Author Topic: Taxes - say goodbye to the small note exemption  (Read 13422 times)

jpildis

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Taxes - say goodbye to the small note exemption
« on: January 19, 2013, 12:26:43 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

yojoakak

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Re: Taxes - say goodbye to the small note exemption
« Reply #1 on: January 19, 2013, 01:51:03 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

Am I still going to have to print out 40 pages of Folfiofn transactions to attach to my return? (Form 8949)

AmCap

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Re: Taxes - say goodbye to the small note exemption
« Reply #2 on: January 19, 2013, 07:18:24 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

Am I still going to have to print out 40 pages of Folfiofn transactions to attach to my return? (Form 8949)

You really do that?

Peter

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Re: Taxes - say goodbye to the small note exemption
« Reply #3 on: January 21, 2013, 05:07:54 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

I think that is good news. But I can see the backlash when people start receiving their 1099. Some people will see a 1099 for the first time and no doubt will get upset.
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AmCap

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Re: Taxes - say goodbye to the small note exemption
« Reply #4 on: January 21, 2013, 06:01:24 PM »
Just spoke with my LC rep and she informed me that LC's tax documents will be similar to Prosper's... one consolidated 1099 for all loans combined.  I'm thankful I'm not going to have to mess with multiple 1099s this year and I'm wondering how many lenders have been underfiling prior to this year.

I think that is good news. But I can see the backlash when people start receiving their 1099. Some people will see a 1099 for the first time and no doubt will get upset.

Why would people be upset by that Peter?  Are there ppl under-reporting a substantial amount of income?

Peter

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Re: Taxes - say goodbye to the small note exemption
« Reply #5 on: January 21, 2013, 06:05:23 PM »
Yes. I think a large proportion of LC investors with a taxable account have been under-reporting their p2p lending income to the IRS. Many people blindly rely on the 1099 and ignore what they really owe. Of course, I expect that regular readers of the blog or members of this forum would not be part of this group...
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Keltset

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Re: Taxes - say goodbye to the small note exemption
« Reply #6 on: January 21, 2013, 06:15:33 PM »
Yes. I think a large proportion of LC investors with a taxable account have been under-reporting their p2p lending income to the IRS. Many people blindly rely on the 1099 and ignore what they really owe. Of course, I expect that regular readers of the blog or members of this forum would not be part of this group...

I agree I have seen it over and over where people feel if they don't get a tax form they do not need to indicate it on their taxes. I suspect a large number of people will secretly be angry with this change, however I believe it is for the better and it sure does make it easier.

AmCap

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Re: Taxes - say goodbye to the small note exemption
« Reply #7 on: January 21, 2013, 06:45:38 PM »
Yes. I think a large proportion of LC investors with a taxable account have been under-reporting their p2p lending income to the IRS. Many people blindly rely on the 1099 and ignore what they really owe. Of course, I expect that regular readers of the blog or members of this forum would not be part of this group...

I agree I have seen it over and over where people feel if they don't get a tax form they do not need to indicate it on their taxes. I suspect a large number of people will secretly be angry with this change, however I believe it is for the better and it sure does make it easier.

"Well, if it's not on the form, then it's not income subject to tax...right honey????"

*sigh*

yojoakak

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Re: Taxes - say goodbye to the small note exemption
« Reply #8 on: January 21, 2013, 08:00:50 PM »
Am I still going to have to print out 40 pages of Folfiofn transactions to attach to my return? (Form 8949)

You really do that?

It seemed to be what the Form required.

Also, if I remember correctly, the "Cost Basis" on Folfiofn's 1099-B may not be your actual cost basis. You need to calculate that from the information listed on your Year End Trader Statement.

daniel2023

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Re: Taxes - say goodbye to the small note exemption
« Reply #9 on: January 22, 2013, 08:49:19 PM »
One of the reasons I started backing away from LC a few years ago was due to the issues around tax reporting.  Since I started re-investing, I'm definitely glad that they are making the 1099 simpler.  This makes much more sense to have a single form.

Booleans

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Re: Taxes - say goodbye to the small note exemption
« Reply #10 on: January 23, 2013, 01:40:34 PM »
The IRS essentially has no way of figuring out that you under reported earnings that were left off a 1099, correct? And yes, I am genuinely curious and not trying to dodge taxes.   

yojoakak

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Re: Taxes - say goodbye to the small note exemption
« Reply #11 on: January 23, 2013, 02:01:10 PM »
The IRS essentially has no way of figuring out that you under reported earnings that were left off a 1099, correct?

They have a way. It's called an audit.


"I.R.S. MORE LIKELY TO AUDIT THE POOR AND NOT THE RICH"
http://www.nytimes.com/2000/04/16/business/irs-more-likely-to-audit-the-poor-and-not-the-rich.html?pagewanted=all&src=pm
« Last Edit: January 23, 2013, 02:03:26 PM by yojoakak »

Computerizer

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Re: Taxes - say goodbye to the small note exemption
« Reply #12 on: January 28, 2013, 05:12:59 PM »
FYI, LC's help page on tax documents also now says that you will get a 1099-OID: http://www.lendingclub.com/kb/index.php?View=entry&EntryID=240

Quote
1099-OID: If you invested in Lending Club Notes issued on or after October 14, 2008 and received payments on a Note, you will receive a Form 1099-OID. The net result of (i) interest plus late fees less (ii) servicing fees will be reported as taxable interest on your 1099-OID. This form will be posted to your Lending Club account “Statements” section and not mailed; be sure to check your account before filing your taxes.

J2E

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Re: Taxes - say goodbye to the small note exemption
« Reply #13 on: January 28, 2013, 07:29:35 PM »
Just so I'm clear, we can't write off any losses due to defaults/charge off's from our Net as well correct?  That'd definitely bring down my net return.

Computerizer

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Re: Taxes - say goodbye to the small note exemption
« Reply #14 on: January 28, 2013, 08:48:26 PM »
Just so I'm clear, we can't write off any losses due to defaults/charge off's from our Net as well correct?  That'd definitely bring down my net return.

I don't know whether we're allowed to or not, but Lending Club does say they will report charge-offs on a 1099-B for us this year.