I settled a credit card lawsuit and made the final payment of the settlement (agreed judgment) in mid-December 2012. I received a release of judgment lien in late December 2012. The settlement was for less than the amount owed, so I believe this is considered cancelled debt.

However, I have not received a 1099-C from the creditor, and I have not been able to get ahold of someone from the creditor (Citibank) to find out if they have sent a 1099-C to the IRS.

According to IRS Publication 4681, "Even if you did not receive a Form 1099C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies." FYI, I am not insolvent and don't qualify for any other exceptions listed in that publication either.

My concern is if I report the cancelled debt on my 2012 tax return and pay the resulting additional taxes but Citibank did not or does not end up reporting the cancelled debt for tax year 2012. Fast forward to January 2014 and I get a 1099-C for 2013. Now the IRS thinks I should be reporting additional income for 2013, but I would have already reported it and paid the taxes on my 2012 return.

Would I be able to file some form which says I don't owe additional taxes on this debt because I already paid for it on my 2012 tax return? Or could I amend my 2012 tax return at that point to remove the cancelled debt (and get a refund), and then report the 1099-c on my 2013 tax return?

Part of me says to not report it on my 2012 return since I don't know if the debt has been officially cancelled, nor do I know the exact amount of the debt that was cancelled (at least according to the creditor). But I don't want to get a letter from the IRS later this year stating I owe them money with late fees and interest added.

Please, I need some help from a tax guru. Thank you in advance.

“I settled a credit card lawsuit and made the final payment of the settlement (agreed judgment) in mid-December 2012. I received a release of judgment lien in late December 2012. The settlement was for less than the amount owed, so I believe this is considered cancelled debt.”==========As Pub 4681 states, QUOTE,” Generally, if a debt for which you are personally liable is forgiven or satisfied for less than the full amount owed, the debt is considered canceled in whatever amount if remained unpaid.”
.However, I have not received a 1099-C from the creditor, and I have not been able to get ahold of someone from the creditor (Citibank) to find out if they have sent a 1099-C to the IRS.

According to IRS Publication 4681, "Even if you did not receive a Form 1099C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies." FYI, I am not insolvent and don't qualify for any other exceptions listed in that publication either.========Correct. Any time that you have a lender who forgives or cancels a debt that you owe, the IRS requires that they send you a 1099-C to report the amount of debt that was cancelled. Lenders must send you a Form 1099-C if more than $600 in debt you borrowed was either canceled or forgiven by a lending institution. Under federal law, you are required to still claim forgiven debt of less than $600 as income on your taxes but you will not receive a Form 1099-C in that situation.This then becomes taxable income to you. I realize that it is not really income, in the sense that you earned money, but in the eyes of the IRS it is treated as income since you received something in the form of goods or services or cash which you did not have to repay.When the lender issues the 1099-C form, a copy is also sent to the IRS which is how they know this was not reported on your return. It's possible that your copy of the 1099 was lost in the mail or perhaps sent to the wrong address, but in any case, you will now have to deal with this situation. When you have a cancellation of debt, there are really only two ways you can avoid paying tax on the this. One is if the debt was discharged through a bankruptcy filing.The only other option(as you said this is NOT your situation) is if you can show that you were insolvent at the time the debt was forgiven, meaning that at the time this happened your liabilities were more than your assets. In order to claim insolvency and not pay tax on the debt which was forgiven, you must file Form 982 with the IRS.

“My concern is if I report the cancelled debt on my 2012 tax return and pay the resulting additional taxes but Citibank did not or does not end up reporting the cancelled debt for tax year 2012. Fast forward to January 2014 and I get a 1099-C for 2013. Now the IRS thinks I should be reporting additional income for 2013, but I would have already reported it and paid the taxes on my 2012 return.”=======As said, your lender ,when the lender , issues the 1099-C form, a copy is also sent to the IRS. Lenders are required to send out a Form 1099-C to qualified borrowers by the end of January so taxpayers will have the information in time to file their taxes. As you did not receive the form by the first week of February, you should contact your lender(or IRS). Lenders must also file a copy of the form with the IRS by the end of February if they file by mail or March if they file electronically. Although you probably do not need this form when filing your taxes, failure of the bank to furnish this form does not absolve you of any tax liability. If the bank fails to send you the form, the IRS can pressure them in doing so, but you can also reconstruct the 1099-C with bank.If you do not receive a 1099-C in one year, then there is a possiblity that the lender issuing the 1099-C could report it in the next year. I would highly suggest that all taxpayers request a copy of their transcript so that they report everything. In a case where you receive the 1099-C but the company does not send it to the IRS, you are still legally bound to report the debt discharge.


“Would I be able to file some form which says I don't owe additional taxes on this debt because I already paid for it on my 2012 tax return? Or could I amend my 2012 tax return at that point to remove the cancelled debt (and get a refund), and then report the 1099-c on my 2013 tax return?”=== As said above.