Retail Finance Credit Service Sent Me a 1099-C For Some Really Old Debt

“Dear Jim,

Searching for someone that could give me so good advice on what to do after receiving this 1099C form for the first time in my life, didn’t even know they existed, and now I’m worried to all crap about it! Not many people around that know much about it and I’ve read the information online at the IRS site but now I’m more confused than before I read it!

Just today I received a 1099C from a Retail Finance Credit Service for $4,075.00 and the date of Identifiable event was 02/04/2016 The Debt description was “Charge Account” ? My wife and I had filed for Bankruptcy back in May of 2010, went thru the paying monthly ordeal and after 3 years when were paid up the Bankruptcy was discharged thru the Court’s, This charge account was included in this bankruptcy. Is this amount now being sent to me from this company saying I’ll have to include it on my Taxes as Income, legal, when the court’s here in PA have discharged this debt?

The other problem is I had just recently filed my taxes for this year NOT knowing anything about any such form as a 1099C even existed now I’m stuck with filing another 1040X and wanted to know if this is supposed to be included with my current income will I have to pay taxes on an old charge card debt? My wife and I recently retired and living on a fixed income (with her still working part time) isn’t really doing us a lot of good, our AGI this year was only around 24,000.00 the trouble is since I already filed our taxes and we’ve claimed the EIC because we support our 3 grandchildren which live with us I’m worried that it will effect our refund amount that we so much look forward to helping us out thru the year, and will filing a 1040X exempt us from claiming a EIC next year as the form says about not reporting income from previous years could put us at risk of not being able to file for the EIC for the next several years! I hope I haven’t wasted your time asking you questions that maybe your not knowledgeable of or deal with but i’m having problems finding anyone to help me in this horror show I’ve been thrown into this year, The last thing I want now is the IRS knocking on our door or a summons!!

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Thank You in advance for any light you can shine on these questions for me I appreciate it very much!


Dear Bill,

Yes, unfortunately cancellation of indebtedness is income according to the Internal Revenue Code. Your real question is: can it be excluded from my income.

You probably have two exclusion provisions to look at in your situation:

  • Debt canceled in a Title 11 bankruptcy case (sounds like this exclusion applies)
  • Debt canceled during insolvency (often used by those in financial distress)

I cannot exactly conclude from your circumstances whether either of these exclusions absolutely apply to you- but you need to see IRS Publication 4681 and Form 982 to report any exclusion.

You will need to report the income, and any appropriate exclusion – in the end, you may owe no additional taxes. However, you must report the transaction on your return or the IRS will send a Notice CP2000 proposing additional income owed.

Again, because all transactions are inherently factual in nature to determine the tax treatment, you need to consider your circumstances and the exclusions available. In any event, be sure to report the income (and any exclusions) or the IRS will send you notices and possibly penalties.



If you have a tax question you’d like to ask just use the online form. I’m happy to help you totally for free.

Jim Buttonow, CPA/CITP, practices in the area of IRS and State tax controversy. He has more than 29 years of experience in IRS practice and procedure. Reach Jim at jim@buttonowcpa.com or through his website www.buttonowcpa.com

2 thoughts on “Retail Finance Credit Service Sent Me a 1099-C For Some Really Old Debt”

  1. The image is for a 2013 1099-C. May have to file amended return for 2013. Otherwise, if this debt was discharged in a bankruptcy an exclusion would apply. Consult a tax pro.


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