Form 1099-C, Cancellation of Debt, is the information return a lender files when it cancels a debt of $600 or more, and a copy goes to the borrower. As of October 2026, only banks, credit unions, federal agencies and businesses whose significant trade or business is lending have to file it, and the cancelled amount is usually taxable income unless an exception or exclusion applies.
So there are two readers for this form. If you lend as part of your business, it's a filing duty with a deadline. If you've just opened one in the post, it's a tax question, and the IRS is clear that the form doesn't decide your tax on its own. You report the correct taxable amount even if the 1099-C you got is wrong.
Who has to file a 1099-C
The list is narrow. You file only if you're one of these:
- A financial institution such as a bank, trust company, building and loan or savings and loan association.
- A credit union.
- The FDIC, the NCUA, any federal executive agency, a military department or the U.S. Postal Service.
- A subsidiary of a bank or credit union that's supervised by a federal or state regulator because of that link.
- Any organization whose significant trade or business is lending, such as a finance company or credit card company. Lending counts as significant if it's done on a regular and continuing basis.
There are safe harbors for that last group. A business that didn't have to report last year isn't treated as a lender if its gross income from lending in the test year is under both 15% of its gross income and $5 million. A newly formed organization with no test year is also outside the rule. And a retailer that offers credit on its own goods or services isn't a lender for 1099-C purposes, although a separate finance subsidiary is.
When a debt counts as cancelled: the 8 event codes
You don't report the day you write the balance off in your books. You report when an identifiable event happens, and Box 6 takes a letter code for it.
| Box 6 code | Identifiable event |
|---|---|
| A | Discharge in bankruptcy under title 11 |
| B | Debt made unenforceable in a receivership, foreclosure or similar court proceeding |
| C | Statute of limitations expired, upheld by a court with the appeal period over |
| D | Creditor elected foreclosure remedies that bar collection |
| E | Debt made unenforceable in probate or a similar proceeding |
| F | Agreement to settle for less than the full amount, for example a short sale |
| G | A decision or defined policy of the creditor to stop collecting |
| H | Other actual discharge before one of the events above |
Code G is the one to watch. A written policy isn't needed: an established practice of abandoning debts after a set period of non-payment counts as a defined policy.
What you don't have to report
- Interest. It's optional, but if you include it in Box 2 you must show it separately in Box 3.
- Fees, penalties and fines on a lending transaction. Only the stated principal is required.
- A debt discharged in bankruptcy, unless your records show it was a business or investment debt.
- A guarantor or surety. They aren't treated as the debtor.
- Releasing one co-debtor when the others still owe the full unpaid balance.
- Fraudulent debt cancelled because of identity theft. The form is only for debts the person really took on.
You also can't add up several small write-offs to dodge the threshold or to hit it. Separate cancellations aren't combined unless they're part of a plan to avoid filing.
Deadlines and record keeping
| Step | Due date for 2025 forms |
|---|---|
| Copy B to the debtor | February 2, 2026 |
| File with the IRS on paper (with Form 1096) | March 2, 2026 |
| File with the IRS electronically | March 31, 2026 |
| Keep a copy or be able to rebuild the data | At least 4 years from the due date |
The 4 year retention rule is longer than the usual 3 for other information returns. For joint debtors on debts of $10,000 or more, each debtor who's jointly and severally liable gets a form showing the full cancelled amount. Below $10,000, you file only for the first-named debtor. If you're paper filing, the transmittal rules are on our Form 1096 guide.
Got a 1099-C? Is the cancelled debt taxable?
Generally yes. The IRS treats cancelled debt as ordinary income for the year it was cancelled, reported on Schedule 1 of Form 1040 for a personal debt or on the right business schedule for a business debt. Sole proprietors usually start with Schedule C. But some amounts never count as income, and others can be excluded:
- Not income at all: amounts cancelled as a gift, bequest or inheritance, a qualified purchase price reduction from the seller, and debt that would have been deductible if you'd paid it as a cash basis taxpayer.
- Excluded, with Form 982: debt cancelled in a title 11 bankruptcy, debt cancelled while you were insolvent (to the extent of the insolvency), qualified farm debt and qualified real property business debt.
- Main home: qualified principal residence debt is excluded only if discharged before January 1, 2026, or under a written arrangement made before then.
- If you exclude an amount, you usually have to reduce tax attributes such as carryovers and the basis of assets, and report that on Form 982.
One useful detail from the IRS: if the creditor keeps chasing you after sending a 1099-C, the debt may not have been cancelled at all, and you may have no cancellation income. Check with the creditor before you file.
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The verdict
If you're a lender, the filing rule is mechanical: find the event, pick the code, report the principal, keep it 4 years. If you're the borrower, don't just copy Box 2 onto your return. Check whether you were insolvent or in bankruptcy first, because those exclusions can take the whole amount out of income. And if the numbers look wrong, ring the creditor's contact number, which every 1099-C must show.
Related: the investment page.
Frequently asked questions
What is the minimum amount for a 1099-C?
A lender files Form 1099-C when it cancels a debt of $600 or more. Separate cancellations aren't added together unless they're part of a plan to avoid the filing rule.
Do small businesses have to issue a 1099-C when they write off a customer's bill?
Usually not. Only banks, credit unions, certain federal bodies and organizations whose significant trade or business is lending must file. A business that sells goods or services and extends credit on them isn't treated as a lender for these purposes.
When is Form 1099-C due?
For 2025 forms, the copy to the debtor was due February 2, 2026, and the IRS copy was due March 2, 2026 on paper or March 31, 2026 if filed electronically.
Is a 1099-C always taxable?
No. Gifts, inheritances and qualified purchase price reductions aren't income, and debt cancelled in bankruptcy or while you were insolvent can be excluded using Form 982. Otherwise the cancelled amount is generally ordinary income.
What if I get a 1099-C but the creditor is still collecting?
The IRS says the debt may not have been cancelled in that case, so you may not have cancellation income. Contact the creditor to confirm before you file your return.
