Lenders and administrators of most student loans do not have to file Form 1099-C, Debt cancellation, for canceled loans from 2021 to 2025, since borrowers do not have to include those canceled amounts as income for tax purposes, the IRS said Tuesday.
The guidance in Advisory 2022-1 relates to a provision of the American Rescue Plan Act (ARPA), PL 117-2, passed in March 2021. ARPA added a special rule to Sec. 108 (f) (5) providing that the gross income of taxpayers does not include any amount released after December 31, 2020 and before January 1, 2026, for certain loans expressly provided for post-secondary education expenses, whether by the ‘intermediary of an educational institution or directly to the borrower.
Loans covered are those made, insured or guaranteed by the United States or its institutions or agencies; a state, territory or possession of the United States or the District of Columbia, or any of its political subdivisions; or performed by an eligible educational institution, as defined in Sec. 25A. Also covered by the provision are certain student loans made by educational organizations and private lenders.
The notice advises lenders and managers of these loans that they are not, and should not, file information returns or payee statements (i.e. could cause the IRS to issue a notice in error). of underreporting of income and confusing the borrower.
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