The Internal Revenue Service has provided guidance on whether forgiven Payroll Protection Program (PPP) loans require the issuance of a 1099-C, stating that Form 1099-C should not be filed where loans are forgiven under the CARES Act.
The Payroll Protection Program issued forgivable loans to employers to encourage employee retention during 2020; these PPP loans are forgivable as outlined in the CARES Act. Form 1099-C reports cancelations of debt, and it is generally required for most cancelations over $600. In Announcement 2020-12, the IRS states Forms 1099-C should not be filed where the debt is forgiven by function of section 1106 of the CARES Act; reporting the 1099-C in such a situation is unwelcome by the IRS as it could create reporting concerns.
Note that a PPP loan canceled for a reason other than under section 1106 of the CARES Act would not fall under this guidance. In such a situation, filing a 1099-C may be appropriate.
Review Announcement 2020-12.
