Finance Update: IRS Notifies Lenders Not to File Form 1099-C or Provide IRS Payee Statements for PPP Loan Forgiveness Amounts

Paycheck protection program ppp loan for small business forgiveness application.

On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (“SBA”) offered loans under the Paycheck Protection Program (“PPP”) designed to provide a direct incentive for businesses to keep their workers on the payroll.

Updates to PPP Lenders

On September 22, 2020, the Internal Revenue Service (“IRS”) issued Announcement 2020-12 (the “Announcement”) notifying PPP lenders not to report the amount of qualifying loan forgiveness granted to borrowers under the PPP. Unlike the usual treatment of debt forgiveness under the Internal Revenue Code (the “Code”), PPP lenders should not file Form 1099-C information returns or furnish payee statements under section 6050P of the Code for qualifying PPP loan forgiveness.

The Announcement stated that if all or part of the stated principal amount of a covered PPP loan is forgiven because the eligible borrower satisfies the forgiveness requirements under section 1106 of the CARES Act, a PPP lender is not required to, for federal income tax purposes only, and should not, file a Form 1099-C information return with the IRS or provide a payee statement to the eligible borrower under section 6050P of the Code for the loan forgiveness amount. The Announcement indicated that the filing of these information returns with the IRS could result in the issuance of underreported notices (IRS Letter CP2000) to eligible borrowers, and the furnishing of payee statements to eligible borrowers could cause confusion, which the Announcement aims to prevent.

Patrick Ellis is a Traverse City, Michigan-based attorney counseling businesses across numerous industries and stages of maturity regarding corporate formations and governance, investment financing, commercial and strategic transactions, real estate, and day-to-day, operational and legal matters. If you have any questions about the issues addressed in this post, or if you would like a copy of any of the materials mentioned in it, please contact:

Patrick M. Ellis, Esq.
Phone: (231) 947-7900
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