Lenders May Need to File Corrected Forms 1099 if Certain CARES Act/SBA Subsidized Loan Payments Have Been Reported to Borrowers
The Internal Revenue Service (IRS) has notified lenders (Announcement 2021-2) that have filed with the IRS, or furnished to a borrower, a Form 1099-MISC reporting certain payments on loans subsidized by the U.S. Small Business Administration (SBA) as income to the borrower that the lender must file and furnish corrected Forms 1099-MISC, excluding these subsidized loan payments.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) authorized the SBA to subsidize certain payments of principal, interest, and any associated fees owed by a borrower on certain loans. The Consolidated Appropriations Act, 2021 retroactively provided that such payments are not to be included in the gross income of the person on whose benefit the payment was made. On January 19, 2021, the IRS waived the requirement for lenders to file with the IRS, or furnish to a borrower, a Form 1099-MISC reporting the payment of these payments.
The IRS, in this new notification, is informing all lenders that if they had furnished to borrowers a Form 1099-MISC reporting these subsidized loan payments, the lender must furnish to the borrowers a corrected Form 1099-MISC that excludes these loan payments. In addition, if the lender has filed Form 1099-MISC with the IRS reporting these loan payments, the lender must file with the IRS a corrected Form 1099-MISC that excludes these loan payments. Directions for how to file a corrected Form 1099-MISC are included in the 2020 Instructions for Forms 1099-MISC and 1099-NEC and the 2020 General Instructions for Certain Information Returns. If a lender described in this Tax Update furnishes the corrected payee statements within 30 days of the furnishing deadline, the lender will have reasonable cause for any failure-to-furnish penalty. A lender described in this Tax Update must file corrected information returns by the filing deadline in order to avoid failure-to-file penalties.
If you wish to discuss any of the matters in this update in more detail, please contact Chuck Marston, Danelle Stewart, or Tyler Feith at firstname.lastname@example.org, email@example.com, or firstname.lastname@example.org or 724-934-0344.