Borrowers receiving a Form 1099-MISC, “Miscellaneous Information,” that includes as income certain payments on loans authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, such as the Paycheck Protection Program (PPP), may need to request a corrected 1099-MISC from their lenders. If income relating to these types of loan forgiveness is incorrectly included in a Form 1099, it could result in IRS correspondence to borrowers regarding underreported income.
The IRS released Announcement 2021-2 directing lenders to issue corrected Forms 1099-MISC within 90 days if payments of principal, interest and associated fees on a loan subsidized by the Small Business Administration are reported as income to the borrower. Directions for filing corrected Forms 1099-MISC can be found in the 2020 filing instructions. Failure to do so could result in penalties assessed to the lender.
Taxpayers that received Forms 1099-MISC from a lender that supplied CARES Act funding should carefully scrutinize the amounts reported to ensure such payments are not being reported as income. If this occurs, they should immediately contact the lender and request a corrected Form 1099-MISC. In January 2021, the IRS previously waived any requirement by lenders to issue Forms 1099-MISC reporting payments of principal, interest and associated fees on CARES Act funding.
For more information about how these issues may affect you, connect with your Baker Tilly tax professional.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.