Instructions for Forms 1099-A and 1099-C Checklist
2011 Tax Year
Forms 1099-A and 1099-C document abandoned property acquisitions and cancelled debts for the 2011 tax year. Lenders and creditors must follow specific IRS reporting requirements when filing these forms to comply with federal tax regulations.
Understanding Form 1099-A Filing Requirements
File Form 1099-A when you acquire an interest in property that secures a debt or when you have reason to know the borrower abandoned the property. The 2011 instructions specify that abandonment occurs when objective facts and circumstances indicate the borrower permanently discarded the property from use.
You must report the property description, fair market value at the time of abandonment or acquisition, and the outstanding debt balance. Lenders need not be in the business of lending money to fall under this reporting requirement.
Completing Form 1099-A Box-by-Box Reporting
Requirements (2011)
Step 1: Complete Box 1 (Date of Lender’s Acquisition or Knowledge of Abandonment)
Enter the date you acquired the secured property or the date you knew or had reason to know of abandonment. For acquisitions, use the earlier of the date title transferred to you or the date possession and the burdens and benefits of ownership transferred to you.
Step 2: Complete Box 2 (Balance of Principal Outstanding)
Report the balance of principal outstanding immediately before the abandonment or acquisition event. This amount must reflect the debt balance on the date of the triggering event in 2011.
Include only the unpaid principal on the original debt without accrued interest or foreclosure costs.
Step 3: Complete Box 4 (Fair Market Value of Property)
Enter the fair market value of the property on the date of abandonment or acquisition. For foreclosure or execution sales, report the gross foreclosure bid price, which the IRS generally considers to be fair market value. For abandonments where you placed an X in box 5, enter the appraised value of the property.
Step 4: Complete Box 5 (Personal Liability Determination)
Mark box 5 by entering an X in the checkbox if the borrower was personally liable for debt repayment. This determination applies when the debt was created or, if modified, at the time of the last modification. Personal liability status affects whether the borrower recognizes cancellation of debt income under recourse debt rules.
- A financial institution described in section 581 or 591(a), such as a domestic bank, trust
- A credit union operating under federal or state regulations must file Form 1099-C.
- The Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the
- A corporation that is a subsidiary of any financial institution or credit union subject to
- A federal government agency, including a department, agency, court, or instrumentality
- Any organization whose significant trade or business is lending money, such as a
- Box 1 requires the specific date the debt was canceled in month, day, and year format.
- Box 2 requires the amount of debt canceled, including stated principal for lending
- Box 3 requires the interest amount if you included it in the canceled debt reported in box
- Box 4 requires a description of the debt origin, such as student loan, mortgage, or credit
- Box 5 requires an X if the debtor was personally liable for debt repayment when the debt
- Box 6 requires an X if you are reporting debt discharged in bankruptcy. Mark this box
- Box 7 requires the fair market value of the property if you are filing a combined Form
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Step 5: Complete Box 6 (Description of Property)
Provide a general description of the property acquired or abandoned. For real property, enter the address or, if the address does not sufficiently identify the property, enter the section, lot, and block. For personal property, enter the type, make, and model, such as describing a vehicle as “Car – 2008 Honda Accord.”
Filing Form 1099-C for Debt Cancellation
File Form 1099-C when you cancel debt of $600 or more owed by a debtor during 2011. The form applies when an identifiable event occurs, regardless of whether actual debt cancellation happens on or before the identifiable event date.
Who Must File Form 1099-C
The following entities are required to file Form 1099-C: company, or savings and loan association, must file Form 1099-C for debt cancellation.
National Credit Union Administration, and any federal executive agency, including
government corporations, must file Form 1099-C. supervision and examination by a federal or state regulatory agency must file Form
1099-C. in the judicial or legislative branch, must file Form 1099-C. finance company or credit card company, must file Form 1099-C.
Identifiable Events Requiring Form 1099-C
An identifiable event triggers the filing requirement. These events include discharge in bankruptcy under Title 11 of the U.S. Code, cancellation making debt unenforceable in receivership or foreclosure proceedings, statute of limitations expiration for debt collection, and cancellation when a creditor elects foreclosure remedies, barring further collection.
Additional identifiable events include cancellation of probate proceedings, discharge under a creditor-debtor agreement, discharge based on the creditor’s policy to discontinue collection, and expiration of the 36-month nonpayment testing period for applicable entities.
Borrower Tax Reporting Considerations
Borrowers who receive Form 1099-C must generally report the canceled debt amount as taxable income on their tax return. Refer to Publication 4681 for detailed guidance on reporting canceled debt, including available exclusions for insolvency, bankruptcy, and qualified principal residence indebtedness. Publication 4681 provides worksheets and examples to help borrowers determine whether they can exclude debt cancellation from gross income under applicable tax rules.
Completing Form 1099-C Box Requirements
Enter the date when the identifiable event occurred or when you actually discharged the debt if you choose early filing. transactions. Exclude amounts you received through settlement agreements or foreclosure sales from the canceled debt amount.
2. Reporting interest separately is optional, but if you include it in box 2, you must show it in box 3. card expenditure. Provide as much specific detail as possible to identify the nature of the canceled debt. was created or last modified. This determination matches the recourse versus nonrecourse debt distinction used on Form 1099-A. only when the discharge occurred through formal bankruptcy proceedings under Title 11 of the U.S. Code.
1099-C and Form 1099-A. Enter the gross foreclosure bid price for foreclosure or execution sales or the appraised value for abandonments or voluntary conveyances.
Coordination Between Forms 1099-A and 1099-C
When you cancel debt of $600 or more in connection with foreclosure or abandonment during the same calendar year, filing both forms for the same debtor becomes optional. You may file
Form 1099-C only and meet your Form 1099-A filing requirement by completing boxes 4, 5, and
7 on Form 1099-C. Alternatively, if you file both forms, do not complete boxes 4, 5, or 7 on Form
1099-C to avoid duplicate reporting.
Filing Deadlines and Form Specifications
Furnish Copy B to the borrower or debtor by January 31, 2012. File Copy A with Form 1096 to the IRS by February 28, 2012, for paper filing or by April 2, 2012, for electronic filing.
Copy A filed with the IRS must be on IRS-approved red-ink forms meeting exact specifications for form dimensions, barcode placement, and scannable format. You cannot file Copy A forms that you print from the IRS website because paper forms undergo scanning during processing.
Copies B and C furnished to borrowers or debtors can be printed on plain paper without red-ink requirements.
Exceptions and Special Reporting Rules
You need not report certain bankruptcies unless you know from your books and records that the debt was incurred for business or investment purposes. Reporting interest as a separate item remains optional for all filers submitting Form 1099-C.
For lending transactions, you need not report nonprincipal amounts such as penalties, fines, fees, and administrative costs.
Multiple creditors must each issue Form 1099-C if their portion of canceled debt equals $600 or more. Debt owned by partnerships is treated as owned by partners and follows multiple creditor rules for reporting purposes.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
