IRS requires corrected information returns for certain SBA loans

By Sally P. Schreiber, J.D.

The IRS instructed lenders that have erroneously filed or furnished Forms 1099-MISC, Miscellaneous Income, reporting certain payments on U.S. Small Business Administration (SBA) subsidized loans as income of the borrower, to file and furnish corrected Forms 1099-MISC that exclude these subsidized loan payments (Announcement 2021-2).

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, the SBA is authorized to pay six months of principal, interest, and fees on covered SBA loans. The Consolidated Appropriations Act, 2021, P.L. 116-260, provides that these payments are not includible in the borrower’s gross income. In addition, Notice 2021-6, issued Jan. 19, waived Form 1099-MISC reporting requirements for these payments.

If a lender has already furnished Forms 1099-MISC that report these loan payments to borrowers either before, on, or after Dec. 27, 2020, (the date of enactment of the Consolidated Appropriations Act, 2021) the lender must furnish to the borrowers corrected Forms 1099-MISC that exclude these loan payments. In addition, if a lender has already filed with the IRS Forms 1099-MISC that report these loan payments, the lender must file with the IRS corrected Forms 1099-MISC that exclude these loan payments.

Instructions on how to file amended returns are contained in the Form 1099-MISC and Form 1099-NEC, Nonemployee Compensation, instructions and the IRS’s 2020 General Instructions for Certain Information Returns.

If a lender furnishes corrected payee statements within 30 days of the furnishing deadline, it will have reasonable cause for any Sec. 6722 failure-to-furnish penalty. A lender is required to file corrected information returns by the filing deadline in order to avoid Sec. 6721 failure-to-file penalties.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a JofA senior editor.

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