Economics Finance

You must report the cancellation of personal debt on your income tax return. When an owed debt by either a person or business entity is cancelled or forgiven, some amount of taxable debt income may be generated since the benefit of the amount borrowed in the past is no longer associated with the burden of repayment now or in the future. Cancellation of debt (COD) is reported to both taxpayer and the tax authority on IRS Form 1099-C. This information is transferred, for personal debt, to Line 21 on IRS Form 1040. Business debt, depending on the nature of the business, is transferred to IRS Form 1040 Schedules C, E or F. Continue reading ‘Preparing Income Taxes – Reporting the Cancellation of Debt’ »