Do we issue a 1099-MISC for a payment we made to a lienholder for an insurance claim? The car was totaled and we (the insurance company) paid off the lien.

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According to Ms. Hudgins (ID #1001306495) of the IRS, if the lien payoff was less than or equal to the vehicle's current substantiated value (substantiated being the key word here), then there was no income to the lienholder and no 1099 is necessary. However, even if the lien payoff was greater than the vehicle's current worth, if the payoff was to a financial institution like a bank or credit union, then the lienholder was most likely a corporation and therefore not subject to 1099 reporting anyway. If the lienholder is not a corporation and the amount paid exceeded the vehicle’s current worth, you would report the excess.

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