Instructions for Forms 1099-A and 1099-C Checklist —
2018 Tax Year
Forms 1099-A and 1099-C report acquisition or abandonment of secured property and cancellation of debt to the IRS. This information returns documents foreclosure, repossession, abandonment of secured property, or forgiven debt events that may affect how amounts appear on your tax returns for the applicable tax year.
When to File Forms 1099-A and 1099-C
You must file Form 1099-A when a lender acquires secured property through foreclosure or repossession, or when the lender has reason to know the property has been abandoned. When a reportable identifiable event occurs during the tax year, and an applicable creditor cancels or forgives debt of $600 or more, you are required to file Form 1099-C. These filings inform the IRS and the borrower of transactions that may result in cancellation of debt income or other tax consequences, depending on exclusions, debt type, and property use.
Step-by-Step Reporting Guide for Forms 1099-A and
1099-C
Step 1: Confirm Form 1099-A Reporting Requirements for Secured Property
Acquisitions
Determine whether your organization acquired secured property through foreclosure, repossession, or abandonment during 2018. The lender or creditor files Form 1099-A to report the outstanding balance of principal and the fair market value of the property at the time of acquisition. You must enter the appraised value of the secured property in Box 4 as of the acquisition date, even if a foreclosure sale has not occurred.
Step 2: Verify Nonrecourse Debt Treatment
Identify whether the obligation qualifies as nonrecourse debt, meaning the creditor has no personal claim against the borrower beyond the collateral. Nonrecourse classification affects whether cancellation of debt income arises from foreclosure or abandonment of secured property. If a borrower abandons secured property tied to nonrecourse debt, the transaction
generally produces no cancellation of debt income. However, Form 1099-A or Form 1099-C filing requirements still apply based on identifiable events.
Step 3: Calculate Cancellation of Debt Amount for Form 1099-C
Determine the amount of forgiven debt following the Form 1099-C instructions. The canceled amount generally equals the balance of principal outstanding minus any amounts recovered through a foreclosure sale, short sale, settlement, or similar satisfaction. Report the forgiven debt in Box 2 of Form 1099-C. If cancellation of debt of $600 or more occurs in the same year as a secured property acquisition, you may file only Form 1099-C and complete Boxes 4, 5, and
7 to satisfy Form 1099-A requirements.
Step 4: Apply the $600 Threshold for Form 1099-C Filing
File Form 1099-C only when canceled debt equals or exceeds $600 during the 2018 tax year, and a reportable identifiable event has occurred. You must not aggregate multiple separate debt cancellations to meet the threshold unless the cancellations are part of a plan to evade reporting rules. This filing requirements standard applies to financial institutions, mortgage company lenders, government agencies, and other financial entities subject to section 6050P.
Step 5: Identify Insolvency Exclusion Eligibility for the Debtor
Evaluate whether the debtor was insolvent immediately before the cancellation of debt occurred.
Insolvency exists when total liabilities exceed the fair market value of assets, including real property and personal assets. If the debtor qualifies, the forgiven debt may be excluded from income, and the debtor generally reports the exclusion by attaching Form 982 to Form 1040 when filing tax returns.
Step 6: Report Debt Discharge Due to Bankruptcy Proceedings
When a discharge in bankruptcy under Chapter 7 or Chapter 13 constitutes a reportable identifiable event, enter code “A” in Box 6 of Form 1099-C. Certain bankruptcy discharges are excluded from reporting under Form 1099-C instructions, so you must review the specific facts of the case. Bankruptcy reporting rules apply regardless of whether the debt involved secured property, credit card debt, car loan balances, or personal loan obligations.
Step 7: Determine Fair Market Value Reporting for Form 1099-A
Obtain a current appraisal or market analysis to establish the fair market value of secured property acquired through foreclosure or repossession. You must report this appraised value in
Box 4 of Form 1099-A as of the acquisition date. This valuation directly affects how borrowers calculate capital gain or loss on Schedule D or Form 4797, depending on property classification and business use.
Step 8: Verify the Debtor's Tax Identification Number on Both Forms
You must obtain and verify the debtor’s correct Tax Identification Number using Form W-9 when required. The TIN may be a Social Security number or an employer identification number, depending on the debtor’s status. Incorrect or missing TINs can trigger IRS penalties, backup withholding requirements, and compliance issues during tax season for filers submitting 1099-A
Forms or Forms 1099-C.
Step 9: Report Accrued Interest and Unpaid Fees Separately
You are not required to report interest on Form 1099-C. If you choose to include accrued interest or unpaid fees in the forgiven debt reported in Box 2, you must separately disclose that interest amount in Box 3. Accurate separation supports proper reporting for borrowers determining taxable income, exclusions, or basis adjustments related to principal residence indebtedness or other secured obligations.
Step 10: Complete Form 1099-A for Property Held as Security
File Form 1099-A when you acquire an interest in secured property in full or partial satisfaction of a debt or when abandonment of secured property becomes known. You must include a clear property description, acquisition date, and fair market value. These details help borrowers determine adjusted basis, calculate gain or loss, and assess reporting obligations under
Publication 544.
Step 11: Determine if Seller-Financed Debt Requires Form 1099-C Reporting
If you financed the sale of property and later forgave the debt in 2018, determine whether you qualify as an applicable entity required to file Form 1099-C. Certain reductions of purchase-money debt may qualify as purchase price adjustments rather than cancellation of debt income. These distinctions commonly apply to principal residence transactions and seller-financed real property agreements.
- Foreclosure involving nonrecourse debt generally does not create cancellation of debt
- Insolvency exclusions require proof of insolvency immediately before debt cancellation
- Bankruptcy-related reporting on Form 1099-C requires proper use of identifiable event
- Coordination rules allow filing Form 1099-C alone when cancellation and secured
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 12: File Forms by the 2018 Due Dates
For the 2018 tax year, file Copy A of Forms 1099-A and Forms 1099-C with the IRS by February
28, 2019, if filing on paper, or by April 1, 2019, if filing electronically. Electronic filing through the
IRS FIRE System requires a timely submission, while paper filers must include Form 1096 and use the correct mailing addresses.
Key 2018 Tax Year Changes and Updates income, though property disposition rules still apply. and reporting through Form 982. codes. property acquisition occur in the same calendar year.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
