When a loan ends badly instead of paying off, the IRS may still expect paperwork — this time issued to the borrower. NoteHarbor builds both forms from the loan you already track.
1099-A — the foreclosure form
When your foreclosure case is closed out (Foreclosure tab → Close Out), the loan is marked Foreclosed and a Generate 1099-A card appears on the Foreclosure tab. The form reports your acquisition of the secured property:
- Box 1 — the acquisition date, straight from the foreclosure close-out.
- Box 2 — the balance of principal outstanding from the loan ledger (principal only — never accrued interest or foreclosure fees).
- Box 4 — the property's fair market value: you enter it at generation (usually the foreclosure sale price, or the appraisal if you kept the property).
- Box 5 — whether the borrower was personally liable (recourse). Checked by default; uncheck only for a true non-recourse note.
1099-C — the cancellation-of-debt form
Forgive a balance — a charge-off, a settlement for less than owed, a written-off deficiency — and the borrower may need a 1099-C ($600+ of canceled debt requires one). For a Foreclosed or Charged Off loan (or a Closed loan where you supply the figure), open the loan's Tax Tracking tab and use the Generate 1099-C card:
- Box 1 — the date of the identifiable event (prefilled from the foreclosure close when there is one).
- Box 2 — the amount discharged, prefilled with the balance as of the box 1 event date (recoveries recorded after the event are added back, and changing the date refreshes the figure) but editable — if you settled for less, report what was actually forgiven. Closed loans have no default; you enter the amount.
- Box 6 — the identifiable event code, a plain-language selector (default G — decision to stop collecting).
- Box 7 — optional FMV for a combined A/C situation: a same-year foreclosure where you file only the 1099-C instead of both forms.
Two copies, one rule
Same discipline as the 1099-INT: Copy B (for the borrower) always shows a masked Tax ID; the filing copy is the only output with the full Tax ID, and generating it is recorded in your audit log every time. A borrower with no Tax ID on file is flagged — add their SSN/EIN first.
Heads up: on multi-borrower loans the form is issued to the primary borrower. If co-borrowers were also personally liable, issue their copies manually for now.
Paper filing only — e-file is not offered. File with the IRS on official scannable Copy A forms (with a Form 1096 transmittal) — the copies here are your reference and the borrower's statement, not the red scannable form. Canceled debt can be taxable income to the borrower, and exclusions (insolvency, bankruptcy) are determined on their return — these forms support your filing; confirm specifics with your CPA.