Instructions for Forms 1099-A and 1099-C Checklist –
2016 Tax Year
Filers must report foreclosures, abandonments, and cancellations of debt for the 2016 calendar year using Forms 1099-A and 1099-C. The Internal Revenue Service requires creditors, financial institutions, and government entities to follow specific reporting procedures when these transactions occur.
Understanding the thresholds, timing requirements, and coordination between forms ensures accurate tax compliance. Proper reporting helps borrowers correctly report cancellation of debt income on their tax returns while allowing creditors to meet their obligations under Section
6050P of the Internal Revenue Code.
Filing Steps for Forms 1099-A and 1099-C
Step 1: Verify Filer Status and Reporting Obligation
Confirm you are a creditor, financial institution, or government entity required to file Forms
1099-A or 1099-C for 2016. Certain secured creditors issuing discharge documents must file
Form 1099-A for any property foreclosure or abandonment occurring during the calendar year.
Organizations whose significant trade or business involves lending money must file when they cancel debt of $600 or more. Review the 2016 threshold for reportable transactions to determine your filing requirement.
Step 2: Identify Applicable Transaction Type for 2016
Determine whether the transaction qualifies as a foreclosure, debt cancellation, or both under the reporting requirements. Abandonment of property triggers Form 1099-A reporting when a secured creditor acquires title or the right to acquire title.
Debt cancellation reporting on Form 1099-C applies only to canceled indebtedness of $600 or more in the 2016 tax year. When a creditor cancels debt of $600 or more in connection with foreclosure or abandonment during the same calendar year, filing both forms becomes optional.
Creditors may file Form 1099-C only and satisfy the Form 1099-A requirement by completing boxes 4, 5, and 7 on Form 1099-C. This coordination reduces duplicate reporting while ensuring the IRS receives all necessary information about the transaction.
Step 3: Gather Acquisition Details for Form 1099-A
Collect the date of acquisition, the fair market value of the property as of the acquisition date, and the outstanding principal balance immediately before the foreclosure or abandonment. The acquisition date represents when title transfers to the creditor or when possession and ownership burdens shift to the lender.
If state law provides an objection period, use the date that period expires as your reporting date.
When the property sells at foreclosure, apply the later date between the sale and expiration of any redemption rights.
Step 4: Document Fair Market Value Using 2016 Standards
Record the fair market value of the property as of the date the creditor acquired it. Values must reflect the actual condition and use as of the acquisition date, not prior tax year estimates or future projections.
For foreclosure sales, the gross foreclosure bid price generally establishes the fair market value without additional adjustment. Abandonment situations or voluntary conveyances require an appraised value obtained through an independent professional assessment.
Obtain independent appraisals or documented comparable sales data contemporaneous with the 2016 acquisition to support reported values. Determine whether the property includes personal property, real property, or both types of assets in the secured transaction. No reporting occurs for tangible personal property held solely for personal use unless the property serves a trade, business, or investment purpose.
Step 5: Calculate Canceled Indebtedness Amount for Form 1099-C
Determine the total amount of debt canceled or discharged in 2016 that meets or exceeds the reporting threshold. For 2016, the $600 threshold applies to all cases, regardless of the borrower’s status or the type of debt.
The canceled debt amount represents the total debt minus any amounts received through settlement agreements, foreclosure sales, or other debt satisfaction methods. Include accrued but unpaid interest and fees forgiven as part of the cancellation amount if they were part of the original obligation.
Box 2 on Form 1099-C reports the amount of debt discharged, which cannot exceed the total debt minus payments received. If you choose to include interest in Box 2, you must also report it separately in Box 3 of the form.
Step 6: Determine Principal Residence Indebtedness Exclusion
Applicability
Verify whether the canceled debt qualifies for exclusion under the Mortgage Forgiveness Debt
Relief Act provisions extended through 2016 by the Protecting Americans from Tax Hikes Act of
2015. Only debts secured by a qualified principal residence are potentially excludable from the borrower’s gross income under this provision.
