The IRS today released an advance 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.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.