Author Topic: Lending Club and Tax Implications  (Read 8863 times)

Gundy

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Lending Club and Tax Implications
« on: February 14, 2013, 07:20:35 AM »

This is the first year that I've received a tax statement from lending club and I am a little confused.

In "Block 1" it shows almost 1,400 dollars in interest. In the instructions it says to "report that as interest income on your tax return."

Ok, so no questions there.

However, my Lending Club account did not go up by 1,400 dollars in 2012. I perhaps received that much in interest, but that was before you take into account the loan defaults that significantly reduced the overall gain. There is no record of that on the form 1099-OID.

Any LC veterans out there know how that works? Thank you in advance.


MrSaturday

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Re: Lending Club and Tax Implications
« Reply #1 on: February 14, 2013, 11:24:04 AM »
I think you'll probably want to itemize the defaults as capital losses on schedule D.

dragoncar

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Re: Lending Club and Tax Implications
« Reply #2 on: February 14, 2013, 12:35:58 PM »
Lending club should team up with H&R block to offer free tax preparation if you invest over $X

Left

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Re: Lending Club and Tax Implications
« Reply #3 on: February 15, 2013, 12:23:07 AM »
I was planning to use Lending club through a roth to avoid these things :S

as I was researching LC, you don't get the 1099 form on interests made on $25 investments, each interest is too low to trigger need for form. It doesn't mean you don't have to report it though :S

Post how it went for you once it is figured out, and maybe with some numbers/estimates? So I can decide if I want to use roth or not when I get started later this year

Gundy

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Re: Lending Club and Tax Implications
« Reply #4 on: February 15, 2013, 06:08:18 AM »


Ok, I just received this email:

Lending Club will be issuing corrected 2012 IRS Forms 1099-OID and 1099-INT in addition to providing a new IRS Form 1099-B for recoveries of principal amounts from previously charged-off loans by February 19, 2013. Please use the corrected Form 1099s for your tax filing purposes.


Perhaps there was a mistake originally.

MrSaturday, I looked at my 2012 year-end statement and it listed $658 of charged off loans. So the good news is that it does have a way of listing the total without me going through personally and recording each one as it happens.

What I was worried about originally was that based on the way the information was being reported it would count for more capital gains than you would normally expect. But, since it looks like the updated tax forms will come out in a few days I'll sit tight and wait for the update. Thanks guys for replying and I'll let you know how it goes.

Gundy

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Re: Lending Club and Tax Implications
« Reply #5 on: February 15, 2013, 06:14:07 AM »
eyem- Yes, I was not 100% accurate with my first post. I had received a tax statement the previous year and it only had one loan on there. When I started my LC account two years ago I mistakenly invested up to $100 in some loans before I smartened up and made sure every one was only $25. Last year from what I can tell none of my $25 loans made it on to the tax form and I had the same impression that you did. (as in, the $25 loans wouldn't trigger enough interest to be taxable) That was why I was surprised this year to see a list three pages this year. I'm going to wait until the updated form comes out to see if that clears up some of the confusion.

Nords

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Re: Lending Club and Tax Implications
« Reply #6 on: February 15, 2013, 08:41:39 AM »
Last year from what I can tell none of my $25 loans made it on to the tax form and I had the same impression that you did. (as in, the $25 loans wouldn't trigger enough interest to be taxable) That was why I was surprised this year to see a list three pages this year. I'm going to wait until the updated form comes out to see if that clears up some of the confusion.
The interest may not be enough to trigger the IRS requirement to generate a 1099, but the interest income is still taxable. 

As P2P lending grows, I bet the IRS is going to make a lot of interest/penalties from these sort of oversights...

Honest Abe

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Re: Lending Club and Tax Implications
« Reply #7 on: February 16, 2013, 05:13:17 AM »
I'm not an LC investor, but as far as I'm aware they are no longer calculating interest from loans individually but rather putting them all on the same 1099

http://www.lendacademy.com/forum/index.php?topic=621.0

Mike

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Re: Lending Club and Tax Implications
« Reply #8 on: February 19, 2013, 03:40:42 AM »
I read on another site (can't remember where) that LC will not issue a tax statement to you for your defaults/charged off loans(I think it's a 1099-C) unless the value of them exceeds $600.  So in order to count the defaults against your earned interest, you'll have to pull that info from the annual account statement.

Nords

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Re: Lending Club and Tax Implications
« Reply #9 on: February 19, 2013, 08:47:08 AM »
I read on another site (can't remember where) that LC will not issue a tax statement to you for your defaults/charged off loans(I think it's a 1099-C) unless the value of them exceeds $600.  So in order to count the defaults against your earned interest, you'll have to pull that info from the annual account statement.
That's the IRS rule that a 1099 only has to be generated for amounts over $600.

I've written lots of $595 checks to vendors...

Gundy

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Re: Lending Club and Tax Implications
« Reply #10 on: February 20, 2013, 11:10:56 AM »
Honest Abe -Thanks for the link. I'm going to look into it.


BlueBeard

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Re: Lending Club and Tax Implications
« Reply #11 on: March 04, 2013, 02:00:11 PM »
bump.  Did anyone receive a tax form yet?  Did it have complete totals or just the loans with large interest?

Mike

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Re: Lending Club and Tax Implications
« Reply #12 on: March 06, 2013, 03:12:45 AM »
My 1099 OID had every note on it.