Should a taxpayer attempt to report canceled or forgiven debt on a self-prepared tax return?
This is dangerous territory for most taxpayers. First, it may be the first and only time a taxpayer has ever received a Form 1099-C. Unless inclined to learn about the issues, some taxpayers will simply ignore the issue and hope it escapes IRS detection. However, make it a point to add a question to your organizer in bold letters that asks if the taxpayer received a Form 1099-C during the year. If interviewing a taxpayer face-to-face, make sure the question is one of your standard questions. Best of all, you know your clients and should be in a position to know who is likely to be affected by this situation. Do some phone calling or better yet, schedule an in-house seminar and invite clients who are likely to be affected or who you know have been affected. This is a situation that demands the help of a tax professional. • What are some consequences of improperly reporting information on Form 1099-C? Standard problems arise out of non-reporting canceled or forgiven debt. First, while it
