Steps to Preparing Tax forms for Firms that Received a Business Loan

Written By Steps To Faculty Published April 30th, 2010

The Internal Revenue Service Taxpayers and tax-exempt institutions use tax forms issued by the Internal Revenue Service to record financial information. After business loan has been received there are some variants to be made in the Form 1099. This form is used to prepare and document an information return to record certain types of income to the business. These variants depend on the nature of the loan transaction and include 1099-C where the firm’s debts are cancelled or written off. If a business distributes dividends or bonuses to its shareholders it must fill Form 1099-DIV. Let’s look at what happens.

Step 1 Watch for changes in capital structure

When a loan is used to finance the firm, there is a change in Corporate Control and Capital Structure and the firm is supposed to fill Form 1099-CAP.

Step 2 Complete Form-INT if you issued loans to other businesses

If a company issues loan to other firms, and generate interest income it should file a Form-INT. If after receiving loan a firm opts to be categorized under the Subchapter S – Corporation, it has to fill Form 2553 (called Election by a Small Business Corporation). This form is used to permit a firm to which is not a corporation by default to choose to be taxed as an S – corporation. This can be due to a change in the firm’s capital structure.

Step 3 Consider foreign monies

If your firm has issued loan extension to other firms outside the United States or obtained financing or from a creditor outside the United States, it must file a Form 2555 (called Foreign Earned Income). This identifies the loan income derived or expense accrued from sources in the overseas exempt from United States income tax. Form 2555 is also used to claim no-taxable deductions. A taxpayer cannot exclude or include more than is earned or accrued from outside the country for the given tax year.

Remember all tax forms can be found at www.irs.gov/formspubs.


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