In most situations, if you receive a Form 1099-C from a lender after negotiating a debt cancellation with them, you'll have to report the amount on that form to the Internal Revenue Service as taxable income.Certain exceptions do apply.n most situations, if you receive a Form 1099-C from a lender after negotiating a debt cancellation with them, you'll have to report the amount on that form to the Internal Revenue Service as taxable income. Certain exceptions do apply.