Instructions for Forms 1099-A and 1099-C Checklist –
2023 Tax Year
Forms 1099-A and 1099-C are IRS forms used by a financial institution or other creditor to report specific debt-related events for the 2023 calendar year through required information returns. These forms focus on property-related debt activity, debt cancellation, and abandonment or transfer of ownership, which may result in taxable income reported on your tax returns.
Form 1099-A applies when a lender acquires an interest in property that secured a debt or
becomes aware of abandoned property associated with that debt during the calendar year.
Form 1099-C applies when a creditor reports canceled debt due to an identifiable event defined by federal tax law.
Key Form-Specific Updates for 2023
For the 2023 tax year, Section 108 qualified principal residence indebtedness follows the statute and generally applies to loans secured by your principal residence, subject to dollar limits. The
Tax Cuts and Jobs Act continues to shape how Section 108 exclusions interact with Mortgage
Forgiveness Debt Relief Act extensions and later legislative updates.
Backup withholding under Section 3406 generally requires withholding at 24 percent in limited circumstances; however, the IRS continues to list canceled debt, foreclosure events, and abandoned property as payments excluded from backup withholding. Credit unions and other creditors still must complete accurate reporting even when backup withholding does not apply.
Step-by-Step Filing Requirements
Step 1: Gather Required Documentation
Collect documentation for any debt forgiven, debt settlement agreements, short sale records, or debt cancellation activity that occurred during the 2023 calendar year. You should retain original loan agreements, payoff statements, correspondence confirming the discharge, and records showing interest included in the canceled amount, when applicable.
Step 2: Evaluate Section 108 Exclusions
Determine whether the canceled debt may qualify for a Section 108 exclusion, including qualified principal residence indebtedness or Title 11 bankruptcy exclusions. You, not the creditor, evaluate whether exclusions apply when preparing Form 982 and Schedule 982 for your Form 1040.
Step 3: Complete Box 2 for Discharged Amounts
Enter only the amount of canceled debt in Box 2 of Form 1099-C, reflecting the portion actually discharged. When a partial discharge or debt settlement occurs, the creditor reports only the canceled portion, not the full balance of outstanding principal.
Step 4: Report Property and Principal Information
For Form 1099-A, complete Box 2 showing the balance of outstanding principal when the lender acquired the property or learned of abandonment. Report the fair market value of the property in
Box 4 to reflect the property aspect of the transaction.
Step 5: Describe the Debt
Complete Box 4 of Form 1099-C with a clear description of the debt that was canceled, including the type of loan or obligation. An accurate description of the debt supports proper tax treatment and helps you reconcile reporting on your tax returns.
Step 6: Identify the Date of the Identifiable Event
Enter the correct date of the identifiable event in Box 1 of Form 1099-C based on the earliest qualifying event under IRS rules. Creditors may use the date of an actual discharge if it occurred before an identifiable event listed in the regulations.
Step 7: Select the Correct Box 6 Code
Choose the appropriate Box 6 code that explains why the creditor filed Form 1099-C, ensuring accuracy for information returns. Codes include bankruptcy under Chapter 7 or Chapter 13, foreclosure election, decision to discontinue collection, or debt forgiven by agreement.
Step 8: Prepare Copies and Verify Information
Prepare Form 1099-C or Form 1099-A in duplicate, providing one copy to you and one copy to the IRS. Verify the debtor TIN, creditor TIN, address accuracy, and Box 2 amounts through TIN matching procedures to reduce IRS notice risk.
Step 9: File with Form 1096 if Required
File paper Forms 1099-A or 1099-C with Form 1096 when electronic filing is not used, ensuring correct form series selection. Electronic filing through an IRS-approved secure portal remains available and may reduce processing delays.
Step 10: Meet IRS Filing Deadlines
Transmit Forms 1099-C to the IRS by February 28 for paper filing or March 31 for electronic filing, subject to weekend and holiday rules. Timely filing helps avoid penalties related to late or incomplete information returns.
Step 11: Furnish Debtor Statements
Furnish a copy of Form 1099-C to you by the applicable recipient deadline and include guidance on reporting canceled debt on Form 1040. The statement should reference Section 108 exclusions and Form 982 without offering tax advice.
- Full IRS transcript retrieval (Wage & Income + Account)
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Step 12: Confirm TIN Accuracy and Withholding Rules
Verify TIN accuracy before filing and follow IRS rules when a TIN is missing or incorrect.
Canceled debt and abandoned property remain excluded from backup withholding despite the general Section 3406 rules.
Notable 2023 Instruction Changes
The IRS clarified that you determine whether a Section 108 exclusion applies based on your facts and circumstances, even when Form 1099-C reporting occurs. Creditors must still issue
Form 1099-C when required, regardless of whether the canceled debt ultimately affects your tax liability.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