Creditors are not required to indicate qualified principal residence indebtedness status on Form
1099-C, as borrowers determine their own eligibility. The exclusion applies to mortgage debt forgiven through foreclosure, short sale, loan modification, or similar transaction involving the principal residence.
Borrowers must use Form 982 to report the exclusion on their tax return and reduce their tax attributes accordingly. This exclusion does not eliminate reporting requirements but allows qualifying taxpayers to exclude forgiven debt from taxable income calculations.
Step 7: Complete Borrower Identification Information Accurately
Enter the borrower’s name, mailing address, and tax identification number exactly as they appear on the borrower’s 2016 tax records or identification documents. The IRS emphasizes accuracy for matching purposes with borrower-filed returns to prevent processing delays or incorrect notices. Verify spelling and address completeness before filing to ensure proper delivery of taxpayer copies and IRS processing.
- Debt is discharged through a Title 11 bankruptcy proceeding under the U.S. Code.
- Debt becomes canceled if a receivership, foreclosure, or similar court proceeding
- A cancellation is treated as occurring when the statute of limitations expires or a
- Debt is considered canceled when a creditor elects foreclosure remedies that, under
- Debt is regarded as canceled if probate or similar legal proceedings make the obligation
- An agreement between the creditor and debtor to cancel debt for less than full
- Debt cancellation occurs when a creditor formally decides, or follows an established
- Debt is considered canceled for applicable financial entities upon expiration of the
- A debt is considered discharged if an actual discharge takes place before any other
Step 8: Document Cancellation Event Date in 2016
Record the specific date in 2016 when an identifiable event occurred that triggered the debt cancellation. For foreclosures, use the acquisition date of the property as the identifiable event date on the form.
The reported date must match the actual event, not the filing or reporting date, to ensure proper tax year assignment. Ensure the date falls within the 2016 calendar year for inclusion on the
2016 return filed with the IRS.
Identifiable events include the following circumstances: renders the obligation legally unenforceable. deficiency judgment period ends, and the expiration is upheld by a final court decision. applicable law, eliminate the right to collect the remaining balance. unenforceable against the debtor or the debtor’s estate. consideration results in a discharge of the obligation. policy, to discontinue collection activity.
36-month nonpayment testing period. identifiable event occurs.
- Box 1 reports the date of the identifiable event or the date of the lender’s acquisition or
- Box 2 reports the balance of principal outstanding for Form 1099-A or the amount of
- Box 3 remains reserved on Form 1099-A and reports interest if included in Box 2 on
- Box 4 reports the fair market value of property on Form 1099-A or provides a debt
- Box 5 indicates whether the borrower was personally liable for repayment of the debt at
- Box 6 contains the property description on Form 1099-A or the identifiable event code on
- Box 7 reports the fair market value of property when filing a combined Form 1099-C that
Step 9: Complete Box Entries Using 2016 Instruction Definitions
Fill Boxes 1 through 7 according to the 2016 form layout and instruction specifications provided by the Treasury Department. knowledge of abandonment. debt discharged for Form 1099-C.
Form 1099-C. description on Form 1099-C. origination or last modification.
Form 1099-C. satisfies both reporting requirements.
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 10: File Corrected Forms for Prior-Year 2016 Transactions
File a corrected Form 1099-A or 1099-C by checking the “CORRECTED” box at the top of the form and submitting it with accurate information. This follows standard IRS procedures for correcting information returns previously filed with incomplete or incorrect data.
Submit the corrected form to the appropriate IRS service center using the same filing method as the original return. Maintain copies of all filed forms or retain the ability to reconstruct the data for at least four years from the due date.
Record retention periods extend to four years for Form 1099-C and apply when backup withholding was imposed on any transaction. Keep documentation supporting fair market value determinations, acquisition dates, and canceled debt calculations to substantiate reported amounts if the IRS requests verification.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
