Form 1099-A vs Form 1099-C
If you’ve gone through a foreclosure, abandoned property, or had debt forgiven, you may receive one or more IRS forms—specifically Form 1099-A and Form 1099-C. While these forms are related to debt and property, they serve different purposes and have distinct tax implications. Understanding the difference between the two is essential to filing an accurate tax return and avoiding IRS issues.
What Is Form 1099-A?
Form 1099-A, titled Acquisition or Abandonment of Secured Property, is issued when a borrower’s property is either foreclosed upon or voluntarily surrendered to a lender. This form provides the IRS (and the borrower) with information about the transfer of ownership of property that secured a loan.
Key details reported on Form 1099-A include:
- Date of acquisition or abandonment
- Fair market value (FMV) of the property
- Balance of outstanding principal
- Whether the borrower is personally liable for the debt
Form 1099-A is used to determine whether there is a gain or loss on the disposition of the property.
What Is Form 1099-C?
Form 1099-C, titled Cancellation of Debt, is issued when a lender forgives or cancels a borrower’s debt, typically after foreclosure, short sale, or settlement. The canceled amount is considered taxable income unless an exception applies.
Form 1099-C includes:
- Amount of debt canceled
- Date of cancellation
- Reason for cancellation
This form is primarily used to report cancellation of debt income (COD income) on the borrower’s tax return, which may increase their taxable income.
Key Differences
| Feature | Form 1099-A | Form 1099-C |
| Purpose | Reports acquisition or abandonment | Reports canceled or forgiven debt |
| Common Trigger | Foreclosure, surrender of property | Debt settlement, post-foreclosure |
| Tax Impact | Potential gain/loss on property | Potential taxable income |
| Can You Receive Both? | Yes, in some cases | Yes, especially if debt is forgiven |
Conclusion
In summary, Form 1099-A deals with the property aspect of a loan default, while Form 1099-C deals with the debt forgiveness portion. You may receive both forms, and each has different implications for your taxes. Be sure to review them carefully and consider professional tax advice.
If you are not sure, Dimov Tax presents professional aid. Reach out to us today for Form 1099-A and Form 1099-C assistance.