Need to file a 1099-INT

[JimDimitri]

Need to file a 1099-INT for interest paid on a car loan that I hold the title from a person that bought the car. I am acting as the bank. Interest paid is more that $600

[ThomasM125]

You don't need to report the interest that you received on a loan you made on a Form 1099-INT. You do need to enter the interest income on your tax return as though you had received the 1099-INT form, but you don't need to actually prepare it and submit it to the IRS. 

[JimDimitri]

Then why do the banks send out 1099-INT forms. I am acting in the same capacity as the bank and need to submit to the borrower the form for their taxes.

[ThomasM125]

Interest income is reported on a Form 1099-INT. Since the loan is being paid to you, you will report the interest income so you would be the one who would receive the 1099-INT form. The payor of the interest is an individual and not a business entity, so he doesn't have to issue a Form 1099-INT to you. The payor would issue the form, you wouldn't issue one since you are the recipient.

The borrower doesn't need the interest statement for his tax return since it is not a mortgage so the interest is likely not deductible. Personal interest on a loan is not deductible like it once was, so the borrower doesn't need to report the interest expense, unless he is self-employed and uses the vehicle for business purposes. In that case, he would just ask you for a statement showing the interest expense. 

[VolvoGirl]

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@JimDimitri wrote:

Then why do the banks send out 1099-INT forms. I am acting in the same capacity as the bank and need to submit to the borrower the form for their taxes.

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Because the bank is paying the interest to you.   You are not paying the interest to the borrower.   You are receiving interest.   When the bank makes a loan they do not give out a 1099 INT to the payer.  Just give the borrower a statement with the amount.  If it was like for a house loan they would get a 1098 from the Bank.  

[Opus 17]

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@JimDimitri wrote:

Then why do the banks send out 1099-INT forms. I am acting in the same capacity as the bank and need to submit to the borrower the form for their taxes.

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If you are the lender on a mortgage, you issue a 1098 to the borrower.   However, a car loan is not a mortgage, and even if it was, you do not issue a 1098 if you hold a mortgage privately, only businesses that make loans are required to issue 1098s.  If you are the lender on a student loan, you issue a 1098-E to the borrower.  

 There is no similar form for car loans, whether business or private.   A lender on a car loan does not issue tax statements to the borrower.  

The 1099-INT is used to report interest paid to a depositor or investor.  Neither you nor the borrower is a "depositor" in this case.  

[JimDimitri]

Thank you I had the wrong form number. So 1098 would be correct BUT you say I don’t have to file that even if it is over $600. Hmm!

And yes they are self employed and use vehicle for their work!

Thanks

Jim

[Opus 17]

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@JimDimitri wrote:

Thank you I had the wrong form number. So 1098 would be correct BUT you say I don’t have to file that even if it is over $600. Hmm!

And yes they are self employed and use vehicle for their work!

Thanks

Jim

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Correct, you don't file a 1098 because the loan is not a mortgage AND because you are not in the business of lending. 

[JimDimitri]

Thank you.

With the IRS wanting to know everything about everything...

Thanks

Jim