How do I avoid paying tax a private loan return?

[Ivan Souvorov]

Hello all,

A few years ago I let my friend borrow 40k for a real estate project.

A good portion of those funds are being returned to me this year.

Is there anything I need to do specifically with the IRS to avoid paying taxes again on these funds?

[Christopher Smith]

If it was in fact a loan then it's simply a return of the loaned funds which would not typically be taxable (just a return of after tax dollars). 

What were the interest terms on the loan? Any interest received will be taxable.