Credit unions generally file Cancellation of Debt Form 1099-C if it hasn’t received a payment on a debt for 36 months. So what happens when the form has been filed, but the member has now made a payment on the debt?
Should the credit union file an amended 1099-C with the IRS?
According to CUNA’s compliance staff, the answer is no.
Once a credit union has filed a 1099-C, the IRS does not require any additional, amended or corrected 1099-C forms to be filed in connection with that debt. In fact, according to the IRS, the filing of corrected 1099-Cs would neither improve tax compliance nor reduce debtors’ confusion.
Credit unions are required to file a 1099-C when an “identifiable event” indicates that a debt of $600 or more during a calendar year will not be repaid.
Examples of identifiable events as defined by the IRS include:
The 36-month non-payment event has resulted in confusion.
Debtors often mistakenly believe that receipt of a 1099-C form means their debt has been cancelled, and creditors are often uncertain of whether they may continue collection activities on these debts once the 1099-C has been filed.
Other times, the amount reported on the 1099-C may not be the same as the amount that the debtor is required to report as income.