The IRS has ordered lenders who wrongly filed or provided 1099-MISC forms, Miscellaneous income, reporting certain payments on subsidized loans from the US Small Business Administration (SBA) as borrower’s income, to file and provide corrected 1099-MISC forms that exclude these subsidized loan payments (Advert 2021-2).
Under the CARES (Coronavirus Aid, Relief, and Economic Security) Act, PL 116-136, the SBA is authorized to pay six months of principal, interest and fees on covered SBA loans. The Consolidated Appropriation Law 2021, PL 116-260, provides that these payments are not included in the gross income of the borrower. More, Notice 2021-6, issued Jan. 19, waived the reporting requirements of Form 1099-MISC for these payments.
If a lender has already provided 1099-MISC forms that report these loan payments to borrowers before, on, or after December 27, 2020 (the date of enactment of the Consolidated Appropriations Act, 2021), the lender must provide borrowers with the 1099 forms. -MISC corrected that exclude these loan repayments. Additionally, if a lender has already filed IRS 1099-MISC forms that report these loan payments, the lender must file with corrected IRS 1099-MISC forms that exclude these loan payments.
Instructions on how to file amended returns are contained in Form 1099-MISC and Form 1099-NEC, Compensation for non-employees, Instructions, and the IRS 2020 General Instructions for certain feedback.
If a lender provides corrected payee statements within 30 days of the remittance deadline, it will have reasonable cause for any Sec. 6722 Penalty for failure to provide. A lender is required to file corrected information returns before the filing deadline in order to avoid Sec. 6721 penalties for failure to produce.
– Sally P. Schreiber, JD, ([email protected]) is a Tax advisor editor-in-chief.