How to report 1099-INT interest income received by an LLC taxed as a disregarded entity?

Forum|Forum|6 years ago
June 4, 2019
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Best answer by Anonymous_

@karenblackwell wrote:

...there has to be a more clear way to report it on Schedule C but still reference the 1099-INT

You do not actually want to report bank interest (e.g., savings account interest) on your Schedule C unless you are dead set on paying self-employment tax on that interest income.

Otherwise, that type of interest income should be reported as personal, rather than business, income.

DS30

Employee

You would still report this interest income under Schedule C. Even though the LLC is considered a disregarded entity for income tax filing purposes, this will not change business interest income (reported on Schedule C) to personal interest income (reported on Schedule B).

You can report this LLC interest income under "other income" under the business income (screenshot).

Please note: Even though line 5 on the Schedule C says "other income not reported on 1099", it is actually referring to 1099-MISC income only and not interest income (reported on a 1099-INT). So this is the appropriate place to report business interest income if you received a Form 1099-INT.

yveshuinAuthor

I agree on the principle but do not understand how to report it on Schedule C as line 5 "Other Income" specifies NOT REPORTED ON 1099? Thanks for the clarification.

eds4526

If the interest is not distributed (unrealized); must it be reported as Income. No 1099 received.

Anonymous_

Employee

@eds4526 wrote:

If the interest is not distributed (unrealized); must it be reported as Income. No 1099 received.

The interest is required to be reported even if a tax reporting statement, such as a 1099, is not received. It is entirely inconsequential whether or not the interest was distributed to the owners (e.g., members of an LLC, S corporation shareholders, etc.).

Taxathrone

@pnored -- I'm in this situation now, with 1099-INT interest issued to my LLC's EIN--did reporting it on Schedule C work out for you, or did the IRS follow-up, saying that it was under-reported?

pnored

@Taxathrone

I have not heard anything from them and I even had to file a paper return which some say gets more scrutiny. However, I am leaning more towards reporting with my Schedule E this year. I also think maybe mine did not get questioned like others because of the small amount ($13). But I am not certain. Overall, I think the fact that one tries to report is important here. And when it can be explained what the thought process was... that is important too . I hope this helps.

Taxathrone

@pnored -- yeah, ultimately, it seems that reporting it either way seems to satisfy the IRS, even if one has to explain where it was reported on the return. I did find a couple sources, fact-checked by CPAs, which indicate that reporting it on Schedule C, line 6 is what they would do (see here and here), so I think that's where I'm going to report my single member disregarded entity LLC's bank interest (and not on my Schedule B).