The Internal Revenue Service said Tuesday that lenders who issue Paycheck Protection Program loans that are subsequently canceled under the CARES Act should not file information returns or provide payee statements to report the payroll. ‘cancelation.
In Announcement 2020-12, the IRS has stated that when all or part of the stated principal amount of a covered loan is canceled because the recipient meets the cancellation requirements under Section 1106 of the CARES Act, an entity is not required, “for federal income tax purposes only,” and must not file an information return on Form 1099-C with the IRS or provide a beneficiary return to the beneficiary as a result of the delivery.
The IRS noted that filing such information returns with the IRS could result in the issuance of underreporting notices on the IRS CP2000 letter to eligible recipients, and the provision of beneficiary statements. to these recipients could therefore lead to confusion. The IRS released the ad in an attempt to avoid such confusion.
The announcement may be confusing, however, as transparency around PPP lending has been the subject of wrangling in Congress. Earlier this year, Democrats pressured the Small Business Administration to release more information on loan recipients. Some information eventually came out as spreadsheets, but the data turned out to be inaccurate in many cases. Earlier this month, the Justice Department’s criminal division indicted 57 defendants with PPP-related fraud and identified nearly 500 people suspected of COVID-related loan fraud.