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Taxslayer 11. Taxslayer   How To Get Tax Help Table of Contents Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Taxslayer Free help with your tax return. Taxslayer   You can get free help preparing your return nationwide from IRS-certified volunteers. Taxslayer The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Taxslayer The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Taxslayer Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Taxslayer In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Taxslayer To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Taxslayer gov, download the IRS2Go app, or call 1-800-906-9887. Taxslayer   As part of the TCE program, AARP offers the Tax-Aide counseling program. Taxslayer To find the nearest AARP Tax-Aide site, visit AARP's website at www. Taxslayer aarp. Taxslayer org/money/taxaide or call 1-888-227-7669. Taxslayer For more information on these programs, go to IRS. Taxslayer gov and enter “VITA” in the search box. Taxslayer Internet. Taxslayer    IRS. Taxslayer gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Taxslayer Download the free IRS2Go app from the iTunes app store or from Google Play. Taxslayer Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Taxslayer Check the status of your 2013 refund with the Where's My Refund? application on IRS. Taxslayer gov or download the IRS2Go app and select the Refund Status option. Taxslayer The IRS issues more than 9 out of 10 refunds in less than 21 days. Taxslayer Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Taxslayer You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Taxslayer The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Taxslayer Use the Interactive Tax Assistant (ITA) to research your tax questions. Taxslayer No need to wait on the phone or stand in line. Taxslayer The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Taxslayer When you reach the response screen, you can print the entire interview and the final response for your records. Taxslayer New subject areas are added on a regular basis. Taxslayer  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Taxslayer gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Taxslayer You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Taxslayer The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Taxslayer When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Taxslayer Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Taxslayer You can also ask the IRS to mail a return or an account transcript to you. Taxslayer Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Taxslayer gov or by calling 1-800-908-9946. Taxslayer Tax return and tax account transcripts are generally available for the current year and the past three years. Taxslayer Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Taxslayer Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Taxslayer If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Taxslayer Check the status of your amended return using Where's My Amended Return? Go to IRS. Taxslayer gov and enter Where's My Amended Return? in the search box. Taxslayer You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Taxslayer It can take up to 3 weeks from the date you mailed it to show up in our system. Taxslayer Make a payment using one of several safe and convenient electronic payment options available on IRS. Taxslayer gov. Taxslayer Select the Payment tab on the front page of IRS. Taxslayer gov for more information. Taxslayer Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Taxslayer Figure your income tax withholding with the IRS Withholding Calculator on IRS. Taxslayer gov. Taxslayer Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Taxslayer Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Taxslayer gov. Taxslayer Request an Electronic Filing PIN by going to IRS. Taxslayer gov and entering Electronic Filing PIN in the search box. Taxslayer Download forms, instructions and publications, including accessible versions for people with disabilities. Taxslayer Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Taxslayer gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Taxslayer An employee can answer questions about your tax account or help you set up a payment plan. Taxslayer Before you visit, check the Office Locator on IRS. Taxslayer gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Taxslayer If you have a special need, such as a disability, you can request an appointment. Taxslayer Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Taxslayer Apply for an Employer Identification Number (EIN). Taxslayer Go to IRS. Taxslayer gov and enter Apply for an EIN in the search box. Taxslayer Read the Internal Revenue Code, regulations, or other official guidance. Taxslayer Read Internal Revenue Bulletins. Taxslayer Sign up to receive local and national tax news and more by email. Taxslayer Just click on “subscriptions” above the search box on IRS. Taxslayer gov and choose from a variety of options. Taxslayer Phone. Taxslayer    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Taxslayer Download the free IRS2Go app from the iTunes app store or from Google Play. Taxslayer Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Taxslayer gov, or download the IRS2Go app. Taxslayer Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Taxslayer The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Taxslayer Most VITA and TCE sites offer free electronic filing. Taxslayer Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Taxslayer Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Taxslayer Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Taxslayer If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Taxslayer The IRS issues more than 9 out of 10 refunds in less than 21 days. Taxslayer Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Taxslayer Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Taxslayer The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Taxslayer Note, the above information is for our automated hotline. Taxslayer Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Taxslayer Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Taxslayer You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Taxslayer It can take up to 3 weeks from the date you mailed it to show up in our system. Taxslayer Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Taxslayer You should receive your order within 10 business days. Taxslayer Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Taxslayer If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Taxslayer Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Taxslayer The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Taxslayer These individuals can also contact the IRS through relay services such as the Federal Relay Service. Taxslayer Walk-in. Taxslayer   You can find a selection of forms, publications and services — in-person. Taxslayer Products. Taxslayer You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Taxslayer Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Taxslayer Services. Taxslayer You can walk in to your local TAC for face-to-face tax help. Taxslayer An employee can answer questions about your tax account or help you set up a payment plan. Taxslayer Before visiting, use the Office Locator tool on IRS. Taxslayer gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Taxslayer Mail. Taxslayer   You can send your order for forms, instructions, and publications to the address below. Taxslayer You should receive a response within 10 business days after your request is received. Taxslayer Internal Revenue Service 1201 N. Taxslayer Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Taxslayer The Taxpayer Advocate Service (TAS) is your voice at the IRS. Taxslayer Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Taxslayer   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Taxslayer We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Taxslayer You face (or your business is facing) an immediate threat of adverse action. Taxslayer You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Taxslayer   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Taxslayer Here's why we can help: TAS is an independent organization within the IRS. Taxslayer Our advocates know how to work with the IRS. Taxslayer Our services are free and tailored to meet your needs. Taxslayer We have offices in every state, the District of Columbia, and Puerto Rico. Taxslayer   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Taxslayer   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Taxslayer If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Taxslayer Low Income Taxpayer Clinics. Taxslayer   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Taxslayer Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Taxslayer Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Taxslayer Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Minnesota

