How to Fill Out Form 1099-C: Boxes, Deadlines, and Penalties

If you are a creditor who forgave $600 or more of a borrower’s debt, here is how to fill out Form 1099-C. You enter the date the cancellation happened, the amount discharged, any interest you chose to include, a plain-English description of the debt, whether the borrower was personally liable, the letter code for the event that triggered the filing, and, when property is involved, its fair market value. Copy B goes to the borrower by January 31, and Copy A goes to the IRS by February 28 on paper or March 31 electronically.¹

If you received a 1099-C rather than needing to prepare one, this form is not yours to fill out. The creditor files with the IRS and sends you Copy B; your job is to report the canceled amount on your own return and consider whether an exclusion applies.

Who Has to File a 1099-C

Not every business that writes off a bad debt has to file. The obligation falls only on “applicable financial entities”: banks, credit unions, the FDIC, other federal executive agencies, subsidiaries of financial institutions subject to federal or state banking regulation, and any organization whose significant line of business is lending money.² A landlord writing off unpaid rent, for example, would not typically qualify.

The $600 Threshold and the Event That Triggers Filing

The requirement kicks in when a single canceled debt reaches $600 or more. You cannot combine several smaller cancellations for the same borrower to reach that mark unless the separate cancellations are part of a scheme to dodge the reporting rules.³

You file only after one of eight recognized “identifiable events” occurs. Each event has a letter code that goes in Box 6:

Code A: Discharge in a Title 11 bankruptcy case.
Code B: Debt made unenforceable through a receivership, foreclosure, or similar court proceeding outside of bankruptcy.
Code C: The statute of limitations for collecting the debt expires, but only after a court upholds the borrower’s statute-of-limitations defense in a final judgment and the appeal period has run.
Code D: The creditor uses a foreclosure remedy that, under local law, eliminates the right to pursue the remaining debt (common with “power of sale” clauses in mortgages).
Code E: Debt canceled through a probate or similar proceeding.
Code F: Creditor and borrower agree to settle the debt for less than the full balance, including short sales.
Code G: The creditor decides to stop collecting and cancel the debt, whether by written policy or an established business practice such as abandoning debts after a set period of nonpayment.
Code H: Any actual discharge that happens before one of the events above.

Pick the code that fits before you touch the rest of the form; the code drives which date you use in Box 1 and, in property cases, whether Box 7 comes into play.³

Box-by-Box Instructions

Before entering any financial data, get the official scannable forms from the IRS or an authorized tax software provider. Do not print Copy A from the IRS website and mail it in; the IRS cannot scan those printouts and may penalize you for filing an unreadable form.⁴ Verify the borrower’s legal name, address, and taxpayer identification number (Social Security number for individuals, EIN for businesses).

Box 1: Date of the Identifiable Event

Enter the date the identifiable event actually occurred. This date pins the cancellation to a specific tax year for the borrower. For a negotiated settlement, that is usually the date the agreement was signed. For a bankruptcy discharge, it is the date of the court order.³

Box 2: Amount of Debt Discharged

Enter the total canceled amount. For a lending transaction, that is the stated principal the borrower no longer owes. Interest does not have to be included here, but if you do include it, you must also break it out separately in Box 3.³

Box 3: Interest Included in Box 2

If you added accrued interest to Box 2, report that interest portion here. Reporting interest is optional, but once you include it in Box 2, Box 3 becomes mandatory. This split helps the borrower determine whether any of the interest might be deductible elsewhere on their return.³

Box 4: Debt Description

Describe the original debt as specifically as you can: “student loan,” “credit card expenditure,” “first mortgage,” “auto loan.” A vague label like “loan” makes it harder for both the IRS and the borrower to determine the correct tax treatment.³

Box 5: Personal Liability Checkbox

Check this box if the borrower was personally on the hook for repaying the debt when the debt was created, or at the time of its last modification. A checked box means recourse debt: the lender could have pursued the borrower’s other assets. An unchecked box means non-recourse: the lender’s only remedy was the collateral itself. The classification changes how the IRS treats the discharge, particularly in foreclosure situations.⁴

Box 6: Identifiable Event Code

Enter the letter code (A through H) that matches the event from the list above. Use Code H if an actual discharge happened before any of the other listed events.³

Box 7: Fair Market Value of Property

Box 7 applies only when the cancellation involves a property transfer. For a foreclosure or similar sale, fair market value is generally the gross foreclosure bid price. For an abandonment or voluntary transfer to the lender in lieu of foreclosure, use the appraised value. For a short sale, the IRS also directs filers to use the appraised value.³ Getting this figure right prevents the discharged amount from being overstated or understated relative to what the property was actually worth.

Joint Borrowers on One Debt

Joint debts add a wrinkle. For debts of $10,000 or more taken on after December 31, 1994, where the borrowers are jointly and severally liable, issue a separate 1099-C to each borrower showing the full canceled amount. The IRS assumes joint and several liability unless there is clear evidence otherwise.³

For debts under $10,000, or for older debts taken on before 1995, file only for the primary borrower. There is also a married-couple exception: if the borrowers were spouses living at the same address when the debt was created and nothing indicates that has changed, one form covers both.³

Deadlines and Electronic Filing

Copy B goes to the borrower by January 31 of the year after the cancellation. Copy A goes to the IRS by February 28 for paper filers or March 31 for electronic filers.¹

Electronic filing is mandatory if you file 10 or more information returns of any type during the year. That threshold counts all information returns combined, not just 1099-Cs.⁵ For the 2026 filing season (covering tax year 2025 cancellations), electronic submissions go through the IRS FIRE system. The IRS plans to retire FIRE after the 2026 filing season and move all electronic information return filing to its newer IRIS platform starting in 2027.⁶ Creditors who have not already set up IRIS access should start that process now.

Penalties for Missing or Late Filing

The IRS imposes tiered penalties for missing or late information returns. For returns due in 2026, the penalties per form are:

Filed within 30 days of the deadline: $60 per return.
Filed after 30 days but by August 1: $130 per return.
Filed after August 1 or not at all: $340 per return.
Intentional disregard: $680 per return with no annual cap.

Annual caps apply to the first three tiers, and smaller businesses (gross receipts of $5 million or less) get lower caps. A small business that never files faces a maximum of $1,366,000 per year; a larger business faces up to $4,098,500.⁷

1
Internal Revenue Service. About Form 1099-C, Cancellation of Debt
2
Legal Information Institute. Definition: Applicable Financial Entity From 26 USC 6050P(c)(2)
3
Internal Revenue Service. Instructions for Forms 1099-A and 1099-C (Rev. April 2025)
4
Internal Revenue Service. Form 1099-C (Rev. April 2025) Cancellation of Debt
5
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
6
Internal Revenue Service. Filing Information Returns Electronically (FIRE)
7
Internal Revenue Service. IRM 20.1.7 Information Return Penalties