Form 1099-C Checklist: 2013 Tax Year
Purpose
Form 1099-C reports the cancellation or forgiveness of debt of $600 or more by creditors to the IRS and debtors. For the 2013 tax year, creditors must file this form when an identifiable event triggers deemed discharge or when debt is actually canceled. Debtors receiving Form 1099-C must report the canceled amount as gross income on Form 1040, Line 21, unless they qualify for statutory exceptions or exclusions under bankruptcy, insolvency, or other provisions outlined in IRS Publication 4681.
Debtor Filing Steps
Step 1: Obtain Your Form 1099-C
Request Copy B of Form 1099-C from your creditor by January 31, 2014. Verify that Box 1 shows the correct identifiable event date, which should reflect the earliest triggering event or actual discharge date according to 2013 IRS regulations. Keep this form with your tax records, but do not attach it to your tax return.
Step 2: Verify the Discharged Amount
Confirm that Box 2 accurately reflects the total debt discharged during calendar year 2013, including principal and any applicable fees or penalties. If you dispute the amount shown, contact your creditor immediately before filing your 2013 return to resolve discrepancies.
Step 3: Review Interest Included
Check Box 3 to determine whether interest is included in the discharged amount shown in Box 2. Consult Publication 4681 (2013 edition) to assess whether this interest must be included in your 2013 taxable income or qualifies for exclusion under specific exceptions.
Step 4: Identify the Event Code
Review Box 6 to identify the identifiable event code (A through I) that triggered the debt cancellation. Each code corresponds to specific circumstances: bankruptcy (A), judicial debt relief (B), statute of limitations expiration (C), foreclosure election (D), probate relief (E), creditor-debtor agreement (F), policy to discontinue collection (G), nonpayment testing period expiration (H), or other actual discharge (I). Understanding your event code helps determine which exceptions or exclusions may apply.
Step 5: Determine Personal Liability
If Box 5 is checked, you are personally liable for the debt. Report the full discharged amount on Form 1040, Line 21, as other income unless you qualify for an exception or exclusion under Publication 4681 that eliminates or reduces taxable inclusion.
Step 6: Check Property Fair Market Value
If Box 7 shows a fair market value and the debt relates to foreclosure or abandonment that occurred in 2013, you may need Form 1099-A for additional reporting. If the property was your main home, consult Publication 523 (2013 edition) to calculate your basis and determine any potential gain or loss from the disposition.
Step 7: Apply Exceptions and Exclusions
Report canceled debt as income only if you do not qualify under bankruptcy (title 11 filing), insolvency (liabilities exceed assets as of the identifiable event date), qualified principal residence indebtedness, or other statutory exclusions detailed in Publication 4681. Calculate insolvency by comparing your total liabilities to the fair market value of all assets immediately before the cancellation.
Step 8: Complete Form 982 If Applicable
If you qualify for any exclusion, complete Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your Form 1040. This form documents your eligibility for exclusion and the required reductions to tax attributes, such as basis, losses, or credits.
Step 9: Report Taxable Canceled Debt
Include any taxable canceled debt on Form 1040, Line 21, labeled as “Canceled Debt” or “Form 1099-C Income.” Report the amount remaining after applying any applicable exceptions or exclusions. Keep your Form 1099-C with your tax records for future reference, but do not attach it to your return.
Step 10: Understand Multiple Debtor Situations
If you and another person were jointly and severally liable for the canceled debt, you may each receive a Form 1099-C showing the full amount. However, report only your allocable share based on debt proceeds received, interest deductions claimed, and property basis allocated to you. Review all facts and circumstances to determine your reportable portion.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Creditor Filing Steps
Step 1: Prepare Required Forms
Complete Form 1099-C Copy A for IRS submission and Copy B for debtor distribution using the 2013 Instructions for Forms 1099-A and 1099-C and the 2013 General Instructions for Certain Information Returns. Ensure all boxes are accurately completed with the correct taxpayer identification numbers.
