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Direct Loan Borrower Recipients of IRA Assistance FAQ

Frequently Asked Questions for direct loan borrowers who received financial assistance in 2022 from the Farm Service Agency (FSA) under Section 22006 of the Inflation Reduction Act (IRA). (En español)

Direct loan borrowers who received Section 22006 assistance in 2022 will soon receive a set of revised tax documents along with a letter 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.

If you are not a direct loan borrower who received assistance in 2022, please see our other tax resources

Forms and Documents

What revised tax documents and notifications did USDA send, and what is the difference between the revised tax forms and the previous tax form I received from USDA? I recently received two new envelopes with tax forms from USDA and I’m not sure what each one is for. 

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 will soon receive:

  • A 1099-C form, Cancellation of Debt, reporting the portion of the borrowers FSA payments made under Section 22006 for each FSA direct loan a borrower received a Section 22006 payment on (i.e. if a borrower received Section 22006 payments on three different FSA loans, they would receive three 1099-C forms),  
  • A corrected 1099-G form, subtracting the amount reported on the borrower’s 1099-C form(s) from the amount reported on the previous 1099-G form, 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.   

When recently revised tax documents were distributed, they were mailed in separate envelopes. Borrowers should receive two separate envelopes. One envelope will include the Form 1099-C along with the letter notifying the borrower of their options. The other envelope will include the revised Form 1099-G. 

Why did FSA send me a letter about my taxes in April?

Since USDA was charged with delivering assistance to financially distressed borrowers under Section 22006 of the Inflation Reduction Act (IRA), USDA has been working closely with the Department of Treasury to address the potential tax implications from the receipt of Section 22006 assistance, including exploring options that may be available to potentially avoid or alleviate any tax burden incurred as a result of receiving this financial assistance.

Once a determination was made regarding the characterization of the debt and the ability to issue Form 1099-Cs, USDA quickly executed a plan to distribute revised tax forms and notify borrowers of the changes.

With a tax filing deadline on April 18, 2023, USDA encourages borrowers to consult a tax professional as soon as possible to discuss their options, including:  

  • Whether to seek an extension to file their income tax return,  
  • Whether to file an amended return, 
  • Whether they might meet the criteria for this cancellation of indebtedness to be excluded from income under section 108 of the Internal Revenue Code, and 
  • Whether any other strategies are available for managing their tax liabilities. 

What is a 1099-G? 

Form 1099-G is issued annually by Government entities to inform individuals and businesses of certain funds received during a calendar year that may need to be reported to the IRS for federal income tax purposes. 

What is a 1099-C? 

Form 1099-C is issued annually by certain lenders to inform individuals and businesses of debts that have been cancelled during a calendar year that may need to be reported to the IRS for federal income tax purposes. 

Why did I receive multiple 1099-Cs and only one 1099-G form?

Direct loan borrowers who received Section 22006 assistance in 2022 will all receive:  

  • One corrected Form 1099-G, and  
  • One new Form 1099-C for each direct loan the borrower received a Section 22006 payment on.   

For example, if a borrower received Section 22006 assistance on three different direct FSA loans, they would receive one corrected Form 1099-G and three Form 1099-Cs. 

I received assistance under Section 22006 in 2022 but I did not receive a set of revised tax documents or a notification letter. What should I do?

Please allow an appropriate amount of time for potential mail delays. After doing so, borrowers who received assistance under Section 22006 in 2022 but have not received a set of revised tax documents or a letter from FSA may contact their local office or the FSA Call Center at 1-877-508-8364.  

I received a letter that had a 1099-C included and shared that I would be receiving a second letter with a 1099-G.  I haven’t received the 1099-G yet.  How can I request a copy? 

Please allow an appropriate amount of time for potential mail delays. After doing so, borrowers who received assistance under Section 22006 in 2022 but have not received a both updated tax documents along with a letter from FSA may contact their local office or the FSA Call Center at 1-877-508-8364. 

My neighbor received a letter from FSA about the change in their 1099 form and I did not.  Is everyone that had business with FSA last year getting a letter and the updated 1099 Form?

Updated 1099 Forms are only being provided to direct farm loan borrowers who received an IRA 22006 assistance payment in calendar year 2022. FSA is required to send the appropriate 1099 Form each year to customers who receive assistance from the Agency.  Most FSA customers will not receive an updated 1099 Form from FSA.

Will revised tax forms be provided to guaranteed loan borrowers be receiving updated tax forms?  

At this time, only direct loan borrowers who received Section 22006 assistance are receiving revised tax forms. If you also have received Section 22006 assistance as a Guaranteed Loan borrower, it is not part of this reclassification and will still be reflected on your Form 1099-G.

Since this is a change in what I previously received from USDA, is the Department of the Treasury aware of these updated 1099 forms? Will the Department of the Treasury be issuing anything publicly? And since I received corrected forms, does this mean that the Department of the Treasury has to update their tax forms that I prepared? 

