IRS Instruction 1099-A and 1099-C

IRS Instruction 1099-A and 1099-C – In the complex world of tax reporting, IRS Forms 1099-A and 1099-C play crucial roles for lenders, borrowers, and taxpayers dealing with secured property and debt forgiveness. These forms are essential for reporting events like foreclosures, property abandonments, and debt cancellations, which can have significant tax implications. Whether you’re a lender required to file these forms or a borrower receiving one, understanding the instructions for Forms 1099-A and 1099-C is key to staying compliant with IRS rules. This guide, based on the latest IRS instructions updated in April 2025, breaks down everything you need to know about these forms, including who must file, when to file, and the potential tax consequences.

What Is IRS Form 1099-A: Acquisition or Abandonment of Secured Property?

Form 1099-A is used to report the acquisition or abandonment of property that secures a loan. If a lender acquires an interest in a borrower’s property (such as through foreclosure) or has reason to believe the property has been abandoned, this form must be filed. It’s typically issued when the property is transferred in full or partial satisfaction of a debt.

Key scenarios include:

  • Foreclosures on homes or other real estate.
  • Repossessions of vehicles or other personal property.
  • Abandonment of secured assets, determined by objective facts like the borrower permanently discarding the property.

The form reports details like the date of acquisition or abandonment, the outstanding principal balance, the fair market value (FMV) of the property, and whether the borrower was personally liable for the debt. For tax purposes, receiving a Form 1099-A may mean treating the event as a “sale” of the property, potentially resulting in capital gains or losses.

What Is IRS Form 1099-C: Cancellation of Debt?

Form 1099-C reports the cancellation, forgiveness, or discharge of debt amounting to $600 or more. This occurs when a lender decides not to collect on a debt, often in situations like loan settlements, bankruptcies, or foreclosures where the debt exceeds the property’s value.

Common triggers include:

  • Debt settlements with credit card companies or banks.
  • Student loan forgiveness under certain programs.
  • Mortgage debt canceled after a short sale or foreclosure.

The form includes the date of the cancellation, the amount of debt discharged, any interest included, and an identifiable event code (e.g., bankruptcy or expiration of statute of limitations). Importantly, canceled debt is generally considered taxable income to the borrower, unless an exception applies.

Who Must File Forms 1099-A and 1099-C?

Not everyone is required to file these forms—filing obligations depend on your role and the transaction type.

For Form 1099-A:

  • Lenders in a trade or business who acquire secured property or know of its abandonment.
  • This includes banks, governmental units, and even non-lenders if the loan is business-related.
  • Trustees or record owners file on behalf of multiple loan owners (e.g., in mortgage pools).

For Form 1099-C:

  • Applicable entities like financial institutions, credit unions, federal agencies, or organizations whose significant business is lending money.
  • File if debt of $600+ is canceled and an “identifiable event” occurs (e.g., foreclosure, bankruptcy).
  • Safe harbors may exempt entities with low lending income.

If multiple creditors are involved, each may need to file for their portion of the debt. Statements (Copy B) must be furnished to borrowers, and electronic filing is encouraged for efficiency.

When and How to File These Forms

Timing is critical to avoid penalties.

  • Form 1099-A: File in the year following the acquisition or knowledge of abandonment. For expected foreclosures within three months, report at the sale date; otherwise, at the end of the three-month period.
  • Form 1099-C: File in the year following the identifiable event. Optional early filing if cancellation occurs before the event.

Deadlines for 2025 tax year filings (due in 2026):

  • Recipient statements: January 31, 2026 (or February 17 for certain forms).
  • IRS filing: February 28, 2026 (paper) or March 31, 2026 (electronic).

Use the IRS FIRE system for electronic filing, and include Form 1096 for paper submissions. Corrections can be made if errors are discovered.

Key Boxes and Information to Report

Filling out these forms requires accurate details to ensure compliance.

Form 1099-A Boxes:

  • Box 1: Date of acquisition or abandonment.
  • Box 2: Principal balance outstanding (exclude interest).
  • Box 4: FMV of the property.
  • Box 5: Check if borrower personally liable.
  • Box 6: Property description (e.g., address or vehicle details).

Form 1099-C Boxes:

  • Box 1: Date of identifiable event.
  • Box 2: Amount of canceled debt (principal only for lending transactions).
  • Box 3: Interest included (optional).
  • Box 6: Event code (A-H).
  • Box 7: FMV of property if applicable.

Include account numbers and creditor contact info. Truncate TINs on recipient copies for privacy.

Coordination Between Forms 1099-A and 1099-C

If both an acquisition/abandonment and debt cancellation occur in the same year for $600+ debt, you can file Form 1099-C alone by completing its Boxes 4, 5, and 7 to cover Form 1099-A requirements. Filing both is optional but avoid duplicating information.

Exceptions, Exclusions, and Relief

Not all events require filing:

  • No Form 1099-C for fraudulent debts, interest-only cancellations, or foreign debtors under certain conditions.
  • Student loan forgiveness for death/disability or qualifying programs may qualify for relief through 2026.
  • Exclusions from income for qualified principal residence indebtedness (expired December 31, 2025) and certain student loans.

Penalty relief applies for nonlending discharges or errors in good faith.

Tax Implications for Recipients

For Form 1099-A:

The event is treated as a property sale. Calculate gain or loss using the FMV (or sale proceeds) minus your adjusted basis. Report on Schedule D (Form 1040) for personal property or Form 4797 for business assets. If the debt is recourse (personal liability), amount realized is FMV; if nonrecourse, it’s the full debt amount.

For Form 1099-C:

Canceled debt is generally taxable as ordinary income, reported on Form 1040. Exceptions include bankruptcy, insolvency, qualified farm or real property business debt, or certain student loans. Use Form 982 to claim exclusions. In foreclosures, remaining debt after property sale may be taxable COD income.

Consult a tax professional for your specific situation, as exclusions can reduce or eliminate tax liability.

Recent Changes and Updates

The latest instructions note the expiration of exclusions for discharged mortgage and student loan debt under section 108(f)(5) after December 31, 2025. Continuous-use forms apply for 2025 and later. Always check IRS.gov for updates, as new forms like 1099-DA for digital assets may impact related reporting.

Conclusion: Stay Compliant with IRS Rules

Navigating IRS Forms 1099-A and 1099-C can be daunting, but understanding their instructions ensures accurate reporting and minimizes penalties. For lenders, timely filing is essential; for borrowers, these forms signal potential tax obligations or opportunities for exclusions. Download the official instructions from IRS.gov and consider professional advice for complex cases. By staying informed, you can handle acquisition of secured property, abandonment, and cancellation of debt with confidence.