No need to file a 1098?

[tacks]

An individual holding a mortgage note -- the lender -- is NOT required to file a 1098. (see below) She did not acquire the mortgage in the course of her trade and or business. Are there any other special considerations to this scenario?

I read one fellow advising that such an individual report on Schedule B the borrower's name and SSN. Meanwhile I, myself, think that merely typing out "Mortgage Interest Income Received" would suffice.

[By the way, i absolutely would advise this lender client to send a statement to borrower in leau of 1098 -- showing an amount for interest expense. Both parties should report the same amount.]

Per 1098 instructions:

"You are not required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence. The buyer makes mortgage payments to you. You are not required to file Form 1098."

[JohnH]

I have the lender client send a copy of the amortization schedule to the borrower each year, with the amount of interest for the year sub-totaled and highlighted. No 1098 called for, per the reasons you posted. As for other info required, it depends upon whether or not the property is used as a residence by the buyer. Here are the instructins for Schedule B concerning this entry:

"Seller-financed mortgages. If you sold your
home or other property and the buyer used the
property as a personal residence, list first any interest
the buyer paid you on a mortgage or other form of
seller financing. Be sure to show the buyer’s name,
address, and SSN. You must also let the buyer know
your SSN. If you do not show the buyer’s name,
address, and SSN, or let the buyer know your SSN,
you may have to pay a $50 penalty."

[tacks]

Wow. Thanks JohnH! I wouldn't have thought that was necessary!

I see this rule is detailed in IRS Publication 17 also.

[taxxcpa]

Here is what my daughter, who is a real estate lawyer told me to send:
Principal paid: $XXXXXX
Interest Paid: $ XXXXXXXX
Escrow Paid: $ XXXXXXX (tax & ins was increased)
Real Estate taxes paid: $ XXXXXXX( prior year was $ XXXXXX)
Insurance paid: $ XXXXXXX (prior year was $ XXXXXX)
Balance Due on Loan: $ XXXXXXXXX
Remaining payments as of Dec 31, 2009 under the terms of contract: 147 plus a balloon payment on the 148th payment

The "prior year" figures were not necessary, but I sent it to indicate why more of the payment went to escrow in 2009 in case they wondered why.

[nwtaxlady]

no 1098 but what about a 1099-INT to person holding note?

I was curious if the borrower paying the mortgage needs to or has to issue a 1099-INT to the person who is holding the note for the mortgage for the amount of Interest paid for the year?

[JohnH]

I've never seen any requirement for the borrower to send a 1099-INT. As I understand it, only the lender has any responsibility, and that is only if the borrower uses the property as a personal residence. I take that to mean there isn't any requirement at all if the borrower holds the property for investment, for example. And even if everything is done wrong, there's only a $50 penalty (provided the seller reports the income).

[nwtaxlady]

a common scenario

I am thinking of a common scenario. Someone holds a 2nd mortgage for someone else who uses that house as a personal residence. So the borrower who makes the payments to the person who holds the note....is the borrower required to issue a 1099-INT for the amound of interest paid for the year since he the 2nd mortgage is on his personal residence?