Why Did I Get A 1099-C?
So you had a rough few years, but things are turning around. You did the unthinkable and paid that annoying debt collector. I do not recommend paying old collections, but that topic is for another day. Now you have received a 1099-C form for Cancelation of Debt. Why did you get this? Creditors are required to issue one if the canceled debt was $600 or more. So if you settled it would be the amount that was forgiven. In any case, it’s a good idea to hire a tax professional who can help you determine your tax liability.
Let's say you maxed out that credit card at $11,000. After 30 calls a day for a few months you finally picked up the phone to confront the debt collector. After a lengthy conversation you settled for 30% of the debt. Thant would be $3,300. The IRS would consider the difference between the total debt and the settled amount as taxable income. So the 1099-C should show $7,700.
The Bottom Line
Great job for clearing out some of your past debt. Be sure to consult a , the last thing you want is to clear out a bad debt then end up getting in trouble with the IRS for not filing it correctly on your taxes. Stay positive and keep moving forward with reaching your financial goals.