Lenders not required to file Form 1099C for PPP loan forgiveness

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September 2020

Overview

The IRS on September 22 issued Announcement 2020-12, notifying lenders of covered loans made under the Paycheck Protection Program (PPP) that they should not file information returns or furnish payee statements under Section 6050P to report the amount of qualifying forgiveness with respect to those loans. Section 6050P generally requires a lender that discharges at least $600 of a borrower’s indebtedness to file a Form 1099-C, Cancellation of Debt, with the IRS and to furnish a payee statement to the borrower.

The takeaway

The IRS Announcement should provide relief for many lenders. Although the CARES Act clearly provides that qualifying forgiveness is not includible in a borrower’s gross income for tax purposes, the Section 6050P regulations generally require lenders to report the amount of any discharged debt on a Form 1099-C, regardless of whether the amount discharged represents taxable income to the borrower. As a result, the new guidance provides lenders with much-needed certainty regarding their information reporting requirements and should result in less confusion during next year’s tax filing season.

It should be noted that the relief applies only to qualifying forgiveness, or amounts that are forgiven because the borrower satisfied all the criteria in Section 1106 of the CARES Act (the funds were used for eligible expenses, employees’ wages were not reduced by more than 25%, etc.). Thus, if a lender chooses to forgive all or a portion of a PPP loan, regardless of whether the borrower meets the applicable requirements, then it must report any amounts that do not constitute qualifying forgiveness on Form 1099-C (assuming all other requirements for filing a Form 1099-C are met).

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Dominick Dell'Imperio

Partner, PwC US

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