I used my Roth solo 401k Account to lend someone money, and he is about to repay that solo 401k Account. He is asking for a 1098 Form ( like what Mortgage Companies would send out every end of the year) so he can use it for tax deductions. I am trying to see how I can generate such a form for him?
ANSWER:
I understand that you have invested in a Promissory Note secured by real estate (i.e. a home Mortgage) and the borrower is deducting the interest paid to the solo 401k (as the lender) from their personal tax return. You asked if you should issue the borrower a 1099 reflecting the interest paid.
The form to which I believe you are referring would be Form 1098 (rather than 1099), titled "Mortgage Interest Statement". From a 401k reporting perspective, a Form 1098 is not required as it only pertains to lending money as part of a "trade or business" which does not apply to a retirement trust such as a 401k as the 401k is a passive investor. However, you are not prohibited from issuing a Form 1098 to the borrower if they are requesting such documentation to file with their personal tax return. Here is link to the 1098 instructions for your reference: https://www.irs.gov/instructions/i1098