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Most canceled debt is taxable Similar to income tax forms, you will also receive a copy of the 1099-C forgiveness of debt form from the forgiving creditor in the tax year the final payment is made. ?That form will give you the amount forgiven,? says Tayne, which is the amount that's considered taxable income.

While you don't have to file the 1099-C, you should use it to prepare and file your income tax return. In some cases, your forgiven debt is taxable ? and in some it's not. When it is taxable nonbusiness debt, you'll use the copy of the 1099-C to use to report it on Schedule 1 of Form 1040 as other income.

Is a 1099-C Form Good or Bad for Your Credit? The 1099-C form shouldn't have any impact on your credit. However, the activity that led to the 1099-C probably does impact your credit.

While you don't have to file the 1099-C, you should use it to prepare and file your income tax return. In some cases, your forgiven debt is taxable ? and in some it's not. When it is taxable nonbusiness debt, you'll use the copy of the 1099-C to use to report it on Schedule 1 of Form 1040 as other income.

This would be reported to the shareholders on Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc., Line 10 as Other income. Any information relating to the deferral or exclusion of income can be reported on Schedule K-1 (Form 1120-S), Line 17 as Other information.

After a debt is canceled, the creditor may send you a Form 1099-C, Cancellation of Debt showing the amount canceled and date of cancellation. Contact the creditor if you receive a 1099-C reflecting incorrect information.