Go to:

January 2019
< Dec Feb >
Leaguer Email Subscription

You are not currently subscribed. Click Subscribe below to receive the Leaguer email.

Do CUs Ever Need to File an Amended 1099-C?
Wednesday, June 29, 2016 6:45 AM

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:

  • Bankruptcy;
  • Foreclosure;
  • Expiration of the statute of limitations for collecting the debt;
  • Agreement between credit union and debtor;
  • A 36-month period of non-payment; and
  • Probate or similar proceeding.

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.

This confusion has led the IRS to issue a proposal that would remove the 36-month non-payment rule. According to the IRS spring 2016 rulemaking agenda, this rule could be finalized in December.

In addition to CompBlog, CUNA’s Compliance Community contains discussion boards and a number of other resources for credit union compliance professionals around the country.