The American Institute of CPAs has written to the Internal Revenue Service agreeing with the IRS’s
“We support the Internal Revenue Service’s efforts to address issues surrounding
The AICPA letter noted that confusion and misreporting occur because the 36-month nonpayment testing period can result in a Form 1099-C being issued several years after the debt is legally discharged. The AICPA recommended that the IRS amend the applicable regulations so that a Form 1099-C is issued only for the year that a debt is legally discharged, which would solve the timing problem created by the 36-month testing period.
The AICPA also encouraged the IRS to collaborate with other government agencies involved with credit card and other debts to ensure that the rules for legal discharge of debt are applied so that borrowers do not receive a Form 1099-C if the lender or third party purchaser of the debt intends to continue collection efforts.