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Accounting & Bookkeeping & Small Business Forum
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Balloon_Guy
Joined: 17 Nov 2008
Posts: 2
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| Posted: Mon Nov 17, 2008 3:01 pm Post subject: Tax Question - Form 1099 |
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Can someone please clarify something for me?
Situation:
I have a company ABC LLC in the USA
I borrow money from Lenders located in Canada, and issue them promissory notes with a return of 3% monthly for one year term.
I then take the money and lend it to another company XYZ in the USA who invests it for themselves, providing me with a promissory note with a return of 4% monthly for one year term.
After the calender year, XYZ issues me a 1099 form for the interest 4% earned on the money I lent them.
Question:
What form do I provide the lenders who lent me money? is is 1099-int?
Would i write that they earned 3% return? What about the fact they live in Canada? Do they report it 1099 form to the CRA in Canada?
Am I only responsible to pay taxes for ABC of 1% only?
Or is there something else I need to do? Withhold taxes? etc....
Can someone please advise?
Thank you
Balloon_Guy |
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BirchAccounting
Joined: 09 Aug 2008
Posts: 10
Location: Surrey, BC, Canada
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| Posted: Mon Nov 17, 2008 4:28 pm Post subject: |
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Is the lender in Canada a person or a corporation? Depending on the dollar value the income should be reported to CRA so that they can ensure it's claimed on a person's T1 or a corporation's T2. In Canada they would receive a form called a T5 which shows investment income - including interest. My clients who receive interest from American sources still give me a T5 not a 1099 so I am not sure where the information exchanges hands. To make sure you are complying with Canadian Tax Law you may want to call CRA at 1-800-267-6999
Amanda |
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Balloon_Guy
Joined: 17 Nov 2008
Posts: 2
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| Posted: Mon Nov 17, 2008 4:59 pm Post subject: |
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Thanks for the response Amanda,
The lender from canada is a person NOT a corp.
Also, I don't believe a T5 is req'd since this is not an investment from the persons. It is merely a personal loan to which interest is paid too from my LLC. Therefore only interest can be taxed. NO capital gains or losses in this situation.
I am just unsure of what forms i need to send them, in canada & what is the procedure. |
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