As part of the CARES Act, active and new SBA borrowers (through September 30th) received six months of payment relief on their loans. These payments were wholly forgiven and offered significant relief to many borrowers during the heart of the recession.
Borrowers who received this benefit should prepare themselves for the tax implications. Yesterday, the SBA instructed the lenders to send a 1099-MISC to these borrowers for all principle, interest, and forgiven fees.
While many borrowers might not have thought about this possibility, this should not be a surprise – this payment relief was a form of income. Those businesses that had significant losses in 2020 will likely not be impacted, but those who made money in 2020 can now expect to give Uncle Sam some more of it.