Creditors, Borrowers, and Cancellation of Debt Software

Cancellation of debt can come from a variety of sources: for-profit creditors, family members, federal agencies, financial institutions, and healthcare providers, just to name a few. The specific rules for how that debt cancellation gets counted as a write-off for the creditor and as income for the taxpayer depends on the nature, source, and size of the cancellation.

Advanced Micro Solutions (AMS) has a better way for you to prepare and file all your 1099 forms including form 1099-C. Our Forms Filer platform offers the foundational data management features you need to prepare and print information on your w-2 and 1099 forms. From there, you can add other features to your system that will enable your business to generate their own blank tax forms, e-file with state and federal agencies, and comply with a number of extra filing requirements.

You can bring basic small business filing software to your company for as little as, or you can buy a comprehensive form filing and payroll software solution for as little as a few hundred dollars. But along with this powerful and cost-effective software packaging, we wanted to provide basic information about the cancellation of debt and how it applies to your form filing requirements.

Basic Rules and Instructions for the Cancellation of Debt

We’re not going to try to offer personalized advice for every situation, but we can help you quickly find the information that speaks to your circumstances. Toward this goal, let’s break this information down into a few basic categories:

  • Are you forgiving a debt but not sure you need to report it as debt cancellation income? There are, indeed, a handful of outright exceptions—cases in which debt is cancelled but not counted as income. Most of these exceptions pertain to personal gifts, inheritances, student loans, and property.
  • Most all other forms of debt cancellation will require filing form 1099-C with the IRS and the debtor, who will include the form as part of his or her own returns. If you’re a small business trying to determine if you need to issue Form 1099-C or if you’re an individual taxpayer with questions about this form, you can find the basic rules and instructions directly from the IRS here.
  • There are also a number of situations in which the creditor is entitled to use the debt as a tax write-off, despite the fact that the cancellation is excluded from counting as debt income against the individual taxpayer. This includes things like debts discharged in Title 11 bankruptcy, as well as qualified debts for farms and real property. It’s crucial to note, however, that in this case, form 982 may need to be filed as part a Section 1082 basis adjustment so as to report a reduction of other tax attributes.

Form 1099-C and Other 1099 Filing Software

The cancellation of debt is often beneficial for both the creditor and the debtor, but it requires accurate and timely paperwork so that the creditor can receive the corresponding tax write-off, while the debtor gets some measure of debt relief. Let AMS make this form filing paperwork as painless as possible. Check out our products and prices, download our demo software, or call our Sales and Information team at (800) 536-1099.

Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.