Realizing you forgot to report something on your tax return can be a good or bad thing, depending on whether it means you owe more money or the Internal Revenue Service owes you. If you failed to include a Form 1099-C on your tax return, it's probably the former: You probably owe more in taxes than you originally thought. You can fill out a Form 1040X to amend your tax return and pay any additional taxes you owe.

Form 1099-C Lowdown

If a creditor forgives or cancels any of your debt, it will issue you a Form 1099-C. If you received a Form 1099-C, so did the IRS, and the agency will notice if you exclude it from your tax filing. You may receive Form 1099-C if you negotiated a debt settlement on credit card debt or student loan debt or if you declared bankruptcy during the year. If you're unsure why you received a 1099-C, match the code in Box 6 of your 1099-C to the canceled debt categories in IRS Publication 4681.

Tax Implications

The IRS considers canceled debt to be a form of income. Some types of forgiven debts -- like those from Chapter 7 and Chapter 13 bankruptcy cases -- aren't taxable, but debt cancellation from a credit card company or student loan is taxable. Fill out IRS Form 982 to calculate how much, if any, of your debt cancellation is excluded from your taxable income.

Amending Your Return

To make things right, fill out Form 1040X to amend your tax return. Form 1040X allows you to fill data into two columns -- one with the information you originally filed and another with your correct information. After filling in your updated data, recalculate the tax you owe to the IRS. If you owe more in taxes, include a check for the dollar amount with your return. Regardless of whether you owe or not, include a copy of your newly discovered Form 1099-C with your amended tax return before mailing it to the IRS.

Extra Fees

Unfortunately, you may have racked up late fees on any taxes you didn't originally pay. The IRS is allowed to charge up to 0.5 percent per month on unpaid taxes. If the 1099-C omission substantially understated your tax bill, you may face an immediate 20 percent penalty. If you're concerned about potential fees, reach out to the IRS Taxpayer Advocacy Service. The IRS may be willing to waive fees if the creditor was late sending out the 1099-C and you acted in good faith.