1099 canceled debt
Hello~~In 2013, we negotiated a settlement on an old debt. We made the last payment on 21 December of that year. It cleared our bank before the end of the year. Our agreement with the company was that upon receipt of that payment, the balance of the debt would be forgiven. The IRS says that forgiven debts must be claimed and taxes paid on them in the year they were forgiven, whether a 1099 is received or not. We did not receive a 1099.
We included the income in our tax return for 2013 and paid the required taxes on it. (We were not insolvent in 2013.)
Yesterday, we received a year 2014 1099 on the debt. I suppose our choices are two: We can submit an amended 2013 tax return and wait for the refund, or we can send an explanation with our tax return for 2014, without including this income.
What do you suggest?