Should I issue a 1099-INT for personal loan interest that hasn't been paid yet?

Thanks for the explanation. Does this apply even if the loan agreement specifically states that interest accrues monthly? And what's the threshold for needing to issue a 1099-INT? Is there a minimum amount?

Yes, this still applies even if your agreement states interest accrues monthly. What matters for 1099-INT purposes is when the interest is actually paid, not when it accrues contractually. The threshold for issuing a 1099-INT is $10 in paid interest during a tax year. If you pay at least $10 in interest in a single tax year, you need to issue a 1099-INT. Remember that when you do make the payment, you'll need to separate the principal from the interest portion to accurately report the interest amount.

Does it actually look at your specific loan document or just give general advice? I've tried other tax tools that claim to be personalized but just spit out boilerplate info.

I'm intrigued but skeptical. How does it handle loans that have unusual payment structures like this one? Most tools I've tried don't account for lump sum payments that include both principal and accumulated interest.

It actually does analyze your specific documents. You can upload your loan agreement and it'll identify the key terms about interest accrual, payment schedules, and then tell you exactly what your reporting requirements are based on your specific agreement. It's not just generic advice. For unusual payment structures like lump sum payments combining principal and accumulated interest, it specifically addresses those scenarios. It has a feature that helps calculate the interest portion of your payment and tells you which tax year it belongs in. That's actually one of the strengths of the tool - handling non-standard loan arrangements.

Wait, this actually works? How does it connect you faster than waiting on hold yourself?

This sounds too good to be true. The IRS phone system is notoriously awful. I find it hard to believe some service can magically get through when millions of people can't even reach a human.

Yes, it actually does work! They have technology that automatically dials and navigates the IRS phone system, and they have multiple lines going at once. When one gets through, they connect that line to you. It's not that they have a "special connection" to the IRS - they're just handling the waiting part for you. It's not magic - it's just efficiency. Think of it like having someone stand in line for you. The IRS phone system is definitely awful, which is exactly why this service exists. I was skeptical too, but after wasting 3 hours on hold myself and then getting disconnected, I tried it and got through to an agent within 20 minutes. The time saving was absolutely worth it.

Can you explain more about these imputed interest rules? Our loan is at 3.5% - is that considered reasonable? I don't want to get caught in some complicated tax situation.

Sure thing! The IRS has what's called the Applicable Federal Rate (AFR), which is the minimum interest rate they consider legitimate for loans. If your rate is below the AFR, the IRS might "impute" interest, meaning they treat the loan as if it charged the minimum rate, even if it didn't. A 3.5% rate is likely fine for 2024-2025. The AFR changes monthly, but has generally been in the 2-4% range for mid-term loans recently. As long as your rate is at or above the AFR that was in effect when your loan was made, you should be safe from imputed interest complications.

TurboTax isn't great for generating 1099-INTs. For issuing forms, I've found it easier to just order the official forms from the IRS website or use their online system. Much simpler than trying to make TurboTax do something it wasn't really designed for.