Debt forgiveness=income
Click here for Top Ten Discussions. CLICK HERE for Q & A Homepage
Receive Free Rental Owner Updates Email:  
MrLandlord Q & A
Debt forgiveness=income (by Dee Ann [WI]) Sep 21, 2022 12:49 AM
       Debt forgiveness=income (by Dee Ann [WI]) Sep 21, 2022 12:53 AM
       Debt forgiveness=income (by don [PA]) Sep 21, 2022 2:00 AM
       Debt forgiveness=income (by Steve [MA]) Sep 21, 2022 5:05 AM
       Debt forgiveness=income (by Dee Ann [WI]) Sep 21, 2022 8:11 AM
       Debt forgiveness=income (by Marv [IL]) Sep 21, 2022 8:39 AM
       Debt forgiveness=income (by S i d [MO]) Sep 21, 2022 9:23 AM
       Debt forgiveness=income (by WMH [NC]) Sep 21, 2022 10:12 AM
       Debt forgiveness=income (by Vee [OH]) Sep 21, 2022 10:19 AM
       Debt forgiveness=income (by WMH [NC]) Sep 21, 2022 10:21 AM
       Debt forgiveness=income (by Renne [TX]) Sep 21, 2022 10:56 AM
       Debt forgiveness=income (by WMH [NC]) Sep 21, 2022 11:26 AM
       Debt forgiveness=income (by Ray-N-Pa [PA]) Sep 21, 2022 11:33 AM
       Debt forgiveness=income (by WMH [NC]) Sep 21, 2022 11:37 AM
       Debt forgiveness=income (by mapleaf18 [NY]) Sep 21, 2022 1:51 PM
       Debt forgiveness=income (by S id [MO]) Sep 21, 2022 3:23 PM
       Debt forgiveness=income (by Renne [TX]) Sep 21, 2022 8:11 PM
       Debt forgiveness=income (by tryan [MA]) Sep 22, 2022 10:04 AM
       Debt forgiveness=income (by John... [MI]) Sep 22, 2022 3:40 PM
       Debt forgiveness=income (by John... [MI]) Sep 22, 2022 3:41 PM

Click here to reply to this discussion.
Click Here to send this discussion to a friend

Debt forgiveness=income (by Dee Ann [WI]) Posted on: Sep 21, 2022 12:49 AM

Anyone in the hive ever sent a 1099C (Debt Forgiveness) to a tenant for unpaid rent you can't collect on?

Would you consider sending one if there were a moratorium in effect, your tenants stopped paying rent although they could have?

I remember hearing that approach in a seminar where it was used to suggest a tenant pay their rent debt, to avoid the IRS notification. Just wondered if anyone has used that approach or would consider it.

In the same vain, if you don't have a judgement, is it considered a debt. And if you don't have a judgement, can you send the debt to a collection agency? --75.11.xx.xx

Debt forgiveness=income (by Dee Ann [WI]) Posted on: Sep 21, 2022 12:53 AM

Therefore, the forgiven debt is considered "income" to the recipient tenant whose debt was forgiven. --75.11.xx.xx

Debt forgiveness=income (by don [PA]) Posted on: Sep 21, 2022 2:00 AM

It also means that you can NEVER collect the debt. I have had tenants get their act together and try to buy a home----but they could not get the mortgage with an unpaid judgment. They called ME begging to pay.

Debt forgiveness=income (by Steve [MA]) Posted on: Sep 21, 2022 5:05 AM

I've done it a few times but as don mentioned once you do it you can never go after them for that money. Each time that I did it I was 99.9999% sure that unless they won the lottery there wasn't any chance that I would ever see a dime of the monies owed me. I admit that the only real reason that I did it was to just give them a bit of misery as payback for all the trouble that they had caused me. I know that one of them ended up being bumped into a higher tax bracket, had 2 IRS audits & bounce numerous checks when their account was frozen.

If there is even a slight chance that they might someday be in a position to be able to & more importantly want to pay it off, I suggest that you just sit on the debt. Of course, you could always just forgive a portion of the debt say the yearly interest. In MA we get 12% interest on court awarded judgements.

Debt forgiveness=income (by Dee Ann [WI]) Posted on: Sep 21, 2022 8:11 AM

Yes, I see and agree!

Recently had jury duty here in Milwaukee. The courts were packed with rooms full of potential jurors, like never before.

The news tonite confirmed the court system is in an emergency; not enough workers, etc. They may be able to purchase a house before I can get a judgement.

