The IRS “What Ifs” for Struggling Taxpayers – Debt Related (B-2)

The IRS “What Ifs” for Struggling Taxpayers – Debt Related (B-2)
What if my debt is forgiven?
The tax impact of debt forgiveness or cancellation depends on your individual facts
and circumstances. Generally, if you borrow money from a commercial lender and
the lender later cancels or forgives the debt, you may have to include the cancelled
amount in income for tax purposes.

The lender is usually required to report the amount of the canceled debt to you and
the IRS on a Form 1099-C, Cancellation of Debt. There are several exceptions to
the taxability of cancelled debt, such as insolvency or bankruptcy. 

(IRS Web Site Updated 3/28/22) (TTT 07/12/22)