Forms 1099-A and 1099-C Reporting Checklist for 2021

You must determine whether a Form 1099-C reporting event occurred during the 2021 tax year.

For IRS Form 1099-C purposes, a discharge of indebtedness occurs when an identifiable event takes place, even if the debt cancellation arises through a settlement agreement or mortgage modification.

Cancellation of debt income generally arises when a creditor forgives loans or cancels debt for less than the amount owed. Common triggering events include loan forgiveness, debt restructuring, property sales for less than the outstanding balance, or formal debt cancellation by an applicable entity.

It is imperative that you record the precise date of the identifiable event, the total canceled amount, and whether the debt consisted of principal or interest and was included in the canceled amount. Accurate documentation supports proper tax treatment on the federal return.

1. Step 2: Identify Form 1099-C Reporting Threshold

   You must confirm whether the canceled debt meets the minimum threshold for reporting the discharge of indebtedness. Under IRC §6050P and Treasury Regulation 26 C.F.R. § 1.6050P-1, a creditor files Form 1099-C when the canceled debt equals or exceeds $600 during the tax year.

   The 2021 instructions did not change this threshold. If the canceled amount falls below $600, reporting generally does not apply.

   You should still retain records supporting the determination, particularly when a disputed debt or a bona fide disputed debt resolution exists. Accurate threshold analysis ensures compliance with tax reporting obligations and avoids unnecessary information returns.

2. Step 3: Assess Insolvency Exclusion Eligibility Under Section 108

   You must evaluate whether you were insolvent immediately before the discharge occurred.

   Insolvency exists when total liabilities exceed the fair market value of total assets, calculated immediately before the identifiable event. This determination applies on a dollar-for-dollar basis, limited to the extent of insolvency.

   To claim this exclusion, you must attach Form 982 to your income tax return, such as Form

   1040, Form 1040-SR, or Form 1040-NR. Properly claiming insolvency may reduce the cancellation of debt income included on Schedule 1 (Form 1040) and affect future tax attributes.

3. Step 4: Evaluate Section 108(a) Business Debt Exclusion

   You should determine whether the canceled debt qualifies for an exclusion under Section 108(a)

   related to business debt. Qualified real property business indebtedness involves depreciable real property used in a trade or business and requires basis reduction rather than income inclusion. This exclusion does not apply to personal or consumer debt.

   To confirm eligibility, you should review loan documents, settlement agreements, and the description of the debt. Accurate classification supports proper reporting on Schedule C,

   Schedule E, or Schedule F, depending on how the business activity reports income on the federal return.

4. Step 5: Apply 2021 ARPA Temporary Exclusion for Employer Debt

   Forgiveness

   You must review whether any discharged student loan qualifies for the temporary exclusion enacted under the American Rescue Plan Act of 2021. Section 108(f)(5) excludes qualifying student loan debt from gross income when discharged after December 31, 2020, and before

   January 1, 2026. This exclusion applies regardless of insolvency.

   Eligible discharges include certain employer-provided student loan forgiveness and federal government loan discharges. To ensure accurate reporting on your tax return and proper tax treatment, you must verify the loan type, discharge date, and statutory coverage.

5. Step 6: Verify Pass-Through Entity Forgiveness Under ARPA Section 108(a)(3)

   You must confirm whether insolvency applies to debt canceled through a pass-through entity arrangement. Section 108(a)(3) limits the exclusion to the amount by which you were insolvent immediately before the cancellation. This calculation uses the same fair market value methodology applied in individual insolvency determinations.

   Documentation of asset valuations, liability balances, and supporting records is recommended.

   Clear documentation supports Form 982 disclosures and helps substantiate the exclusion if questioned during review of reporting cancellation of debt.

6. Step 7: Complete Form 1099-C Reporting Information

   You must gather all required data elements to complete Form 1099-C accurately. Required information includes filer and debtor identifying details, the date of the identifiable event, and the amount of debt discharged reported in Box 2. Accurate entry ensures compliance with IRS Form

   1099-C requirements.

   When Form 1099-C satisfies Form 1099-A obligations in the same year, you must complete the applicable coordination fields. Proper completion avoids duplicate filings and ensures consistency across information returns submitted to the Internal Revenue Service.

• The American Rescue Plan Act of 2021 excludes qualifying student loan discharges
• Insolvency determination methodology remains consistent with prior years and requires
• The $600 minimum threshold for Form 1099-C reporting remains unchanged for the
• Paycheck Protection Program loan forgiveness is excluded from Form 1099-C reporting
• Form 1099-A reporting requirements for 2021 follow prior-year property classification
• Full IRS transcript retrieval (Wage & Income + Account)
• Professional tax form review
• Preparation & filing support
• Tax relief options if you owe the IRS

7. Step 8: Determine Form 1099-A Reporting Requirement (Property Acquisition or Abandonment)

   You must identify whether property acquisition through foreclosure or abandonment of secured property occurred during 2021. Form 1099-A applies when a lender acquires property or when a debtor abandons property securing a loan. Required entries include the street address, date of acquisition or abandonment, and outstanding debt balance.

   When cancellation of debt and foreclosure occur in the same calendar year, filing only Form

   1099-C may satisfy both reporting obligations if coordination boxes are completed. This approach aligns with IRS guidance and prevents redundant filings.

   Year-Specific 2021 Updates and Changes from gross income for tax years 2021 through 2025.

   Form 982 to claim the exclusion.

   2021 tax year. under separate guidance. standards without modification.

   If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.