The IRS has issued new guidance directing lenders not to file information returns or furnish statements to borrowers to report the amount of qualifying loan forgiveness for covered loans made under the Paycheck Protection Program.
Generally, forgiveness of debt is considered taxable income for a borrower. However, under provisions in the CARES Act, PPP forgiveness income is not includible in the gross income of the eligible recipient. The Internal Revenue Code generally requires a lender to file form 1099-C when debt is forgiven, regardless of the potential taxability of the income. The exemption outlined in the guidance will address several concerns previously raised by ABA and others and provide greater clarity to borrowers regarding PPP loan forgiveness.