Step 2: Enter the Event Date
Report in Box 1 the date of the earliest identifiable event occurring in 2013. Alternatively, you may report the date of actual discharge if it happened before any identifiable event. This flexibility allows creditors to choose the reporting date that best reflects the transaction circumstances.
Step 3: Report Total Debt Discharged
Enter in Box 2 the total amount of debt actually or deemed discharged in calendar year 2013. Include all principal, fees, and costs unless statutory exceptions apply. Do not combine multiple cancellations to meet the $600 threshold unless they are part of a plan to evade reporting requirements.
Step 4: Separate Interest if Included
If you include interest in the Box 2 amount, report that interest separately in Box 3. If no interest is included in the canceled debt amount, leave Box 3 blank. This separation helps debtors determine the deductibility of the interest portion.
Step 5: Select the Correct Event Code
Choose the appropriate identifiable event code for Box 6 that accurately describes the cancellation reason: bankruptcy (A), judicial relief (B), statute or deficiency period expiration (C), foreclosure election (D), probate relief (E), creditor-debtor agreement (F), creditor policy decision (G), nonpayment testing period expiration (H), or other actual discharge before identifiable event (I).
Step 6: Indicate Personal Liability Status
Check Box 5 if the debtor was personally liable for repayment at the time the debt was created or, if modified, at the time of last modification. This information helps debtors determine whether recourse or nonrecourse debt rules apply.
Step 7: Report Property Fair Market Value
If property foreclosure or abandonment occurred in 2013 in connection with the debt cancellation, enter the fair market value in Box 7. Generally, use the gross foreclosure bid price for foreclosure sales or the appraised value for voluntary conveyances. Alternatively, file a separate Form 1099-A if you acquired the secured property.
Step 8: Coordinate with Form 1099-A
If you cancel debt of $600 or more in connection with foreclosure or abandonment in the same calendar year, you may file only Form 1099-C and complete Boxes 4, 5, and 7 to satisfy both reporting requirements. However, if you file both forms, do not duplicate information in Boxes 4, 5, or 7 on Form 1099-C.
Step 9: Furnish Copy B to Debtor
Provide Copy B to the debtor by January 31, 2014. This deadline ensures debtors have sufficient time to prepare their tax returns. Furnish the statement to the debtor’s last known address or use electronic delivery if the debtor consents.
Step 10: File Copy A with the IRS
Submit Copy A to the IRS by February 28, 2014, if filing paper returns, or by March 31, 2014, if filing electronically using IRS-compliant software per Publication 1220 specifications. Electronic filing is encouraged for faster processing and reduced errors.
Year-Specific Updates for 2013
The $600 minimum discharge threshold applies uniformly to all 2013 canceled debt transactions reported on Form 1099-C. Federal agency debt discharges must be reported regardless of amount. Publication 4681 (2013 edition) serves as the definitive reference for determining exclusions and exceptions. Calculate insolvency by comparing total liabilities to the fair market value of total assets as of the identifiable event date using 2013 valuations.
When foreclosure or abandonment of real property triggers debt discharge in 2013, coordinate reporting with Form 1099-A if filed separately, or complete Box 7 on Form 1099-C with the property’s fair market value. Publication 523 (2013 edition) governs the main home sale exclusion rules for determining whether gain from foreclosure is taxable.
The identifiable event codes A through I remain consistent with prior years for 2013 reporting. However, application to specific fact patterns must reference 2013 regulations and Treasury guidance in effect as of the identifiable event date. Creditors should review the exact instructions for each event code to ensure accurate classification.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Multiple creditors canceling portions of the same debt must each file Form 1099-C if their canceled portion exceeds $600. A designee may file on behalf of all creditors if authorized. For jointly and severally liable debtors, report the full debt amount on each debtor’s form unless clear evidence shows the debt is not joint and several.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
