Why Did I Receive A 1099-C Tax Form From My Credit Card Company?


Why Did I Receive a 1099-C Tax Form from my Credit Card Company?

Remember, the IRS views forgiven credit card debt as taxable income

Dear Kim,

About 6 months ago, I received a call from a credit card company offering me the opportunity to pay $3,000 instead of the $5,200 I owed them. I had recently lost a job and had not been paying on the card. Payment was about 4 month past due. When I got a new job, I went ahead and accepted the settlement offer. I just received a 1099-C in the mail and have no idea what this is. It appears to be a tax form and is in regards to the $1,200 that was settled by my credit card company. What do I do with this form?

Thank you,



Dear Sylvia,

Let me begin by stating that I am not a tax professional and that I strongly suggest seeking the guidance of a tax professional before filing your taxes. The 1099-C is a tax form sent by the credit card company with whom the debt was settled and is a very important tax form. The form reports Cancellation of Debt Income.  When a settlement is accepted by a credit card company, a certain amount of debt is forgiven by the credit card company. The IRS views that forgiven debt as taxable income.

When filing your taxes, you will report the 1099-C on line 21 of the 1040. This amount will be added to the income, increasing the tax liability. It is imperative that you file the 1099-C. If you neglect to do so it could result in IRS penalties, fines and an IRS audit.

Many consumers are unaware of the 1099-C. Creditors and collection agencies don't often reveal to the consumer that they will be required to file the form, or the potential tax ramifications. At this time, they are not required to divulge this information. For countless consumers, this tax burden exacerbates an already acute financial situation.

It is my opinion that debt settlement is rarely the answer to a financial hardship. The tax consequences can be significant enough to offset the benefits of the forgiven debt. The damage to the credit report and score can be significant, and other avenues should be investigated prior to agreement to a debt settlement. I suggest speaking with a certified credit counselor before agreeing to any settlement offer and working with a tax professional if you are in receipt of a 1099-C.

Good Luck,


Kim headshot 3

Kim Cole is the Education Outreach Coordinator for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month's edition. All identifying information will be kept anonymous.

Please send your questions via email to DearKim@navicoresolutions.org

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