A 1099C form is sent at the end of a financial year when a lender forgives a portion of your debt. You'll have to pay tax on the cancelled amount.

I recieved a cancellation of debt form 1099c in the mail last day. Will I have to pay taxes on this? If so, how much have I to pay as I live in CA.

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Yes, if the lender is forgiving a portion of the total outstanding balance while in a settlement, the IRS considers it as an income. Therefore, you must pay taxes on it. Otherwise, you will now incur tax debt. However, the forgiven amount must be at least or more than $600.

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When a lender forgives a portion of your total outstanding debt, that forgiven amount is considered as income as per the IRC. The lender, therefore, sends you a form 1099c at the end of the financial year as you owe taxes on that amount. Usually, you're charged 10%-20% on the forgiven amount.


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