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IRS clarifies reporting requirements for PPP loan forgiveness
The Internal Revenue Service (IRS) Tuesday published an announcement related to reporting requirements for paycheck protection program (PPP) loans forgiven under the CARES Act. Based on the announcement, lenders who have made PPP loans that qualify for forgiveness are not required to file information returns or furnish payee statements to report the amount of qualifying forgiveness.
The IRS typically requires lenders that discharge more than $600 of a borrower's indebtedness to file a Form 1099-C and Cancellation of Debt with the IRS and to furnish a payee statement to the borrower.
In the announcement, the agency indicated that "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 section 1106 of the CARES Act, an applicable entity 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 recipient under section 6050P of the Code as a result of the qualifying forgiveness. "
The IRS highlighted that the filing of "such information returns" with the agency could result in the issuance of underreported notices to eligible recipients and cause confusion.
NAFCU continues to advocate for a simplified loan forgiveness process for PPP loans under $150,000 and regularly updates its FAQs as more forgiveness guidance has been released. Access all relevant resources here.