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Announcement 2021-2: Lenders to correct Forms 1099-MISC if previously reported loan payments as income

Announcement 2021-2: Lenders to correct Forms 1099-MISC

The IRS today released an advance version of Announcement 2021-2 to notify lenders that have filed with the IRS (or furnished to a borrower) a Form 1099-MISC, “Miscellaneous Information,” reporting certain payments relating to loans subsidized by the U.S. Small Business Administration as income of the borrower and further providing that these lenders must file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments.

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Read Announcement 2021-2 [PDF 66 KB]

Summary

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136) authorized the SBA to subsidize certain payments of principal, interest, and any associated fees owed by a borrower on certain loans.

Subsequently, provisions of the Consolidated Appropriations Act, 2021 (Pub. L. No. 116-260) retroactively provided that these subsidized loan payments are not included in the gross income of the person on whose behalf the payment is made.

The IRS in January 2021 issued Notice 2021-6 to waive a requirement for lenders to file with the IRS (or to furnish to a borrower) a Form 1099-MISC reporting the payment of principal, interest, and any associated fees subsidized by the SBA under the CARES Act provision.

Today’s release explains that the filing of information returns that included these subsidized loan payments could result in IRS correspondence to borrowers regarding underreported income, and the furnishing of payee statements that included these loan payments to borrowers could cause confusion. Accordingly, Announcement 2021-2 provides:

  • If a lender has already furnished to borrowers Forms 1099-MISC that report these loan payments, whether before, on, or after December 27, 2020, the lender must furnish to the borrowers corrected Forms 1099-MISC that exclude these loan payments.
  • If a lender has already filed with the IRS Forms 1099-MISC that report these loan payments, whether before, on, or after December 27, 2020, the lender must file with the IRS corrected Forms 1099-MISC that exclude these loan payments.
  • If a subject lender furnishes corrected payee statements within 30 days of the furnishing deadline, it will have reasonable cause for any failure-to-furnish penalty imposed under section 6722. An eligible lender must file corrected information returns by the filing deadline in order to avoid section 6721 failure-to-file penalties. 

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