Farm Service Agency (FSA) direct loan borrowers who received Section 22006 assistance in 2022 via the Inflation Reduction Act (IRA) will receive a set of revised tax documents along with a letter (below) explaining the revised forms and notifying the borrower of options that may be available to avoid or alleviate any tax burden incurred as a result of receiving that financial assistance.
Earlier this year, borrowers who received financial assistance in 2022 from FSA under Section 22006 of the IRA received a Form 1099-G, Certain Government Payments, reporting that financial assistance. Direct loan borrowers who received that assistance in 2022 should have recently received or will soon receive:
- A Form 1099-C, Cancellation of Debt, reporting the portion of the borrowers’ FSA payments made under Section 22006 (one form per loan);
- A corrected Form 1099-G, subtracting the amount reported on the borrower’s Form 1099-C from the amount reported on the previous Form 1099-G; and
- A letter explaining the revised forms, notifying the borrower of potential options to avoid or alleviate any tax burden incurred as a result of receiving Section 22006 assistance, and directing borrowers to available tax resources.
The documents will arrive in two separate envelopes. One will include the Form 1099-C along with the letter notifying the borrower of their options. The other envelope will include the Form 1099-G. The letter and corrected tax forms were mailed on or around Wednesday, April 12.
Depending upon the borrower’s circumstances, the Section 22006 assistance reported on their new Form 1099-C may be excluded from their taxable income. USDA cannot provide tax advice, but they do want borrowers to be aware of options that may help manage their tax liability. Borrowers are encouraged to consult a tax professional as soon as possible to discuss their options, including whether they might meet the criteria for this cancellation of indebtedness to be excluded from income under section 108 of the Internal Revenue Code.
Our partners at Farmers’ Legal Action Group (FLAG) put together this guide for farmers and farm service providers to help them navigate these changes.
Helpful Resources from USDA
- USDA has shared a recorded webinar here explaining the new and corrected tax documents and outlining next steps recipients of Section 22006 assistance can take.
- USDA will also be hosting a more in-depth live webinar today, April 19, 2023, at 2pm ET. The webinar will provide additional information on how to navigate tax preparation, manage potential tax burdens, and provide an opportunity to answer producer questions. It will be recorded and made publicly available for those who cannot attend the live event. Borrowers, tax professionals, and farmer service providers can register for the webinar here.
- This webpage contains a library of resources on agricultural taxes, webinar recordings, and informational documents borrowers can share with a tax professional to help them navigate tax filing season.