If I get paid on a 1099-C, but only earn a portion of the money reported on the 1099-C, how do I separate out my actual income so it doesn't look like I earned the full amount on the form? For example: I am an attorney, and when I settle a case I get a 1099-C from the insurance company. However, the 1099-C is for the full settlement amount, and I only take a percentage fee on that full amount. So, the 1099 shows the full settlement and not my actual income for my fee.
A 1099-C is issued for forgiveness of debt. Since the 1099-C is not for your debt that was forgiven, I believe the 1099 should be issued in the person’s name who had the debt forgiven. You would then report income of the amount you received on Schedule C. Otherwise, the IRS will be looking for the full amount of the 1099-C to be reported on your tax return.
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Answered by: Amy L. Bishop, CPA, MST, is a tax and accounting manager with Delisi, Keenan & Associates PC in Greensburg, Pa.