1099INT for private loans

21 Replies

I have a number of private loans to me. I am paying interest on these loans, but since they are private individuals they wont be submitting 1099INTs to me.

How do others deal with this?

They are to send you one by Jan. 31!

It doesn't matter if it's a private loan, you should still get one. If they refuse to send you one, fill them out yourself and send mail them. I don't know the proper channels to use when someone doesn't give you all of your tax documents. Calling the IRS would probably be the first step.

I have some private loans that I'm paying on and some land contracts that I'm collecting on. I send out and receive Form 1098 for mortgage interest. I'm not familiar with 1099INT. I've been using Form 1098 for years with no problems. My private loans are all tied to real estate. If this is just a private loan that is not tied to a property, it might be different.

I would just have your tax professional send them out. If you actually do your own taxes yourself which I highly recommend not too if your in this business and not a tax professional. You will have to go to library and find one you can send to partners. You want to send them out so they dont come back complaining to you about it later. Interest , its an expense and you want to document it in your business properly and communicate it with partners, investors, lenders so they are willing to do business with you.

Paying for an cpa to handle my taxes was one of the wisest moved I made very early in this business. They can be worth there weight in gold. Calling them with questions during the year to figure out which capital improvements have what time line for depreciation can help you determine which improvements to make first on a property. It can help you increase roi. Of course I am speaking about property you hold long term.

You should be receiving a 1098 for the interest paid. If it is not secured by property you should be issuing a 1099-INT for interest paid to that person or business.

1099-INT is issued to the person who received the interest.

1098 is issued to the person who paid interest.

You should have an amortization schedule that you should be able to use.

My clients call me with questions like this all of time.


@Steven Hamilton II If I make payments on private loans secured by real estate and receive a 1098, do I still need to send out a 1099 also? Currently, I send out 1098's to people that pay me interest and the people that I send payments to send me a 1098. None of us use 1099's for this.

Rob K 1099 int is used to report interest received on checking and savings accounts. Since yours is secured by RE you don't need one.

Rob -

I believe that if the loan is secured by real estate (mortgage or trust deed), there is no obligation on the part of the payor to issue anything.

I'm sure Steven will chime in if I'm incorrect...

Sorry, meant 1098 but I can't go back and edit now.

They are not refusing to send them to me, but since they are private individuals I want to make the process as easy and painless for them as possible.

What can I do, so that they have to do the least?

I'm not a tax expert, but there is no exception for any note due to it being secured by real estate. Reporting is required, not an option. You can get fined for not reporting interest paid to you to the borrower by Jan 31. You complete the 1098 received from others, your borrowers, which includes installment contracts as they are entitled to deduct the interest expense paid to you. Only one party can claim interest paid on the property. The 1098s and 1099s are to match up, it is an audit issue for the IRS.

A lender is required to submit, you are a lender if you loaned money in cash or equity. A borrower is not required to send anything but to report if claimed as a deduction. It doesn't matter who fills out the forms, but you need to make sure that the lender and borrower are claiming the same amount to thier transaction. We had to fill out both on serviced loans and installment contracts, you guys have it easy, took us several days and a bunch of stamps licked!

This is from the 2013 version; however:

Box 1. Shows taxable interest paid to you during the calendar year by the payer. This does not include interest shown in box 3. May also show the total amount of the credits from clean renewable energy bonds, qualified forestry conservation bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, qualified school construction bonds, and build America bonds that must be included in your interest income. These amounts were treated as paid to you during 2013 on the credit allowance dates (March 15, June 15, September 15, and December 15). For more information, see Form 8912, Credit to Holders of Tax Credit Bonds.

Bottom line if you paid interest they should be receiving one. Now, being that they are issuing a 1098 that is enough reporting in that the IRS knows they received interest income.

If you receive a 1098, you should be fine; however, I don't mind issuing 1098/1099s for everything.


@Eli C. ,

You can fill out the forms for them and have them fill in their taxpayer ID(SSN or ITIN) and they can send it in.


The instructions from the IRS for the 1098 say that you only report interest of $600 or more, and that it is interest from an individual or sole prop. not a company, corporation, trust, etc. So there are a couple possible reasons for not having to fill it out. A lot of loan to investors are to LLCs and IRAs etc.

LLCs need to be issued 1099s as should IRAs.

FILL OUT 1099s!!!! It is one less item for the IRS to question.

Think of it as audit proofing.

I purchased a home (fixer-upper) in 2010 from an individual through a private mortgage with a 5% interest rate for a 6 year term. Given the condition, the purchase price was very low at $30K. I recently refinanced through a bank and closed out my private mortage with that individual (who is very old and lost her husband 2 years ago). Throughout the 3 years, I never received a 1098 and never sent them a 1099-INT however; I also never reported the interest paid on my tax return since A. I didn't itemize and B. the amount was so insignificant on such a small loan. I did not realize i needed to provide them with a 1099. I figured that since they had the same amoritization schedule that I had, they would report the income from the principal and interest on the taxes. She is now telling me that she did not because her income level is so low. She has been working with her cpa who basically told her that she would be subjected to a fine by the IRS because they did not report the income, specificlally the $13K that she received to pay off the loan. She is now informing me that I may also be subjected to a fine based on the interest "if she reports it on her tax return". I know this is confusing to you all, as it is to me because she does not quite understand herself, nor could she give me an exact reason that I could be fined, but any help would be appreciated.


Originally posted by @Jason Jay :
Throughout the 3 years, I never received a 1098 and never sent them a 1099-INT however; I also never reported the interest paid on my tax return since A. I didn't itemize and B. the amount was so insignificant on such a small loan. I did not realize i needed to provide them with a 1099.

Yes, you should have sent a 1099. I'm not a tax professional, but I don't imagine you'll face any repercussions for failing to do so (just common sense based on the fact that I don't know anyone who has been penalized for that...though my experience may not be very indicative, of course).

As far as you being penalized for not accounting for the interest on your returns, I'm assuming you were the payor of the interest, in which case, the worst you've done is not taken a deduction you were entitled to. In other words, you didn't cheat the IRS out of any money (your lender did) -- in fact, you may have paid more than you needed to.

If that's the case, you have nothing to be concerned about...

Originally posted by @Eli C. :
I have a number of private loans to me. I am paying interest on these loans, but since they are private individuals they wont be submitting 1099INTs to me.
How do others deal with this?

To go back to the original question. Whether you recive a 1099/1098 from your borrowner or not you need to report the income.

@J Scott ,

Thanks for the quick reply. I was thinking the same thing. I contacted her accountant and he too didn't have a very clear answer. It made me feel like he was not too competent on the whole situation. He only referenced the interest I paid in 2010 and said nothing about the following 3 years. I am a little suspicious of what is going on, but I'm just going to let it be. LIke you said, I will have nothing to worry about.

Bringing this topic back.

My LLC has a loan from an individual person. We pay him interest throughout the year. It is not secured by RE.

When I read the IRS site about the 1099-INT, I'm confused. It says the following:

"Interest excluded from reporting. You are not required to file Form 1099-INT for interest on an obligation issued by an individual, interest on amounts from sources outside the United States paid outside the United States by a non-U.S. payer or non-U.S. middleman, certain portfolio interest, interest on an obligation issued by an international organization and paid by that organization, and payments made to a foreign beneficial owner or foreign payee."

Am I understanding the part that I bold and underlined? To me, it says you're not required to report interest paid to an individual. And unless I missed it, it doesn't seem to specify if the person paying the interest is an individual too or a business.


Disregard. I've confirmed the difference. This is just talking individual to individual. Such confusing writing the IRS does...

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here