Forms 1098 Mortgage and 1096 Questions

[choral54]

I made a loan to my son to help purchase a home which he started paying back in 2022. It is my understanding that I am to file a Form 1098 Mortgage Copy A and form 1096 with the IRS. What is the deadline for filing these forms? I understand that the Form 1098 Copy A must be "official" and not copied from the internet. Is my only option to order these forms from the IRS or where can I procure them? I am aware of the information needed for the Form 1098. Is the only way to submit these forms through the mail? I file my 1040 return as efile. Would you recommend I have a CPA that does my taxes do these forms or is it something I can do on my own? I know I can order these forms from Amazon or Staples but I don't need a packet of 50 2022 forms. Some confusion on my part!

Thanks for a wonderful forum. I always appreciate the knowledge shared on Bogleheads.

[MarkNYC]

Form 1098 is required to be filed if you received more than $600 mortgage interest from a loan made in the course of your trade or business. Individuals who make private loans to friends or family are not required to file the form.

The interest you receive will be taxable income. To be tax deductible mortgage interest to the borrower there must be a promissory note specifying the terms of the loan and the loan must be secured by the real estate.

[choral54]

[Thread merged into here --admin LadyGeek]

I made a loan to my son for a home in November 2021. He started paying back the loan plus interest on January 1, 2022. We had formal mortgage papers drawn up and a rate higher than AFR is being charged for interest. What do I need to do as far as IRS considerations go? Do I need to submit a 1098 Mortgage form or any other information to the IRS prior to my filing my personal tax return? Am I required to give my son any formal forms for the interest he paid prior to his filing his personal taxes? Or is this an item for Schedule B interest (on my end)? Can anyone guide me to the correct answer on the IRS website? I am TOTALLY confused!

[LadyGeek]

choral54 - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and explained what's wrong.)

[choral54]

[Thread merged into here --admin LadyGeek]

I loaned my son $120 K to purchase a home on which he is making payments as of January 1, 2022. What kind of forms if any do I need to file with the IRS? 1098 Mort?? Do I need to issue my son a 1099 INT or 1098 MORT and also file this with the IRS separate from efiling my 1040 return. Just not sure of the protocol in this situation. My CPA had said to file an "official" 1098 MORT--I now have the form but is this just for businesses or are these used on personal loans also? Any direction would be greatly appreciated! Or do we just use the Schedule B to report the interest but have no other form?

[Chuck]

I am not an anything (lawyer, accountant, comedian), but do you have a mortgage lien on your son's house? If not, then your son has a personal loan, not a mortgage, so I'm guessing a 1098 would not be proper.

(Mortgage interest is tax deductible to the borrower, so if people could just say a loan is a mortgage, I expect it would open up opportunities for tax fraud.)

[choral54]

Yes. I had an attorney draw up Real Estate Mortgage papers. We followed the AFR guidelines and I have an amortization schedule.

[Hyperchicken]

To clarify, there is no such thing as "1098 MORT". The form is simply called "Form 1098".

[LadyGeek]

choral54 - I merged your update into the original thread. As noted before, please keep all of your questions in a single thread. It allows the members to see what was previously discussed which will help you better.

[toddthebod]

I loaned my son $120 K to purchase a home on which he is making payments as of January 1, 2022. What kind of forms if any do I need to file with the IRS? 1098 Mort?? Do I need to issue my son a 1099 INT or 1098 MORT and also file this with the IRS separate from efiling my 1040 return. Just not sure of the protocol in this situation. My CPA had said to file an "official" 1098 MORT--I now have the form but is this just for businesses or are these used on personal loans also? Any direction would be greatly appreciated! Or do we just use the Schedule B to report the interest but have no other form?

You likely do not have to file form 1098 because you are not in the lending business. (The guidance uses the example of seller-provided financing for a home sale, but this seems similar enough.) If you want to be on the safe side and your CPA wants you to file it, it's pretty straightforward.

You would report the interest income on 1040 line 2b, attaching Schedule B if it totals $1,500+.

Here's the form 1098 instructions:

Not in the lending business. If you receive mortgage interest of $600 or more in the course of your trade or business, you are subject to the requirement to file Form 1098, even if you are not in the business of lending money. For example, if you are a real estate developer and you provide financing to an individual to buy a home in your subdivision, and that home is security for the financing, you are subject to this reporting requirement. However, if you are a physician not engaged in any other business and you lend money to an individual to buy your home, you are not subject to this reporting requirement because you did not receive the interest in the course of your trade or business as a physician.

[w5000]

But what does the son need to be able to deduct the loan/mortgage interest paid on his taxes? Wouldn't the son want a 1098 for that?

[toddthebod]

But what does the son need to be able to deduct the loan/mortgage interest paid on his taxes? Wouldn't the son want a 1098 for that?

No 1098 is necessary. Mark covered the requirements.above:

To be tax deductible mortgage interest to the borrower there must be a promissory note specifying the terms of the loan and the loan must be secured by the real estate.

[MarkNYC]

But what does the son need to be able to deduct the loan/mortgage interest paid on his taxes?

He would need (1) a copy of the mortgage loan documents, (2) evidence of actual payments, and (3) an amortization schedule showing how much of the payments were interest.

[choral54]

Guessing I can file the 1098 and 1096 just to be safe? What is the due date for the paper form? Am I reading correctly that Copy A should be filed by the end of February?

Thanks for all the advice. It is appreciated.

[choral54]

Guessing I can file the 1098 and 1096 just to be safe? What is the due date for the paper form? Am I reading correctly that Copy A should be filed by the end of February?

Thanks for all the advice. It is appreciated.