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Bloomington 1550 American Blvd. East
Suite 700
Bloomington, MN 55425

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**
 

Services Provided

(651) 312-8082 
Duluth  515 W. First St.
Duluth, MN 55802 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
 

Services Provided

(218) 626-1624 
Mankato  1921 Excel Dr.
Mankato, MN 56001 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)

 

Services Provided

(507) 625-4977 
Minneapolis  250 Marquette Ave.
Minneapolis, MN 55401 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
 

Services Provided

(651) 312-8082 
Rochester  310 South. Broadway
Rochester, MN 55904

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)

 

Services Provided

(507) 281-3044 
St. Cloud  3800 8th Street North
St. Cloud, MN 56303 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
 

Services Provided

(320) 251-9261 
St. Paul  430 North Wabasha Street
St. Paul, MN 55101
(Physical address only) 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

Services Provided

(651) 312-8082 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).
 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (651) 312-7999 in Minneapolis/St. Paul or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
U.S. Bank Financial Center 
1550 American Blvd., E. 
Stop 6610 BLM, Suite 705
Bloomington, MN 55425

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Taxslayer

Taxslayer 1. Taxslayer   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Taxslayer General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Taxslayer There are exceptions to this rule, discussed under Exceptions , later. Taxslayer Generally, you must include the canceled debt in your income. Taxslayer However, you may be able to exclude the canceled debt. Taxslayer See Exclusions , later. Taxslayer Example. Taxslayer John owed $1,000 to Mary. Taxslayer Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Taxslayer John has canceled debt of $600. Taxslayer Example. Taxslayer Margaret owed $1,000 to Henry. Taxslayer Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Taxslayer Margaret does not have canceled debt. Taxslayer Instead, she has income from services. Taxslayer A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Taxslayer Debt for which you are personally liable is recourse debt. Taxslayer All other debt is nonrecourse debt. Taxslayer If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Taxslayer See Discounts and loan modifications , later. Taxslayer However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Taxslayer As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Taxslayer For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Taxslayer There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Taxslayer See Exceptions and Exclusions, later. Taxslayer You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Taxslayer Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Taxslayer The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Taxslayer For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Taxslayer Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Taxslayer An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Taxslayer Identifiable event codes. Taxslayer    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Taxslayer The codes shown in box 6 are explained below. Taxslayer Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Taxslayer Note. Taxslayer Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Taxslayer However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Taxslayer Code A — Bankruptcy. Taxslayer Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Taxslayer See Bankruptcy , later. Taxslayer Code B — Other judicial debt relief. Taxslayer Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Taxslayer Code C — Statute of limitations or expiration of deficiency period. Taxslayer Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Taxslayer In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Taxslayer Code D — Foreclosure election. Taxslayer Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Taxslayer This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Taxslayer Code E — Debt relief from probate or similar proceeding. Taxslayer Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Taxslayer Code F — By agreement. Taxslayer Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Taxslayer Code G — Decision or policy to discontinue collection. Taxslayer Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Taxslayer For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Taxslayer Code H — Expiration of nonpayment testing period. Taxslayer Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Taxslayer The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Taxslayer This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Taxslayer Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Taxslayer Code I — Other actual discharge before identifiable event. Taxslayer Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Taxslayer Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Taxslayer Amount of canceled debt. Taxslayer    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Taxslayer The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Taxslayer Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Taxslayer Interest included in canceled debt. Taxslayer    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Taxslayer Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Taxslayer See Deductible Debt under Exceptions, later. Taxslayer Persons who each receive a Form 1099-C showing the full amount of debt. Taxslayer    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Taxslayer However, you may not have to report that entire amount as income. Taxslayer The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Taxslayer See Example 3 under Insolvency, later. Taxslayer Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Taxslayer However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Taxslayer The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Taxslayer For more details, see Exceptions and Exclusions, later. Taxslayer Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Taxslayer   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Taxslayer The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Taxslayer The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Taxslayer If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Taxslayer The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Taxslayer For more details, see Exceptions and Exclusions, later. Taxslayer Nonrecourse debt. Taxslayer   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Taxslayer The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Taxslayer The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Taxslayer The character of the gain or loss is determined by the character of the property. Taxslayer More information. Taxslayer    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Taxslayer Abandonments Recourse debt. Taxslayer   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Taxslayer You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Taxslayer For more details, see Exceptions and Exclusions, later. Taxslayer This income is separate from any amount realized from the abandonment of the property. Taxslayer For more details, see chapter 3. Taxslayer Nonrecourse debt. Taxslayer   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Taxslayer Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Taxslayer For more information, see Publication 542, Corporations. Taxslayer Prev  Up  Next   Home   More Online Publications