# Tax Question re: Forgiveness of Debt **URL:** \ **Category:** Factual Questions\ **Created:** [May 20, 2009, 1:13am UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028 "2009-05-20T01:13:54Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 20, 2009, 1:13am UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/1 "2009-05-20T01:13:54Z")
If a collection agency (not the original creditor) settles a debt for less than the full amount, can/must they send a 1099 or does only the original creditor do that? Does it matter how old the debt is? Thanks in advance… ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 21, 2009, 1:44pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/2 "2009-05-21T13:44:40Z")
I’ll use my one bumpity-bump and see if anyone knows… ---
**Author:** ![Keeve](https://avatars.discourse-cdn.com/v4/letter/k/f07891/32.png) [@Keeve](https://boards.straightdope.com/u/Keeve)\ **Post date:** [May 21, 2009, 2:07pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/3 "2009-05-21T14:07:42Z")
IANAtaxprofessional, but I have have made a couple of the kind of deals, and never have they sent me any 1099. 1099s are probably required only for employers, and they don’t count as an employer. But now that you mention it, I do suppose it is income, and I gues I should have included it in my income. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [May 21, 2009, 2:27pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/4 "2009-05-21T14:27:52Z")
> **[i1099ac.pdf](https://www.irs.gov/pub/irs-pdf/i1099ac.pdf)** > > 167.90 KB ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 21, 2009, 3:52pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/5 "2009-05-21T15:52:40Z")
> [@Gfactor](#): > > [http://www.irs.gov/pub/irs-pdf/i1099ac.pdf](http://www.irs.gov/pub/irs-pdf/i1099ac.pdf) Thanks for the link. I understand that if a bank forgives your debt, you will get a 1099, but in your link, I’m not seeing a collection agency mentioned. Is it treated the same? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [May 21, 2009, 3:58pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/6 "2009-05-21T15:58:06Z")
I will point out that forgiveness of debt is not always taxable. If you are bankrupt it is not, and usually if you are insolvent. A lot of dudes are insolvent. ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [May 21, 2009, 4:06pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/7 "2009-05-21T16:06:11Z")
> [@jtgain](#): > > Thanks for the link. I understand that if a bank forgives your debt, you will get a 1099, but in your link, I’m not seeing a collection agency mentioned. Is it treated the same? 1. Many collection agencies don’t own the debt. If that’s the case, the original creditor would have to file if they met the criteria. 2. It doesn’t appear to me that a collection agency meets the reporting criteria. But I’m not a tax expert. 3. You might find this helpful [http://74.125.45.132/search?q=cache:wkXoWXEV0DoJ:www.lsnv.org/Debt\_Cancellation\_Vignette.doc+collection+agency+cancellation+of+debt&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a](http://74.125.45.132/search?q=cache:wkXoWXEV0DoJ:www.lsnv.org/Debt_Cancellation_Vignette.doc+collection+agency+cancellation+of+debt&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a) ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [May 21, 2009, 4:14pm UTC](https://boards.straightdope.com/t/tax-question-re-forgiveness-of-debt/497028/8 "2009-05-21T16:14:21Z")
> [@Gfactor](#): > > 1. Many collection agencies don’t own the debt. If that’s the case, the original creditor would have to file if they met the criteria. > > 2. It doesn’t appear to me that a collection agency meets the reporting criteria. But I’m not a tax expert. > > 3. You might find this helpful [http://74.125.45.132/search?q=cache:wkXoWXEV0DoJ:www.lsnv.org/Debt\_Cancellation\_Vignette.doc+collection+agency+cancellation+of+debt&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a](http://74.125.45.132/search?q=cache:wkXoWXEV0DoJ:www.lsnv.org/Debt_Cancellation_Vignette.doc+collection+agency+cancellation+of+debt&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a) Thanks again. Due to the latest downturn in the housing market, I am definitely insolvent. I never thought that would be a good thing.