The IRS is seeking public comment regarding guidance for entities that discharge indebtedness and may be required to furnish 1099-C returns.

Section 6050P(b) of the Tax Code says that an applicable entity must issue an information return if $600 or more of indebtedness is discharged. Treasury regulation §1.6050P-1(b)(2) also lists eight identifiable events that trigger a reporting obligation, including the expiration of a non-payment testing period that results when a creditor does not receive payment or engage in bona fide collection activity for specified periods of time.

Acknowledging in its notice that taxpayers who receive a 1099-C due to expiration of the non-payment testing period "may be confused" regarding whether to include the amount reported on the Form 1099-C as income, the IRS requests comments as to whether the non-payment testing period rule should be modified or eliminated.

The Treasury and the service are particularly interested in any comments regarding:

  • Whether Treas. Reg. § 1.6050P-1(b)(2)(i) should be amended to remove the non-payment testing period as an identifiable event;
  • Whether the removal of the non-payment testing period would increase or decrease the burden on creditors and taxpayers;
  • If the non-payment testing period is removed, whether additional rules are necessary to address continuing collection activity; and,
  • If the non-payment testing period is retained, how it should be modified to improve its usefulness and alleviate confusion.

Written comments should be sent to CC:PA:LPD:PR (Notice 2012-65), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044.  Comments may be hand delivered between 8:00 a.m. and 4:00 p.m. Monday to Friday to CC:PA:LPD:PR (Notice 2012-65), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, D.C.
Comments may also be emailed to (include "Notice 2012-65" in the subject line).

All comments will be available for public inspection and copying and must be received by Feb. 11, 2013.

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