Lenders Will Not File Form 1099-C For Forgiven PPP Loans

To prevent confusion, the IRS notified lenders that they should not file cancellation-of-debt information returns or furnish payee statements under Sec. 6050P, which is used to report the amount of qualifying forgiveness concerning loans made under the Paycheck Protection Program (PPP) (Announcement 2020-12).

The PPP, created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, allows qualifying businesses to obtain loans guaranteed by the U.S. Small Business Administration. Some loan recipients are eligible for forgiveness of all, or a portion of the stated principal amount of their PPP loan, if certain conditions are satisfied, and the forgiven amount is excluded from the borrower’s gross income.

Sec. 6050P generally requires a lender discharging 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. However, the IRS is advising lenders that when all, or a portion of the stated principal amount of a PPP loan is forgiven because the eligible recipient satisfies the forgiveness requirements, the lender is not required to, and should not, file a Form 1099-C information return with the IRS or provide a payee statement to the eligible recipient as a result of the qualifying forgiveness.

The IRS warns that the filing of such information returns could result in the issuance of underreported notices (IRS Letter CP2000) to eligible recipients, and the furnishing of such payee statements to recipients could cause confusion.

If you think the decision may affect you, schedule a meeting to discuss the impact at hand.