USDA has been working closely with the Department of the Treasury to help borrowers understand the potential tax implications from the receipt of an IRA payment, including that options may be available to potentially avoid or alleviate any tax burden incurred as a result of receiving this financial assistance. Treasury is aware that USDA is issuing revised tax documents to borrowers. Changes to borrowers’ taxes are not automatic but can be made through the tax filing process.  

Borrowers should consult a tax professional as soon as possible to discuss their options, including whether to seek an extension to file their income tax return, whether to file an amended return, whether they might meet the criteria for this cancellation of indebtedness to be excluded from income under section 108 of the Internal Revenue Code, and whether any other strategies are available for managing their tax liabilities. 

If you have already filed your taxes using the original 1099-G and are not seeking to exclude the assistance from your income, you do not need to amend your tax return.  The revised forms are intended to provide potential options for borrowers, but not a requirement to refile.

 

Filing Your 2022 Taxes

I need some time to study what the letter means and am feeling rushed about my taxes that have a filing deadline of April 18, 2023.  If I want to file an extension, where do I go to file an extension?

Visit Extension of Time To File Your Tax Return on the IRS website for instructions on how to file for an extension for individuals and businesses. You can also work with your tax preparer to file for an extension. 

I already filed my taxes and received this letter from FSA. Can I make changes to my taxes?

Please consult your tax preparer to determine if you should amend your tax return.

To learn more about amending your tax return, see the following IRS resources:

What should I do if I am unable to exclude the IRA assistance on my Form 1099-C from income? What resources are available to assist me? 

If after working with your tax preparer you determine that you do not meet the criteria to have the cancellation of debt reported on your 1099-C excluded from income, there are different tax strategies you can use to minimize your tax liability. Please refer to this article from Utah State University's Rural Tax Extension, Farm Loan Immediate Relief for Borrowers with At-Risk Agricultural Operations, and work with your tax preparer to identify strategies that can assist you.

Visit our taxes page for additional information, including webinars on 1099 forms and the Inflation Reduction Act Debt Payments, and a tax estimator tool.  

Many farms that had a small delinquency and are not insolvent, will pay taxes on the assistance similar to other forms of assistance provided by USDA. The cost of taxes and tax preparation may also be included in the eligible expenses as part of a FSA operating loan.  

See the next question for options if you cannot afford the tax liability. 

If I am unable to exclude the IRA assistance on my Form 1099-C from my income and I cannot afford the tax liability associated with the IRA payment, what can I do?  

The Office of the Taxpayer Advocate at the Internal Revenue Service may be able to assist eligible low-income individuals with their filings and/or establishing a payment plan with the IRS.  The Office of the Taxpayer Advocate is an independent organization within the IRS that supports limited resource taxpayers or those experiencing financial hardship in filing taxes, provides advocacy and support for filers to resolve problems with the IRS, can represent them in disputes with the IRS, and works to ensure taxpayers are treated fairly and know their rights. Visit taxpayeradvocate.irs.gov to learn more.

  • LITC: Low Income Taxpayer Clinics provide pro bono representation on behalf of low-income taxpayers in tax disputes with the IRS. They represent taxpayers on matters related to audits, appeals, collections, and federal tax litigation. They can assist taxpayers in responding to IRS notices. They also provide these tax support services to ESL taxpayers. A business or other entity is not a low-income taxpayer eligible for LITC representation. An individual trying to resolve a tax liability arising from personal involvement with a business can be a low-income taxpayer. Learn more about LITC
  • VITA: Volunteer Income Tax Assistance provides free basic income tax return preparation to taxpayers who generally earned $60,000 or less, persons with disabilities, and taxpayers with limited English proficiency who need assistance with preparing their own returns. VITA clinics can assist with Form-1099 C. Learn more about free tax return preparation for qualifying taxpayers.
  • TCE: Tax Counseling for the Elderly program offers free tax help to individuals who are age 60 or older. Where a joint return is involved, only one spouse need satisfy the 60-year age requirement. Learn more about TCE.

If you determine, after considering your options and/or consulting with a tax professional, to decline the IRA Section 22006 assistance received in 2022, you may decline the assistance by contacting your loan officer or the FSA Call Center at 1-877-508-8364 before December 31, 2023, and providing a written request to decline IRA Section 22006 assistance. 

Declining the assistance may reinstate a delinquency or debt and we encourage you to seek information on the potential ramifications or other options to manage your account that may apply (e.g. primary loan servicing).

What is the implication of a 1099-C for the farmers who had large debts that were cancelled – and consequently a large taxable benefit – but now have either high asset values or high incomes? Does this eliminate their tax burden? 

The tax burden associated with IRA payments will vary from operation to operation. USDA cannot advise on what the tax burden will be for operations due to the case-by-case nature of tax filing. Borrowers should consult a tax professional to determine whether they might meet the criteria for this cancellation of indebtedness to be excluded from income under section 108 of the Internal Revenue Code, which may be an option if, for example, a borrower is insolvent or has qualified farm indebtedness.  Farmers with large incomes or high asset values will generally not be insolvent. However, they may qualify to defer tax liability through the qualified farm indebtedness exclusion. We hope that all producers who receive the revised 1099-C will work with their tax preparer to explore all of their options for addressing their tax liabilities.  

