What's considered a qualified dividend for Schedule B reporting?

Thank you so much for the clear explanation! I hadn't realized I needed to file Form 1098 too. Is that something I can do myself or do I need to go through some special service? I've never filed that form before. Also, does this mean my family member can actually deduct this interest on their taxes? I don't think they've been doing that and I wonder if I should let them know.

You can absolutely file Form 1098 yourself - you don't need a special service. You can download the form from the IRS website. You'll need to complete a copy for the IRS and give a copy to your family member by January 31 of the year following the payment (so for 2025 taxes, you'd need to provide it by January 31, 2026). Yes, this is great news for your family member! If they're using the property as their primary residence or second home, they can likely deduct the mortgage interest on Schedule A if they itemize deductions. They should definitely know about this potential tax benefit, so I'd recommend letting them know. They'll need the Form 1098 from you to properly claim the deduction.

How exactly does that work? Like do you upload your documents to it and it tells you what to do? I'm dealing with a similar situation but mine involves a business property I sold to my former partner.

Sounds interesting but I'm always skeptical about these tax tools. Does it actually connect with the IRS systems or is it just giving general advice? I've been burned before by tax software that wasn't updated with the latest rules.

You upload your documents like loan agreements, payment records, etc., and it uses AI to analyze them and identify the relevant tax implications. It then guides you through what forms you need and what information belongs where. It was especially helpful for figuring out the seller-financed mortgage reporting requirements that aren't always obvious. The tool doesn't directly connect to IRS systems - it's more about analyzing your specific situation and documents. I understand the skepticism! What I found valuable was that it's constantly updated with current tax rules and can interpret how they apply to your specific documents. It's more personalized than general advice but doesn't file anything directly with the IRS - you still handle the actual filing.

Wait, how does this actually work? Do they have some special phone line to the IRS or something? I've been trying to get through for 3 weeks about a similar issue.

Yeah right. No way this actually gets you through to the IRS faster than just calling them yourself. Sounds like a scam to me. I've been dealing with tax issues for years and there's no magic solution to the IRS phone lines.

They basically use technology to wait on hold with the IRS for you. You register with them, tell them what department you need to reach, and they navigate the IRS phone tree and wait in the queue. Once they get an agent on the line, they call you and connect you directly to that live IRS person. No special line - just smart technology that does the waiting for you. I understand your skepticism - I felt the same way! But it's not a scam. They don't claim to have special access; they just handle the frustrating wait time part. Think of it like having someone else wait in a long physical line for you. When I used it, I had tried calling the IRS myself for 3 weeks with no success, but with Claimyr I was talking to an actual IRS agent within 20 minutes of starting their service.

Wait, so I need to file both Form 1098 AND Form 1099-INT? That seems redundant. Couldn't I just file one of them? And regarding the amortization - our agreement does specify an interest rate (5%), but not exactly how much of each payment is principal vs interest. Does that mean I need to create an amortization table?

Yes, you may need to file both forms as they serve different purposes. Form 1098 reports mortgage interest that the borrower has paid to you, which they can potentially deduct. Form 1099-INT reports interest you've paid to someone else. However, in your specific case, since this is mortgage interest being received by you (not interest you're paying out), you likely only need Form 1098, not 1099-INT. I apologize for the confusion. Since your agreement specifies a 5% interest rate but doesn't break down each payment, you should definitely create an amortization table. This will help you properly track how much of each payment is interest versus principal reduction. You need this to accurately report your interest income and to provide correct information to your family member for their potential deduction. Most spreadsheet programs have templates for creating these tables.

This is a really good point about installment sales! I did a seller-financed deal last year and completely missed filing Form 6252. Had to file an amended return. The property was actually a rental I sold to a tenant, so I had depreciation recapture to deal with too. That's a whole other can of worms!