Construction loan and a 1099

[A930Rocket]

After building our personal house with a construction loan from Primelending based in Texas (never use them!), they sent me a 1099 for 2016. This was strictly a construction loan and no wages or profit was made.

I asked my accountant about it last year at tax time and he said I could ignore it, as it was probably a mistake. I’ve never received a 1099 for a personal house and I’ve built 6 in the last 24 years.

Well, I just a letter from the IRS asking about the 1099 for 2016.

My accountant says get the lender to reissue a new 1099 with a zero amount. Primelending says show the IRS my invoices....a total pain and leads to who knows what.

Anybody with experience of 1099’s?

[asphaltgambler]

If you're borrowing money to build something how could they possibly send YOU a 1099??

[RANDY P]

Just send another 1099 out to someone you dislike.....Lower your tax liability - not like I ever thought of doing that a few times- heck the guys wouldn't notice, let alone pay. Honest!

rjp

[dafischer]

The proceeds of the loan aren't income, which is what a 1099 represents. Which box was filled on the 1099? I assume that you're paying interest on it.

[legion]

Originally Posted by RANDY P

Just send another 1099 out to someone you dislike.....Lower your tax liability - not like I ever thought of doing that a few times- heck the guys wouldn't notice, let alone pay. Honest!

rjp

I thought about doing that when I got a judgement against a crooked realtor. I instead got a bench warrant issued.

[A930Rocket]

That’s what I don’t understand.

They are about as helpful as a kick in the nuts.

Originally Posted by asphaltgambler

If you're borrowing money to build something how could they possibly send YOU a 1099??

[A930Rocket]

The amount was listed as “non-employee compensation “ on the 1099.

What were they compensating me for!!!

I paid interest as we built, but it’s been converted to a typical mortgage after completing the house.

Originally Posted by dafischer

The proceeds of the loan aren't income, which is what a 1099 represents. Which box was filled on the 1099? I assume that you're paying interest on it.

[RANDY P]

Originally Posted by legion

I thought about doing that when I got a judgement against a crooked realtor. I instead got a bench warrant issued.

Business partner on tax day:

"Aaron is on the lam, let's just send him a 1099- he's never gonna realize it anyways.."

rjp

[MBAtarga]

I think the bank issued you a 1099 - you should have issued your contractor(s) 1099's as they were paid. The net would be ZERO if you walked away with $0 - and you'd have no tax liability.

[GH85Carrera]

My accountant made it clear to me as a business owner. The penalty for not sending a 1099 to a person or company that is due one can be draconian from the IRS. The penalty for sending one to someone that does not really need it is the cost of the postage and the paper it is printed on.

File it away, and ignore it.

[Bob Kontak]

Originally Posted by A930Rocket

I asked my accountant about it last year at tax time and he said I could ignore it, as it was probably a mistake.

Odd that an accountant would think like this.

[Seahawk]

Look at the loan papers and see if there is any reference there.

We do 1099's all the time that are for specific, compensated services. The 1099 agreements are very specific to the tasks we are contracting for.

Odd stuff.

[icemann427]

Tell the idiot banker they were supposed to give you a 1098 not a 1099

[jwasbury]

Sounds like Primelending sent you a 1099-MISC indicating the amount advanced to you under the construction loan contract was non-employee compensation...

Primelending screwed up here. And your accountant did as well. Your accountant should not have told you to ignore. They reported income paid to you to IRS, you did not report the income on your return. I am certain the dollar amount in question was material, so the IRS notice was guaranteed.