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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28094
Experience:  Taxes, Immigration, Labor Relations
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C corp owner made loans totalling 35k over the last two

Customer Question

hi - c corp owner made loans totalling 35k over the last two years. Corp is in a loss postion and having cash flow problems - they can not make interest pmts on the demand notes(fully documented,etc) interest payments have been made in prior years. i'm wondering if owner should be issued a 1099 for interest he did not receive.
JA: Thanks. Can you give me any more details about your issue?
Customer: interest is market rate 5.25%. cash basis corp
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Submitted: 12 months ago.
Category: Tax
Customer: replied 12 months ago.
do i need to do anything else?also, owner took small salary (w2) less than 1 k during the year based on cash flow issues and stopped salary Feb 2015 when it was clear COrp could not afford salary. There is one other employee who remains employed who is not owner or SH.
Customer: replied 12 months ago.
I'm thinking we book the interest expense make m-1 and DO NOT issue 1099 to owner(an individual) assuming this will not materially impact the corp or the shareholders personal tax return?
Expert:  Lev replied 12 months ago.

No need to issue form 1099INT for the interest payments - that form is ONLY required for those who are in business of making loans - such as banks.

However - accrual interest is generally taxable even not paid.

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