SBA: Banks Must File 1099/1098 for CARES Act Loan Subsidies

The Small Business Administration this week released a Q&A document addressing certain tax issues related to payments made on behalf of borrowers to lenders for existing SBA 7(a), 504 and microloans. Under the CARES Act, the SBA began making payments to cover for a six-month period the principal, interest and any associated fees small businesses may owe on these loans.

In general, SBA said that lending institutions must prepare and file Form 1099-MISC indicating the amount of principal, interest and any fees that were made by SBA to the lender on behalf of the borrower.  In addition, where lenders received payment subsidies for loans for which a Form 1098, Mortgage Interest Statement is due, SBA said the form should be filed by the lender.

The American Bankers Association is currently reviewing the guidance, but noted that it is not in line with many banks’ expectations or interpretation of information reporting requirements.  The association is working with SBA and other authorities to address concerns.