I received a 1099-C for my business. Debt description "Loans provided to Small Businesses in response to COVID-19"
Box 5 is checked, does this mean I need to file with my personal taxes? If so, will it count against me?
Where you report your 1099-C depends on who the 1099-C was issued to. You stated it was received for your business, but does it have the EIN of the business or your social security number under the box labeled Debtor's TIN ?
In addition, what kind of business do you have? If you have a s-corporation and you use the accrual basis, you would file this as income under the s corporation. This will flow through to your personal income tax return through your K-1.
If you operate a business as a sole proprietor and you’re using the cash method of accounting, you technically did not deduct expenses paid with the debt. Therefore, you don’t have to report it on your tax return. However, once the debt is canceled you can’t include the expenses it covers in your deductions on Schedule C, which can ultimately increase your taxable net profit.
For more information, please see Guide to Debt Cancellation and Your Taxes.
What program or reason was the forgiven?
Some lenders have erroneously sent out 1099-Cs when they should not have, such as for forgiven loans under the Paycheck Protection Program (PPP).
Based on the latest legislation from Congress, information about your Payment Protection Program loan does not need to be reported on your 2020 tax return. If the 1099-C is for debt made under the PPP, contact the issuer for a corrected form.
To prevent confusion, the IRS notified lenders on Tuesday that they should not file cancellation-of-debt information returns or furnish payee statements under Sec. 6050P to report the amount of qualifying forgiveness with respect to covered loans made under the Paycheck Protection Program (PPP) (Announcement 2020-12). @AdamGaribaldi
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