I'm assuming here that you have a seller-financed loan... Well.. per IRS rules you are required to have the SSN or EIN in order to correctly report interest on a seller financed loan. Have you asked for ITIN number? It is a number that individuals must apply for if they cannot have SSN but must file a tax return. You may enter ITIN, print and mail your tax return with a short explanation.
Otherwise, print and mail your tax return without any information, but attach explanation showing the steps that you did to try to get the number... otherwise you may get a penalty of $50. The same applies if you enter the interest income as if you have received form 1099-INT - you may be subject to the penalty. While you can do so on a regular personal loan, you cannot do so when reporting seller financed loan.
If, in fact, your loan is just a personal loan and not seller financed, you can enter the interest income as if you have received form 1099-INT, you'll be asked to enter the lender name and amount; you are not asked about the SSN.
It is definitely not illegal to request the EIN or SSN for a seller-financed mortgage . The EIN/ITIN or SSN from the mortgage holder is required to be able to deduct mortgage interest. Your attorney is mistaken in this regard.
If there is not one available, you must show the IRS, as outlined above, that you made every attempt to get it and provide alternate information with your paper-filed return. A return without this required cannot be e-Filed, as the explanation as to why it is not available and the alternate identification cannot be attached.
If the loan interest is for a private loan that is not guaranteed by your main home, the personal interest paid is not deductible on an individual tax return.
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