The letter mentions verification of insolvency. Where can I learn more about what insolvency means and calculating how it impacts my taxes? 

IRS Publication 225, Farmer’s Tax Guide, is a good basic resource that covers a variety of farm-related tax issues, including a discussion of the Form 1099-C, and the procedures, forms and worksheets necessary to determine whether canceled debt is includible in income for Federal tax purposes.

Can recipients opt out of IRA assistance? 

If you determine, after considering your options and/or consulting with a tax professional, to decline the IRA Section 22006 assistance received in 2022, you may decline the assistance by contacting your loan officer or the FSA Call Center at 1-877-508-8364 before December 31, 2023, and providing a written request to decline IRA Section 22006 assistance.  

Declining the assistance may reinstate a delinquency or debt and we encourage you to seek information on the potential ramifications or other options to manage your account that may apply (e.g., primary loan servicing). 

In October 2022, I read about the criteria for initial IRA 22006 assistance for distressed borrowers and I believe I am eligible but have not received any assistance. Do I need to take any actions on my taxes? 

USDA publicly announced initial IRA 22006 assistance in October 2022. As of April 6, 2023, financial assistance has been provided to over 13,000 financially distressed direct and guaranteed loan borrowers through an automatic process that has not required borrowers to take any action. Borrowers identified as eligible for assistance are mailed separate notification letters providing their specific assistance details and relevant tax information.

If you have not received an individualized notification of assistance and tax information, you do not need to take any action on your taxes. If you believe you are eligible but have not received assistance, please contact your loan officer or the FSA Call Center at 1-877-508-8364.

Will a cancellation of debt affect my ability to obtain future FSA loans? 

Availing yourself of any of your potential options under the Internal Revenue Code does not impact your status with USDA or eligibility for future farm loans. The assistance provided by IRA Section 22006 does not trigger ineligibility under the statutory provision that prohibits FSA from making direct and guaranteed loans to anyone who has received prior debt forgiveness. However, in some cases there may be other circumstances or earlier actions that may continue to impact your eligibility.

If you have questions, contact your loan officer or make a request through the FSA Call Center at 1-877-508-8364 before December 31, 2023. This virtual call center operated by FSA employees is available during the hours of 7:30am and 8:00pm EST to receive calls from customers nationwide. 

I recently received notification of automatic assistance under Section 22006. Do I need to pay taxes on this assistance? 

Only borrowers that received assistance in 2022 are receiving the revised tax forms. For assistance provided in 2023, you will receive tax forms in early 2024 to assist with preparation of your 2023 taxes. The assistance related to direct loans will be recorded on a 1099-C. 

 

Finding Additional Resources

I received the letter from FSA notifying me of the change in my tax documents. Is there someplace else I can go to learn about taxes and receiving the IRA Assistance?

USDA has partnered with Southern Extension Risk Management Center, National Farm Income Tax Extension Committee and other tax experts across the country to provide general information and resources regarding USDA program payments and agricultural taxes. These resources are available online and in person.

Online resources on can be found at farmers.gov/taxes, ruraltax.org, and agftap.org.

To see if there are ag tax workshops taking place in your community visit agftap.org.

USDA cannot provide tax advice and recommend that it you consult with a tax professional to determine how to minimize potential tax liabilities associated with IRA payments and whether recipients may be eligible to exclude the payments from their taxable income.

IRS Publication 225, Farmer’s Tax Guide, is a good basic resource that covers a variety of farm-related tax issues, including a discussion of the Form 1099-C, and the procedures, forms and worksheets necessary to determine whether canceled debt is includible in income for Federal tax purposes. 

Can someone at FSA help me file an extension or complete the forms?  

USDA cannot provide tax advice and recommend that it you consult with a tax professional to determine how to minimize potential tax liabilities associated with IRA payments and whether recipients may be eligible to exclude the payments from their taxable income. 

We have worked with the National Farm Income Tax Extension Committee to provide an educational walk through of what the 1099 means and items to consider. Watch the video: Form 1099 Information Returns

Individuals will need to file for an extension with the IRS or have their tax preparer file for an extension on their behalf. Learn more about extending time to file your tax returns.

Where can I find additional information about tax resources?

For additional materials on 1099s, choosing a tax professional and other helpful materials please visit our taxes web page and ruraltax.org.

Below are some links producers may find helpful as they navigate filing their taxes for FY 2022.

I received notice of getting Section 22006 assistance in the fall of 2022. What are the criteria for receiving this financial assistance?

Borrowers that received IRA 22006 assistance in the fall of 2022 were mailed an individualized notice with details of their payment. The eligibility criteria for the initial assistance payments provided in 2022 was that a borrower was 60 days or more past due on eligible direct or guaranteed loans as of September 30, 2022.