1098 vs 1099-INT: Filing Rules for Payers 

Forms 1098 vs 1099-INT both report interests-related financial transactions to the IRS. One reports mortgage interest (1098), and the other reports interest income paid out (1099-INT).

Knowing the difference and having a clear comparison of 1099-INT vs 1098 helps payers prevent mistakes in their informational returns.

Using The Right Form Matters For Interest Reporting

Form 1098 and Form 1099-INT are two sides of the same coin when it comes to interest reporting. The former documents mortgage interest received, the latter reports interest income paid.

Despite both forms reporting interest payments, they have different reporting requirements. And misreporting on either of these forms or missing filing deadlines can result in costly penalties and compliance risks.

What Is IRS Form 1098?

Form 1098 is a mortgage interest reporting form which is filed only for mortgage interest payments or mortgage insurance premiums issued from a borrower if they total $600 or more in a tax year.

You also need to report if a borrower overpaid interest in a prior year (like on an adjustable-rate mortgage) and you later refund or credit that overpayment.

Who files and sends 1098 to recipients?

Form 1098 filing requirements requires mortgage lenders such as banks, credit unions, businesses, or even individuals acting as lenders to file it.

Key Reporting Items and Boxes

• Box 1: Mortgage interest received Reports how much mortgage interest the lender received from the borrower.
• Box 2: Outstanding mortgage principal Reports the balance of the mortgage loan or how much principal balance was left at the start.
• Box 3: Mortgage origination date Reports the original start date of the mortgage or when the mortgage was created by the first lender.
• Box 5: Mortgage insurance premiums Reports mortgage insurance premiums or MIPS of $600 or more paid by a borrower on a single mortgage.

Form 1098 Filing Deadlines

• Send Copy B to recipient: January 31
• Paper file Form 1098: February 28
• E-file Form 1098: March 31

What Is IRS Form 1099-INT?

A1099-INT form is required if your business issued an interest payment of at least $10 in a year. This applies to common types of interest such as savings account interest, bond interest, or certain types of investment-related interest.

The form is also required if your business paid $600 or more in interest on late death benefit payments from a life insurance company, interest from a damage settlement, interest on state or federal tax refunds, or other interest-like payments.

Who files and sends 1099-INT to recipients?

This interest income reporting IRS form is filed by businesses, banks, government agencies, or other financial institutions.

Key Reporting Items & Boxes

• Box 1: Taxable interest Reports interest of $10 or more, including bank deposits, bonds, and other financial instruments.

• Box 2: Early withdrawal penalties Reports interest or principal that has been forfeited due to an early withdrawal.

• Box 3: U.S. government bond interest Reports interest earned from U.S. Treasury securities, including Savings Bonds, Treasury bills, notes, and bonds.

• Boxes 6 – 8: Foreign tax paid or tax-exempt interest Reports foreign tax amount paid on interest income, name of the foreign country, and any tax-exempt interest.

Form 1099-INT Filing Deadlines

• Send Copy B to recipient: January 31
• Paper file Form 1098: February 28
• E-file Form 1098: March 31

Comparison Table: Form 1098 vs 1099-INT

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Best Practices for Filing 1098 & 1099-INT

• Collect IRS Form W-9 from the payees before the start of tax form filing season. You’ll need the information on this form (name, TIN, address) when filing both1098 or 1099-INT.
• Always keep clear documentation of all interest received (for 1098) or paid out (for 1099-INT), including dates, amounts, payment methods, and any corrections or adjustments. You’ll need this in case of any audits or inquiries.
• Set up automated calendar reminders so that you never miss out on a deadline and end up paying a penalty.
• If you are going to use a third-party software for e-filing 1098 and 1099-INT, use only IRS approved e-file platforms like Tax1099. E-filing is the faster and simpler option, especially if you are bulk filing forms.
• Do monthly reviews of the payment totals so you always know which payees have crossed the reporting thresholds. This helps you avoid any threshold surprises in January.

1098 vs 1099-INT: Mistakes To Avoid

• Using the wrong form type, like using 1099-INT to report mortgage interest income, confuses both the IRS and recipients who need accurate information for their tax returns.
• The IRS is strict about their deadlines and filing forms late or forgetting to send copies to the recipient can come at a cost.
• Reporting the wrong amount because of accounting errors, such as mixing up accrual-based and cash-based accounting, creates a mismatch in your 1099-INT vs 1098 forms.
• TIN is the backbone of accurate filing and if its incorrect or missing, it could lead to B-notices and penalties.
• Not reporting interest payments done through manual or non-bank setups such as sending a physical check. The IRS requires reporting on all interest payments, regardless of how the payment was done.

Real-Time Scenarios

• If a bank pays $120 in interest to their customer, a savings account holder, the bank needs to file Form 1099-INT since the amount exceeds the $10 minimum reporting threshold.
• If a business reimburses a client and includes a $25 interest, that amount is reportable. Even though it’s not from a savings account, the business still needs to file 1099-INT.
• If a real estate investor sells a property and they act as the financier or lender, the buyer will have to make payments to the investor. This amount is then reported on 1098, but only if $600 or more was collected as interest during the year.
• If a lender receives $1,200 in interest on a second home mortgage, because it’s mortgage-related interest and over the $600 threshold, they must file Form 1098.
• If a crypto platform paid interest in staked tokens, it is reportable on 1099-INT, if the user earned $10 or more in interest.

FAQs

Q1. What if the payer is a small business and only paid interest once?

Even if a payer is a small business and paid interest only once, as long as the interest is $10 or more, the payer needs to file Form 1099-INT.

Q2. Can a payer issue both 1098 and 1099-INT to the same individual?

Yes, if the payer receives both mortgage interest and interest income, they must issue both 1098 and 1099-INT forms, if it meets the payment threshold.

Q3. Is filing still required if the recipient didn’t receive a physical check?

Yes, filing is still required even if the recipient doesn’t receive a physical check. The IRS requires reporting of interest payments regardless of payment method. Electronic transfers, reinvested interest, or credited amounts are all reportable.

Q4. What happens if the payer misses the 1098 or 1099-INT deadline?

If the payer misses the filing deadline for 1098 and 1099-INT, you can expect penalties from $60 to $330 per form, depending on how late the filing is. The later the filing, the higher the penalties.

Q5. Can interest paid to foreign persons be reported on 1099-INT?

No, interest paid to foreign persons are reported on Form 1042-S and not 1099-INT.

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