt (a "recourse" loan). If unmarked, you were not personally liable (a "nonrecourse" loan). This distinction is critical for calculating your tax consequences. With recourse debt, your "amount realized" is the fair market value from Box 4. With nonrecourse debt, your amount realized is the entire debt balance from Box 2.

Box 6 – Description of Property

This provides a general description. For real property, you'll typically see the property address. For personal property, you'll see a description like "Car 2023 Toyota Camry" or a category like "Office Equipment."

How to Report It on Your Tax Return

You'll use Form 1099-A information to calculate gain or loss on the property disposition. For non-business property, report on Schedule D (Form 1040) and Form 8949. For business property, use Form 4797. Your gain or loss equals the "amount realized" minus your "adjusted basis" in the property. If debt was also cancelled, you may have additional cancellation of debt income to report. Publication 4681 provides detailed guidance for these complex calculations.

Common Mistakes and How to Avoid Them

Mistake #1: Ignoring Form 1099-A Because You Received No Money
Many borrowers think that because they didn't receive cash from the foreclosure or abandonment, they have nothing to report. This is wrong. The IRS treats the transfer or abandonment as a sale, and you must report it even if you're "underwater" on the loan. Failing to report can trigger IRS notices and potential audits.
How to Avoid: Report the transaction on your tax return using the information from Form 1099-A, even if it results in zero tax or a loss. For personal-use property (like your primary residence), losses aren't deductible, but you still must report the transaction.

Mistake #2: Confusing Form 1099-A with Form 1099-C
Form 1099-A reports the acquisition or abandonment of property. Form 1099-C reports cancellation of debt. They're related but different. If you receive both forms for the same event, you may be double-counting income if you're not careful.
How to Avoid: Check if you received only Form 1099-A, only Form 1099-C, or both. If you received only Form 1099-C for a foreclosure, boxes 4, 5, and 7 on the 1099-C will contain the property information you need. Use only one set of information when calculating your tax consequences. Publication 4681 contains worksheets to help you navigate this correctly.

Mistake #3: Using Box 2 Instead of Box 4 as Your Amount Realized for Recourse Debt
When you're personally liable for the debt (recourse), your amount realized is the fair market value (Box 4), not the debt balance (Box 2). Many borrowers mistakenly use Box 2, which produces incorrect calculations.
How to Avoid: Check Box 5. If marked (recourse debt), use Box 4 as your amount realized. If unmarked (nonrecourse debt), use Box 2. This distinction is fundamental to proper reporting.

Mistake #4: Not Claiming Available Exclusions
Several exclusions may eliminate or reduce your tax liability from foreclosure or abandonment, but you must proactively claim them. The Qualified Principal Residence Indebtedness exclusion (for debt discharged before January 1, 2026 on your main home) and the insolvency exclusion are commonly overlooked.
How to Avoid: Review Publication 4681 carefully to see if you qualify for any exclusions. You must file Form 982 to claim most exclusions. The IRS won't automatically apply them.

Mistake #5: Not Obtaining a Corrected Form When Information Is Wrong
If the information on your Form 1099-A is incorrect—wrong property value, incorrect debt amount, wrong personal liability status—using it "as is" will produce wrong tax results. Yet many borrowers simply use what they received.
How to Avoid: Review your Form 1099-A carefully when you receive it. Compare Box 2 to your loan records. Verify that Box 5 correctly reflects whether you were personally liable. If anything seems wrong, contact the lender immediately and request a corrected form. Don't file your tax return with incorrect information.

What Happens After You File

Your Reporting Obligation: You must report the acquisition or abandonment of the secured property on your tax return for the year shown in Box 1. This is true even if you ultimately owe no tax due to losses or exclusions. The IRS receives a copy of your Form 1099-A and will expect to see the transaction reported on your return.

IRS Matching: The IRS uses an automated system to match information returns like Form 1099-A with taxpayer returns. If you don't report the transaction or report it incorrectly, you may receive a CP2000 notice (a "matching notice") proposing additional tax, penalties, and interest. These notices typically arrive 12-18 months after you file your return.

If You Disagree with the Form: If you believe your Form 1099-A contains errors and the lender won't issue a corrected form, you should still file your tax return using the correct information. Attach a statement to your return explaining the discrepancy and providing documentation supporting your position. While this doesn't guarantee the IRS will agree, it demonstrates good faith and provides a paper trail.

Potential Additional Forms: Depending on your situation, you may also receive Form 1099-C if debt was cancelled. If you receive both forms for the same event, you'll need to carefully coordinate them to avoid double-reporting income. Additionally, you may need to file Form 982 if you're claiming an exclusion from cancellation of debt income.

