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No Information Reporting by Lenders, PPP Loans Forgiven Under CARES Act (COVID-19)
The IRS has released an advanced version of Announcement 2020-12 clarifying that lenders that make Paycheck Protection Program (PPP) loans that are later forgiven under the “Coronavirus Aid, Relief, and Economic Security Act” (Pub. L. No. 116-136) (CARES Act) should not file information returns or furnish payee statements to report the amount of qualifying forgiveness.
Announcement 2020-12 [PDF 13 KB] explains that lenders should not file information returns or furnish payee statements under section 6050P to report the amount of qualifying PPP loan forgiveness.
In general, a lender subject to section 6050P (referred to as an “applicable entity”) that discharges at least $600 of a borrower’s indebtedness is required to file a Form 1099-C, Cancellation of Debt, with the IRS and to furnish a payee statement to the borrower.
Under provisions of the CARES Act, qualifying small businesses may obtain PPP loans guaranteed by the Small Business Administration (SBA), and such eligible businesses may qualify for forgiveness of indebtedness for all or a portion of the stated principal amount of a covered PPP loan if certain conditions are satisfied. The CARES Act provides that such debt forgiveness is excluded from the borrower’s gross income.
Under Announcement 2012-12, when all or a portion of the stated principal amount of a covered loan is forgiven because the eligible recipient satisfies the forgiveness requirements under the CARES Act, an applicable entity is not required to file a Form 1099-C information return for federal tax purposes or to provide a payee statement to the eligible recipient as a result of the qualifying forgiveness. The IRS release explains that the filing of such information returns could result in the issuance of underreporter (of income) notices to eligible recipients, and the furnishing of such payee statements to eligible recipients could cause confusion. The IRS states that Announcement 2020-12 is intended to prevent any such confusion.