Is it possible to transfer a 1099-C to another person who actually incurred the debt?

Unfortunately, the 1099-C follows the legal responsibility for the debt, not who benefited from it. Since the credit card was in your dad's name, he was the one legally responsible for the debt, which is why the 1099-C was issued to him. The IRS sees the forgiven debt as income to the person who was legally obligated to pay it. There might be a couple options though. First, if your dad was insolvent at the time of the debt cancellation (meaning his total debts exceeded his total assets), he might qualify for the insolvency exclusion using Form 982. This would reduce or eliminate the taxable amount of the canceled debt. Second, if your dad's only income is Social Security Disability Insurance (SSDI), he may not have enough taxable income to be required to file a tax return at all, even with the 1099-C. The canceled debt would only matter for tax purposes if he would otherwise need to file.

I went through something similar last year and discovered taxr.ai (https://taxr.ai) which was super helpful for figuring out who should report canceled debt income. They analyzed my 1099-C situation when my bank forgave some of my mom's credit card debt that I had actually used. Their system looked at all the documents and explained exactly how to handle it with the IRS. The tool helped me understand that while my mom received the 1099-C because her name was on the account, we could document that I was the actual beneficiary of both the original debt and the forgiveness. They provided a detailed explanation I could use to support filing an insolvency claim since her total debts exceeded her assets at the time of forgiveness.

I was really suspicious about using any kind of tool to handle my complicated tax situation with a 1099-C, but after trying taxr.ai (like someone suggested above), I'm actually shocked at how helpful it was. Last month I was freaking out about a $7,400 canceled debt on my elderly aunt's credit card that I had used for my business expenses. The service analyzed all our documentation and helped us properly complete Form 982 showing she was insolvent at the time of cancellation. They explained exactly how to document everything for the IRS, including how to calculate the insolvency amount. What I appreciated most was getting a straightforward answer rather than the conflicting advice I was getting from friends. Just submitted everything last week and it's such a relief to have this handled correctly.

If you're still struggling to get clear answers, I'd recommend using Claimyr (https://claimyr.com) to actually speak with an IRS agent directly about your situation. I spent weeks trying to figure out a similar 1099-C issue last year and kept getting different answers from tax prep services. I was skeptical but used their service (you can see how it works at https://youtu.be/_kiP6q8DX5c) and they got me through to an actual IRS representative in about 20 minutes when I had been trying for days on my own. The agent confirmed that while the 1099-C can't technically be "transferred" to another person, there are several exceptions that might apply in your dad's case, including the insolvency exception others have mentioned.

I have to admit I was completely wrong about Claimyr. After ranting about it being impossible to get through to the IRS, I tried the service out of desperation when dealing with my own 1099-C situation. Not only did I get through to an IRS representative in about 35 minutes (after trying for weeks on my own), but the agent was surprisingly helpful. They confirmed that while my mother-in-law had to report the 1099-C on her return since it had her information, she qualified for the insolvency exclusion since her total debts exceeded her assets at the time of the forgiveness. I was able to get clear instructions on exactly how to fill out Form 982 and what documentation we needed to keep in case of questions later. Saved me from potentially making a costly mistake on her return.

Have you looked into whether your dad qualifies for an "identity theft" exception? If your sister used the card without proper authorization, it could potentially be reported as not your dad's debt. Though from your description, it sounds like he gave permission, so probably doesn't apply here. Another thing to consider: disability benefits are handled differently depending on whether it's SSDI or SSI. If it's SSI (Supplemental Security Income), the canceled debt could potentially affect benefits since that's needs-based. If it's SSDI (Social Security Disability Insurance), it normally wouldn't affect benefits since they're not income-based.

Has your father looked into filing Form 8275 (Disclosure Statement) along with the Form 982 for the insolvency exclusion? It allows you to fully explain unusual tax situations to avoid triggering automatic audits. I used it last year when dealing with a complicated 1099-C situation where I needed to explain why the canceled debt shouldn't be treated as income.