1099 C

[Zee]

1099C was given to the student and her parents for a canceled debt that the student received from a student loan. She isn't a teacher . Who has to report the 1099C?   The student is the borrower and the parents are co borrowers.

[The-Tax-Lady]

Is it a Parent Plus loan? If so, I would say the parents, who are the actual borrowers, would report the 1099C on their return. 

Student loans are tough to cancel, is it a private loan, not Federally backed? What was the code for the cancelled debt and is the box checked that the debtor is personally liable?

Try to work up an Insolvency Worksheet to eliminate the debt from being taxable.

[Zee]

Hi Tax Lady, it is a private loan, student loan is the debt description and borrower was personally liable.

It is not a parents plus loan , they co - signed the loan for their daughter. code is F

[John H · Accepted solution]

Are Parents Co-Borrowers or are they Guarantors?  if they are only Guarantors, they should not have received a 1099-C   Instructions for 1099-c are VERY clear on this but some lenders refuse to follow instructions and regulations on this. If parents are guarantors they received none of the proceeds of the loan and don't have discharge from debt income because being a Guarantor is not being Debtor. contingent liability, not a Debtor because did not receive any funds.  

If your client is a guarantor I would attach a not to their return and indicating that the 1099-c was issued in error and include a copy of the Promissory Note with the guarantor section the client signed indicating that they were only signing as a guarantor.

Student borrower should report the entire 1099-C income on his/her return and visit https://www.irs.gov/pub/irs-pdf/p4681.pdf to see if insolvent.