IRS 1099-C surprise: IRS tax follows canceled debt Connie Prater IRS Internal Revenue Service views forgiven debt as income 1099-C surprise: IRS tax follows canceled debt Internal Revenue Service views forgiven debt as income Source blindsided The IRS may treat any reduced debt as taxable income. IRS IRS 1099-C surprise: IRS tax follows canceled debt The IRS may treat any reduced debt as taxable income. IRS Connie Prater IRS