Slew Of Tax Tips To Clean Your 1099-C Mess

If youโ€™re facing tax headaches because you received a 1099-C for cancellation of debt income, you are not alone. An estimated 6.3 million of those forms have gone out to taxpayers and they are creating all sorts of confusion. Itโ€™s a big mess, and the IRS isnโ€™t exactly handing taxpayers a broom. If youโ€™re among the millions struggling with these forms, take a look at the resources weโ€™ve put together for you here.

For a quick overview, start with our article, What Is A 1099-C? and our Infographic: What To Do If You Receive A 1099-C.

If you received a 1099-C, then read this in depth article: 1099-C In The Mail? How to Avoid Taxes on Cancelled Debt which will explain how you may be able to avoid paying taxes on this โ€œincome.โ€

If you received a 1099-A, most likely due to a foreclosure, then youโ€™ll want to read 1099-A In The Mail? How to Avoid Taxes on Cancelled Debt. A related article, More Confusion Over the 1099-C talks about whether Home Affordable Foreclosure Alternatives payments are taxable, and what happens when private mortgage insurance (PMI) is involved in cancelled debt.

If you filed for bankruptcy or had a student loan forgiven, then hopefully this article, Just Received a 1099-C? Donโ€™t Freak Out! will give you the additional information you are looking for.

If, like many of our readers, you have received a 1099-C for a very old debt, then my article 1099-C: The Worst Tax Mess of the Year? is for you.

I would be remiss if I didnโ€™t warn you that the mess these lenders are creating can also increase your chances of being audited. I explain why in 1099-C Wrong? Taxpayer May Pay With An Audit.

And finally, if you believe a 1099-C form you received is wrong, or too old, youโ€™ll want to make sure you read Tax Help: How to Dispute a 1099-C as well as my more recent article, What to Do If You Get a 1099-C for an Old Debt.

Thanks so much to our readers who have shared their questions, comments and frustrations. I wish we had all the answers, but we donโ€™t. Itโ€™s clearly something the IRS needs to fix, and fast. If youโ€™re facing financial problems or hardships due to a 1099-C, or if you canโ€™t get straight answers to your questions, Iโ€™d encourage you to contact your elected officials in Washington and let them know whatโ€™s going on.

And take heart: maybe it wonโ€™t be as bad as you think. One of our readers who first wrote in โ€œfreaking outโ€ when she got one of these forms now writes:

Just want you to know I made out okay with my taxes regarding the 1099Cโ€ฆโ€ฆ.not as bad as I thought it was going to beโ€ฆโ€ฆso I will pay off what I owe the IRSโ€ฆโ€ฆโ€ฆat least I will be able to eat in the following monthsโ€ฆโ€ฆโ€ฆ.I have certainly learned a lesson in this experience. Never want to have this happen again.

Hopefully youโ€™ll find a way to put this behind you as well, without resorting to an all Ramen Noodle and peanut butter diet.

Image: Linzi Clark, via Flickr

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