If I loan someone money, do I have to claim it as income when they pay me back? Can it count for EITC?

12 Thanks for explaining that. I didn't charge my brother any interest, so I guess there's nothing to report. But what if I did charge a small amount of interest in the future? Would I need some kind of official loan document or could it just be a verbal agreement? And how would I report just the interest part on my taxes?

8 For small personal loans with minimal interest between family members, you can use a simple written agreement - nothing fancy required, though having something in writing is always better than verbal only. If you did charge interest, you would report just that interest amount on Schedule B of your tax return as "Interest Income." You don't need to report the principal repayments anywhere. Keep in mind that for significant loans or higher interest amounts, there are additional considerations regarding appropriate interest rates, but for small family loans with minimal interest, basic reporting on Schedule B is typically sufficient.

7 Does taxr.ai work for other weird tax situations too? I'm dealing with some side gig income plus a partial 401k withdrawal and my regular W-2 job. Tax software gets confused with my situation. Is it something that helps with actual filing or just gives advice?

19 I'm a bit skeptical about these online tools. How does it compare to just asking a question on reddit or using regular tax software? I've tried a couple tax help sites before and they just gave generic answers that I could've found with a Google search.

15 It absolutely works for complicated situations like yours with multiple income sources. The tool specializes in analyzing unusual tax scenarios and giving specific guidance. I uploaded my 1099s, W-2, and withdrawal info, and it sorted everything out perfectly. The best part is it's not just generic advice - it gives you personalized explanations based on your specific documents and situation. It's more like having a tax pro review your specific details rather than just answering general questions.

6 Wait, how does this actually work? Do they have some special access to the IRS or something? When I call the IRS it's literally hours of waiting or getting disconnected. Seems too good to be true that some service could get through when regular people can't.

19 This sounds like a paid service just to talk to the IRS? That's ridiculous. Why should anyone have to pay money just to talk to a government agency they already fund with their taxes? I'll stick with sending certified mail or using the IRS website. No way this actually works better than just being persistent and calling early in the morning.

9 They don't have special access - they use an automated system that navigates through the IRS phone menu and stays on hold for you. When a human agent finally answers, the system connects you directly with them through a callback. The beauty is that you don't waste hours of your day listening to hold music. Their system basically waits in the phone queue on your behalf. It's especially useful during tax season when hold times can be 2+ hours. I was skeptical too, but when I got a call back with an actual IRS agent on the line, I became a believer.

5 So what counts as "lending money regularly" or "significant interest"? Is there like a specific number of loans or percentage that triggers this? I've made maybe 3-4 small loans to family members over the past couple years with minimal interest (like 1-2%).

3 There's no exact threshold defined by the IRS, but generally if you're making loans to multiple people repeatedly and charging market-rate interest, that might look more like a business activity. At 3-4 small family loans with minimal interest like 1-2%, you're almost certainly fine treating any interest as simple interest income rather than business income. The IRS looks at factors like: how many loans you make, whether you advertise lending services, if you keep formal business records for your loans, and if the interest rates are comparable to commercial rates. Your situation sounds clearly in the "personal activity" category, not business.

14 Agreed! And the worst part is even tax preparers give different answers depending on who you ask. I paid one tax person who told me one thing about a personal loan situation, then got audited, and the IRS told me something completely different. Ended up owing penalties even though I tried to do it right.

That's really good advice about keeping records even for small family loans. I never thought about how random large deposits might look suspicious to the IRS later. A simple text message thread is actually a great idea - it's documentation that happens naturally when you're coordinating the loan anyway. Question though - if I have multiple loans out to different family members, should I keep separate records for each one? Like if I lend $1000 to my sister and $2000 to my cousin, do I need to track those separately or can I just keep a general "family loans" record?

Definitely keep separate records for each loan - it makes everything cleaner if you ever need to prove the details to the IRS. Even something simple like a notes app on your phone with entries like "Sister loan: $1000, 1/15/2024" and "Cousin loan: $2000, 2/10/2024" works great. The reason is that if the IRS questions a specific deposit, you want to be able to show exactly which loan it relates to. If you lump everything together as "family loans," it gets messy trying to match specific repayments to specific loans. Plus, if one person defaults and you want to claim a bad debt deduction, you need clear records for that particular loan amount. I learned this from a friend who got audited - having separate documentation for each loan made the whole process much smoother.

This is really helpful clarification! I'm new to understanding how personal loans work with taxes, and it's reassuring to know that getting my money back won't create a tax burden. Just to make sure I understand - if someone pays me back a loan in multiple installments over several months, each payment is still just considered getting my own money back, right? It doesn't matter if it's one lump sum or spread out over time? And thanks for the tip about documentation. I actually do have text messages where my brother and I discussed the loan amount and when he'd pay it back, so sounds like I'm covered there.