What information should be entered in Box 6 (Identifiable event code), and how is it determined?

Box 6 on Form 1099-C (Cancellation of Debt) is used to report the identifiable event code, which indicates the specific event or reason for the cancellation of debt. The code helps the IRS understand the circumstances surrounding the cancellation of the debt and assists in determining whether the debtor might need to include the canceled amount as taxable income.

Identifiable Event Codes for Form 1099-C:

The identifiable event code in Box 6 corresponds to a specific event or reason for the cancellation of the debt. The possible codes are:

1. Code A – Bankruptcy: This code is used if the debt is canceled as part of a bankruptcy proceeding.
2. Code B – Identifiable Event Occurred: This code is used when the debt is canceled due to an identifiable event, such as a foreclosure or a similar event.
3. Code C – Expedited Charge-Off: This code is used when the lender accelerates the charge-off of the debt, meaning the debt is written off earlier than expected.
4. Code D – Debt Discharge in Connection with a Settlement Agreement: This code is used when the debt is discharged as part of a settlement agreement between the debtor and the creditor.
5. Code E – Debt Forgiveness: This code is used when a creditor forgives the debt due to various reasons, such as a negotiated reduction or full cancellation.
6. Code F – Debt Discharge by IRS or Other Government Agency: This code is used if the debt is canceled due to action by the IRS or another governmental agency.

How is the Code Determined?

The identifiable event code is determined by the nature of the debt cancellation event. Here’s how to decide which code to use:

• If the debt was canceled due to bankruptcy proceedings, use Code A.
• If the debt was discharged following a foreclosure or other identifiable event, use Code B.
• If the debt was written off earlier than normal due to the creditor’s decision, use Code C.
• If the debt was forgiven through a settlement agreement, use Code D.
• If the debt was forgiven or discharged as a result of negotiations or an agreement, use Code E.
• If the IRS or a government agency discharged the debt, use Code F.

Each event corresponds to a different tax treatment, so it’s important to choose the correct code based on the specific circumstances of the debt cancellation.