Additionally, continued the Service Center Advice, "we express no opinion whether utilization of
Form 1099C as a debt collection technique may violate provisions of non-Internal Revenue Code law, such as Federal Bankruptcy law, and possibly provisions of the Fair Debt Collection Act and similar consumer protection legislation."
This doesn't affect the collection effort, but it does reinforce the importance of using "open-ended" phrases in the IRS collection letter such as "we will, at our option, issue the
Form 1099c if payment is not received."
It reported COD income (Form 1099C) to the taxpayer for the difference between the mortgage debt and $1.
This information will support both a corrected Form 1099C and the taxpayer's assertion to the IRS that the 1099 is incorrect.
Generally, the lender would have notified the IRS by filing
Form 1099C (Cancellation of Indebtedness).