How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask geedubya55 Your Own Question
geedubya55, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 358
Experience:  17 years experience in business and individual taxation specializing in small business and farming
Type Your Tax Question Here...
geedubya55 is online now
A new question is answered every 9 seconds

I settled a debt with a credit card company. My settlement

Resolved Question:

I settled a debt with a credit card company. My settlement was lower than the balance on the account. I am told I will receive a form 1099c from the credit card company and I must file the form with my income tax. How does the work and will I hae the balance? I told my unpaid balance was forgiven.
Submitted: 5 years ago.
Category: Tax
Expert:  geedubya55 replied 5 years ago.

Thank you for using Just Answer.


Cancellation of debt is considered income to you by the IRS. The reason for this is: if you borrow money or make purchases and then don't have to repay the debt, you have taxable gain. The credit card company will send you a 1099-C after the end of the tax year that will show the amount of debt that was forgiven. They will also send a copy of the 1099-C to the IRS so they will be looking for the debt cancellation on your tax return. You don't actually file the 1099-C with your return, but the income must be included as "other income" on the 1040 unless you qualify for one the exceptions.


There are 5 exceptions to the general rule that cancellation of debt is taxable. Only 2 of the exclusions apply to credit card debt. They are: 1) if you are in bankruptcy at the time the debt is canceled, the cancellation of debt income is not taxable. 2) If you are insolvent immediately before the debt is canceled, it is not taxable to the extent of insolvency. Insolvency means that your debts exceed your assets.


If one of the exceptions apply to you, you must report the amount of cancellation of debt income on form 982 to claim the exception and attach form 982 to your return.


I hope my response has been helpful to you. If so, please remember to click the accept button so I can receive credit for my answer. If you need any further clarification, please don't hesitate to ask. Thanks again.

geedubya55 and other Tax Specialists are ready to help you

Related Tax Questions