Steve, did you forewarn any you were going to send a 1099C as an incentive to pay the debt before you sent the 1099C?

I'm thinking along the lines of terminating this lease as they are leaving the lease early with 7 months left on it, but not terminating it. Once I find replacements I want to terminate the old lease, begin a new lease with new terms for replacements I find. And then, file a 1099C for the portion I am forgiving so I can move forward.

Does that make sense? Rents are much higher than when the current lease was signed. I don't want to be stuck playing out the old lease. --75.11.xx.xx

Debt forgiveness=income (by Marv [IL]) Posted on: Sep 21, 2022 8:39 AM

If you read the instructions for 1099c you will will find that the form is only for use by financial institutions.

Debt forgiveness=income (by S i d [MO]) Posted on: Sep 21, 2022 9:23 AM

"Can I send a debt to a collection agency without a judgment?"

Yes, you can and you should if you've had unacceptable results with DIY collecting. The scenario is this: the person ghosted me when they moved out, leaving no forwarding address. I tally everything up--include my EFT, which our lease specifies is due if they do something to breach the lease--and ship it over along with a copy of the lease, the application, and any personal ID info I have. About 50% of the time, I get a "hit" and we get some money.

Collection agencies have access to skip trace databases, which gives them much better chances of finding a person. Then their agents go to work: sending letters, calling, texting, emailing, etc. Essentially, they "wear them down" to the point where the ex-tenant decides it's better to pay up vs continue with all the interruptions.

I specifically chose my collection agency because they subscribe to a high standard of ethics: they follow the law to the letter and do not use any bully tactics or make false statements. The reason they are so successful is they are PERSISTENT. And yes, the do file the debt on the credit bureaus, which hamstrings most attempts for the debtor to get any credit on favorable terms (or any credit at all).

Then the debtor has to decide: Do I want to pay the couple thousands bucks I owe, or do I want to pay 18% interest on every car loan and 29% on every credit card for the next 10 years?


Debt forgiveness=income (by WMH [NC]) Posted on: Sep 21, 2022 10:12 AM

Marv that is not true. If you read the form you will see it MUST be used for financial institutions - but individuals may certainly use it!

Debt forgiveness=income (by Vee [OH]) Posted on: Sep 21, 2022 10:19 AM

I have done this and have good success when the tenant is using agency assistance, this raises the income requiring an appeal after the court records can show the balance as zero.

Debt forgiveness=income (by WMH [NC]) Posted on: Sep 21, 2022 10:21 AM

" Should I Issue a 1099-C Form if My Ex-Tenant Owes Rent?

First published February 28th, 2021 | Updated June 15th, 2022 by Nomer Caceres. Posted in News - 5 Comments"

By Kimberly Rau, MassLandlords writer

The IRS is clear: If you are forgiven a debt of more than $600, then it counts as income, which means it needs to be reported as such on your taxes. Conversely, if you’re a landlord and you willingly forgive rent that your tenant owes, you can issue a 1099-C form, which then compels them to claim it as income on their taxes.

Debt forgiveness=income (by Renne [TX]) Posted on: Sep 21, 2022 10:56 AM

S i d,

Which agency do you use?

Debt forgiveness=income (by WMH [NC]) Posted on: Sep 21, 2022 11:26 AM

Things to keep in mind about officially forgiving debt, some as noted above: you have now forgiven it and can never collect it, #1. #2 is many tenants are not in a very high tax bracket to begin with and unless they owe you thousands it's not going to hurt them very much. It's more a symbolic thing.

Debt forgiveness=income (by Ray-N-Pa [PA]) Posted on: Sep 21, 2022 11:33 AM

Banks use those 1099s as WMH mentioned to clean up their books as a tool to remove uncollectable debt.

About ten years back, I used a 1099C with a tenant that I felt wasn't collectable. They were semi retired and had SS income along with a small side gig that was on the books. My thought process was to force them to pay me or have this extra income go against the SS income.

My attempt to do this was NOT successful - I never did get paid. I am not sure if the social security income was decreased or not as I had forced them out after they started collecting Dogs.......That is the only time I have ever used that tool. I would be interested in learning if there is a more effective way to use this tool.

Debt forgiveness=income (by WMH [NC]) Posted on: Sep 21, 2022 11:37 AM

Ray, your story confused me. How would sending a 1099-C force them to pay you? If you actually sent one to the IRS then they were off the hook to you - you COULDN'T accept the money after that.