State Tax Implications: Most states follow federal rules for reporting foreclosures and abandonments, but some have different requirements or exclusions. After handling your federal Form 1099-A reporting, check your state's tax agency website or consult a state tax professional to ensure state compliance.

Impact on Future Credit: While not a tax issue, be aware that the foreclosure or abandonment reported on Form 1099-A will affect your credit report and score for years. The tax reporting and credit reporting are separate systems, but both have long-term implications.

Record Retention: Keep your Form 1099-A and all supporting documentation (closing statements, loan records, property basis records) for at least three years after filing your return—or longer if you claimed certain exclusions or reported a loss. The IRS can audit returns up to three years after filing (six years for substantial underreporting).

FAQs

Q1: I received Form 1099-A but haven't received Form 1099-C. Will I get both?

Not necessarily. If your lender cancelled debt of $600 or more in the same year as the foreclosure or abandonment, they may file only Form 1099-C, which includes property information in boxes 4, 5, and 7. This meets their Form 1099-A filing requirement. However, if debt cancellation occurs in a different year or if no debt was cancelled (perhaps because the property value exceeded the loan balance), you'll receive only Form 1099-A.

Q2: The property was my primary residence. Do I have to pay tax on this?

Not necessarily. If the property was your main home, several provisions may help you. First, you can exclude up to $250,000 of gain ($500,000 if married filing jointly) under the home sale exclusion if you meet ownership and use tests. Second, if debt was cancelled, the Qualified Principal Residence Indebtedness exclusion (available for discharges before January 1, 2026) may exclude cancelled debt up to $750,000 ($375,000 if married filing separately). You must file Form 982 to claim this exclusion. See Publication 4681 and Publication 523 for details.

Q3: Box 5 is checked, but Box 4 shows a value much lower than my loan balance. What does this mean?

This situation is common when properties are "underwater." Box 5 being checked means you had recourse debt—you were personally liable. Box 4's fair market value becomes your "amount realized." If it's less than your loan balance (Box 2), the difference may be treated as cancelled debt, which could be taxable income. However, if you also receive Form 1099-C, the lender is reporting this cancelled debt. Check whether you qualify for any exclusions using Form 982.

Q4: Can I claim the loss on my foreclosed rental property?

Generally, yes. Business and investment properties (like rental properties) allow deductible losses, unlike personal-use properties. You'll report the loss on Form 4797. Your loss equals your amount realized (determined by whether the debt was recourse or nonrecourse) minus your adjusted basis in the property. Be aware that if you claimed depreciation deductions during the rental period, these must be "recaptured," which may result in some taxable income even if you have an overall loss.

Q5: I didn't actually abandon my property—I just couldn't make payments. Why did I receive Form 1099-A?

The IRS definition of "abandonment" is based on "objective facts and circumstances" indicating you intended to permanently discard the property. If you stopped making payments, stopped maintaining the property, and the lender couldn't contact you at the property address, the lender may reasonably conclude abandonment occurred. If you believe this is incorrect, contact the lender to discuss the situation and potentially correct the form.

Q6: What's the difference between recourse and nonrecourse debt, and why does it matter?

With recourse debt (Box 5 checked), the lender can pursue you personally for any deficiency if the property value doesn't cover the debt. Your "amount realized" for tax purposes is the property's fair market value (Box 4). With nonrecourse debt (Box 5 unchecked), the lender's only remedy is taking the property; they can't pursue you personally. Your amount realized is the full debt amount (Box 2), regardless of the property's value. This difference significantly affects your gain or loss calculation.

Q7: I received Form 1099-A three years after my foreclosure. Is this correct?

No. Form 1099-A must be furnished by January 31 of the year following the foreclosure or abandonment. A three-year delay is highly unusual and suggests either a processing error or the lender only recently discovered information requiring correction. Contact the lender to verify the correct transaction year. You may need to file an amended return for the proper tax year if you already filed.

Additional Resources

• Form 1099-A and Instructions (IRS.gov)
• Topic 432 - Form 1099-A (IRS.gov)
• Publication 4681 - Canceled Debts, Foreclosures, Repossessions, and Abandonments (IRS.gov)
• Instructions for Forms 1099-A and 1099-C (IRS.gov)

This summary is based on IRS guidance current as of the 2023 tax year. Tax laws change, and individual situations vary. For specific tax advice regarding your situation, consult a qualified tax professional or use the IRS Interactive Tax Assistant at IRS.gov.

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