Question

If an employer loans an employee money and then subsequently forgives the loan, does the employee owe taxes on the amount?

Forum|Forum|4 years ago
July 1, 2021
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TurboTax Premier Online

Employee

Yes, the forgiven loan is taxable income for the employee in the year that the employer forgives the loan. Any forgiven loan is taxable income, whether it's from an employer or anyone else.

How you report the income on your tax return will depend on whether the employer includes it in the wages on your W-2 or reports it on a separate Form 1099-C.

If the employer incorrectly reports the forgiven loan on Form 1099-MISC or 1099-NEC, or does not provide any tax form, post back here with the details and we will tell you how to handle it on your tax return.