Level 2

CARES Act funds

Forum|Forum|5 years ago
February 18, 2021
2 replies
11 views

If I received Federal Care Act Funds in 2020 and returned them to my State in this year will they need to correct the dollar amount on the 2020 1099-G?

Lacerte Tax

This topic has been closed for replies.

qbteachmt

Level 15

I would. Here is the topic for your receiving entities:

https://www.irs.gov/newsroom/cares-act-coronavirus-relief-fund-frequently-asked-questions

And it's box 6 that you used, and would issue a corrected 1099-G for that same tax year.

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qbteachmt

Level 15

Dang it; I forgot to copy your original question text. Did you Edit this? It seemed you were the 1099-G provider, but now you are not?

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Z

Zac FrossAuthor

Level 2

Yes, it was required to be edited by my manager. We are struggling with the workload this is going to cause because of the volume of the Federal Care Act Funds that were returned to our State. Sorry for the inconvenience this may have caused and Thank you for your timely response.

rbynaker

Level 13

I also saw the original question. 🙂

Just shooting from the hip, you can't be expected to rewrite history. If a grant was returned by 12/31/20 then it should not be reported on a 1099 for 2020. You had the month of January to get that accounting done. For folks in that situation you likely need to amend. But granted in 2020 and returned in 2021 is probably taxable to the recipient in 2020 and a claim of right repayment in 2021.

See "Repayments" starting on page 34 of Pub 525 (2020):

https://www.irs.gov/pub/irs-pdf/p525.pdf

If the amount was less than $3,000 then there may be no tax benefit to the repayment in the subsequent year. I'm having trouble feeling sorry for the "tried to cheat my local government, got caught, and had to pay more tax" people though.

Rick

qbteachmt

Level 15

"If a grant was returned by 12/31/20 then it should not be reported on a 1099 for 2020."

I know that the national news commented on large employers taking SBA grants, PPP, etc, and then returning them. The public Cares funds disbursed through the county and States are different, though. The grants were taxable, already. That's why an issuing entity might use a corrected 1099-G. But the receiving entity cannot force nor expect this, and now that the perspective is flipped, you would contact the grantor. They might have turned the disqualified portion into Debt, until repaid.

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