Life Events Back Financial Had Debt Forgiven Had Debt Forgiven The tax impact of debt forgiveness and cancellation depends on your individual facts and circumstances. Generally, if you borrow money and the lender later forgives the debt, you may have to include the cancelled amount in income for tax purposes. The lender usually is required to report the amount of the cancelled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. There are several exceptions to the taxability of cancelled debt, such as insolvency or bankruptcy. For more information see Publication 4681.