On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (SBA) offered loans under the Paycheck Protection Program (PPP). For more information on the PPP, see Practice Note, Road Map to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): Paycheck Protection Program (PPP).

On September 22, 2020, the Internal Revenue Service (IRS) issued Announcement 2020-12 (Announcement) notifying PPP lenders not to report the amount of qualifying loan forgiveness granted to borrowers under the PPP. Unlike the usual treatment of debt forgiveness under the Internal Revenue Code (Code), PPP lenders should not file Form 1099-C information returns or furnish payee statements under section 6050P of the Code for qualifying PPP loan forgiveness.

The Announcement stated that if all or part of the stated principal amount of a covered PPP loan is forgiven because the eligible borrower satisfies the forgiveness requirements under section 1106 of the CARES Act, a PPP lender is not required to, for federal income tax purposes only, and should not, file a Form 1099-C information return with the IRS or provide a payee statement to the eligible borrower under section 6050P of the Code for the loan forgiveness amount. The Announcement stated that the filing of these information returns with the IRS could result in the issuance of underreporter notices (IRS Letter CP2000) to eligible borrowers, and the furnishing of payee statements to eligible borrowers could cause confusion, which the Announcement aims to prevent.

For summaries of the SBA PPP, see:

For additional guidance from the Treasury Department, see: