1099-Int for interest paid on an installment sale?

[Mike12321]

Client received a 1099-Int for interest buyer paid on installment sale for the year. I have never seen this before for a sale. The 1099 is in the buyer's name. The sale is reported on for 6252 and the interest payments carry to sch b already under the property address. The gain from the sale is also reported. Client contacted the buyer's accounting firm and they told him they had to report the interest to the IRS this way. I am concerned the IRS will think the interest from the 1099-Int is additional interest and my client will get a letter/adjustment notice. Has anyone got some input for me?

[dkh]

If the interest on the 1099-INT matches interest taxpayer is reporting for the F6252 there shouldn't be any problem.   

[qbteachmt · Accepted solution]

As long as the interest reported on the tax return filing is as much or more than all 1099-Int filed, you are fine.

The reporting requirements for who should issue a 1099-Int is based on who is required to use that form. This client seems to have sold something to someone and that sale and that buyer seem to meet those requirements.

It's not a problem, unless someone has not been properly reporting the info on their tax return. The 1099-XXX forms are Informational. They don't control what taxpayers should be reporting on their returns; they simply provide evidence of some of these activities.

[jeffmcpa2010]

If the buyer is a trade or business they would be correct in filing the 1099-Int - IF it is paid direct to the seller, If paid through and escrow company, the escrow company would file the 1099. Same Answer.

So long as there is only one 1099, the interest has not been overreported to the IRS.

BTW I normally enter the installment sale interest direct to Schedule B, just makes it easier for me to track that way.

[Mike12321]

So today at work coincidentally, I had an installment sale and there was Seller financed interest, where the name of the buyer is entered on the 6252. Then the Sch B says to go look at the Seller Financed Interest statement, so that would show the name of the buyer and match to the 1099-Int. I just need to get his SSN and address.

Still, I have never seen a 1099-Int from a buyer issued to a seller for an installment sale, and they have not done this in prior years. They had been issuing a 1099-Misc for rent payments, and we finally got that corrected.

[qbteachmt]

"Still, I have never seen a 1099-Int from a buyer issued to a seller for an installment sale, and they have not done this in prior years. They had been issuing a 1099-Misc for rent payments, and we finally got that corrected."

A situation could even require both forms. The 1099-Int really isn't an "installment sale" form; it's for Lending. The Sale is a separate type of activity.

And there might need to be a1098, too.

I have clients who used to buy "man-camp" trailers from the oil field, update them, and park them or sell them to mobile home park businesses, and often would carry the paper on them.