I Got The $$, Now What?
I borrowed 20K from my dad to rehab a house, and I told him I'd take care of all the paperwork. What sort of paperwork do I need for him, for me and for the IRS.
He borrowed it out of his HELOC-4%
I'm paying him 10%.
What do I need in the way of "proof" of payment and are there any IRS forms I need to get in order. I'd hate to wait until April 14 next year to worry about this.
Thanks in advance.
Sam
You need to give him 1099-INT form @ the end of the year.
you need to prepare a promisory note which outlines the terms of his loan. You can pick up a form for this at any good stationery store or there is probably one in the freebies section here.
Yes, of course, promissory note is good. However, he was asking specifically about IRS forms. 1099-INT is an IRS form. Promissory note is a private form that IRS would want to look into ONLY if it audits and suspects that something is funky with the interest paid.
I could always fudge the primisory note Ex post facto, (just like I deduct thousands of miles for my car every year - mileage count, LOL)--IF I ever got audited.
A 1099-INT. Excellent. Thanks a lot.
Sam
Here is a realated question. What if I contribute some money to a rehab deal in a joint venture, but do none of the work? When I get my payoff, how do I report this so I am not paying SE taxes on it?
Have the entity that holds the money/title to the property give you 1099-DIV or 1099-INT. If you do none of the work, it is considered passive income, and AFAIK, passive income is not subject to SE tax - but check with your accountant or do more research, as I am speaking off the top of my head.