Debt forgiveness=income (by mapleaf18 [NY]) Posted on: Sep 21, 2022 1:51 PM

Interesting. DH has an elderly customer who owns a multifamily (full of DSS/subsidized) just decided he was not going to pay the full invoice back in early 2019 for his new boiler before the wuflu hit. I filed a mechanic's lien and have been filing the mech lien extension faithfully every March. This sounds like an interesting prospect. Does it have to be done in the year it owes or will it inflict more pain by them having to do an amended return?

Debt forgiveness=income (by S id [MO]) Posted on: Sep 21, 2022 3:23 PM

Renee, we will need to discuss that offline. This site offers a similar service and I do not want to compete with one of their sponsors. You might want to look into them as well so you can compare the services offered.

You can reach me at my person email:




Put that all together into one word (no spaces, no caps, no other punctuation...just those three lines combined into one) and then add the "@gmail" dot com. --184.4.xx.xx

Debt forgiveness=income (by Renne [TX]) Posted on: Sep 21, 2022 8:11 PM

Thank you, S i d.

Debt forgiveness=income (by tryan [MA]) Posted on: Sep 22, 2022 10:04 AM

I am gonna have some fun with this ... have a couple judgements coming up on a 20 year birthday. They expire at 20... time to alert the NEW IRS agents to debt foregivness.

With interest these guys will DEFINATLEY be bumped up a tax bracket.

Like a double-wammy little pay back to a dead beat and a nice little distraction for the new irs agents.

Debt forgiveness=income (by John... [MI]) Posted on: Sep 22, 2022 3:40 PM

So, I've reposted this in 2013, 2014, and probably several times in between, but I'll do it again. This comes up every time someone mentions a 1099-C. Marv comes in and says it is only for financial institutions -- then I re-post my belief that this incorrect and ask for his followup -- and then he never replies. So, again, Marv, if you disagree with my opinion on this, I'd love to hear more. But, again, I've been asking for that since at least 2013, so...

In any case, here's my repost:

I have seen repeated confusion on that -- even from Marv here (who tends to know his stuff). MY understanding is that the confusion comes from the difference between those that are REQUIRED to report using the 1099-C and those that are ALLOWED to report using it. Basically, those REQUIRED to file a 1099-C for forgiving debt include:

"financial institutions, credit unions, and organizations whose significant trade or business is the lending of money"

Again, that is a list of who MUST use the form. Therefore, a lot of people seem to think "Ok, Landlords are not on that list, so they CANNOT use the form." Back in 2010, Marv stated that it could "only be used by banks." However, I disagree with that -- and I'm fairly certain the IRS does too.

See this IRS memo:

The question basically asked was: "May an individual or entity not REQUIRED to file a Form 1099-C under section 6050P of the Internal Revenue Code nevertheless voluntarily file such a form?"

The summary answer:

"Individuals or entities not required by section 6050P to file Form 1099-C may nevertheless voluntarily file such forms in appropriate circumstances."

It also states: "While the requirement to report discharges of indebtedness applies only to the entities described above, there is no specific prohibition in the Internal Revenue Code or the Income Tax Regulations that forbids the reporting of discharges of indebtedness by entities not required to report. Such reporting may encourage voluntary tax compliance and proper gross income inclusions."

You can read the whole thing for more details, but my general understanding of it is that we can indeed file 1099-C forms for forgiving debt. These articles agree with my interpretation:

So, I think we're fully allowed to issue a 1099-C.

- John...

P.S. I am not a lawyer or tax advisor. Your mileage may vary. Look both ways before crossing.

Debt forgiveness=income (by John... [MI]) Posted on: Sep 22, 2022 3:41 PM

Note that, even though I think we are ALLOWED to do it, I don't. I'm the type that still holds out hope that they might pay up one day. If your state has a statute of limitations on collecting that debt, then I'd probably issue the 1099-C just before that period expires if you're certain that you'll never be able to collect. But, otherwise, I'm not one to file one myself -- but I still think you CAN if you want to according to the IRS rules.

Click Here to send this discussion to a friend
Report discussion to Webmaster

Subject: RE: Debt forgiveness=income
Your Name:
Your State:

Debt forgiveness=income
Would you like to be notified via email when somebody replies to this thread?
If so, you must include your valid email address here. Do not add your address more than once per thread/subject. By entering your email address here, you agree to receive notification from every time anyone replies to "this" thread. You will receive response notifications for up to one week following the original post. Your email address will not be visible to readers.
Email Address: