Hi,

I loaned a friend of mine 5000 early this year (he is an accountant) , and few days ago he said he will return me the money in 5 checks each is 1000 and will issue me 1099 form. Does that mean I will have to pay more tax because it is another income ? Or does that merely reduce his tax ? Thanks

If he's merely repaying money that you lent him, there's no tax liability on your part and therefore no need for a 1099 form. You don't indicate that he's paying you interest on the money. If he were, then the interest would be taxable as income but not the $5000 principal.

Thanks for your answer,
My understanding was that no 1099 is needed since he is not paying me any interest. But since he was insisting to give me 1099 , I become suspicious as I don't understand why he wants to give me 1099.. Do you know what benefit can 1099 bring him ?

Thanks

This is no friend!
Unless there is interest involved (and in that case he would issue a 1099INT), he is merely repaying you your own capital.

Tell him he's a thief and you will report him to the IRS. He is trying to position the repayment of a loan as a $5,000 business expense and stick you with a tax bill... for shame!

Well said, Five Rings! I am in complete agreement!

Thanks Five Rings and Atlanta Tax expert. So, you are saying, that by issuing me 1099, he can claim this money as business expense and get tax cut on his income and at the same time I will have to pay more tax because of this 1099.. do I understand correctly ?

Thanks again

Yes, that is EXACTLY what we are saying!