[PennySaved]

My corrected 1099-OID from Lending Club is posted on their site today.  I will have to persue and compare to my previously issued 1099-OID.  Still trying to understand how LC reports OID, especially for my chargeoffs. 

I was expecting some data for my 21 chargeoffs with loss of $400 plus for 2012 on the 1099-B.  But I only see six notes reported with a total of $1.90 sales price.  All Cost Basis reported as zero.  DUH?  I don't think I had any sales on Folio for 2012.  I thought this 1099-B form was supposed to get me out of reporting all the individual note bad debts on Form number 8xxx? attached to Schedule D.  I was hoping to have one number to report as loss on Schedule D.  I will have to wait until I get home from work to digest this new information.

[TravelingPennies]

Well, I see now on the link on the LC site to the 1099-B, they are calling this "Recoveries for Charge-Offs."  So it is not the Charge-offs, just the recoveries.   I hope Peter Renton is going to do a post on Tax Reporting issues as promised.

[TravelingPennies]

I went back to re-read the email LC had sent me on Feb 7:

"Lending Club will be issuing corrected 2012 IRS Forms 1099-OID and 1099-INT in addition to providing a new IRS Form 1099-B for recoveries of principal amounts from previously charged-off loans by February 19, 2013. Please use the corrected Form 1099s for your tax filing purposes."

So I guess I misread and thought the 1099-B was going to be issued for losses on charged-off loans, but now I realize they said it was for the "recoveries".  I guess now I can stop waiting around and finish working on my taxes.

[daniel2023]

So, in reviewing my personal statements, now that they have sent the corrections, here's what I have:

From year-end statement, $140.37 interest, plus $0.14 late fees, minus $14.54 service fees equals$125.97.  My corrected OID shows $125.98, which seems like only a difference in rounding.  So, it appears the OID factors in service fees, though they are not listed on the OID Box 7.  This makes sense, in that LC never delivers me a the service fee, as it is in essence removed from the received payment.

My 1099 is reporting $3.15 in short/long recoveries.  It makes sense that the cost basis is zero, since I would have charged these off as bad debt.

So then I'm doing another 1099-B write-off from my year end statement of charge-offs.  I'm simply putting this into my tax filing as a 1099-B that was not reported to the IRS.

It'd be nice if LC would issue a 1099-B for charge-offs, but overall, this wasn't as bad as I thought.

[thezinfan]

The corrected 1099-OID was nice. My interest went down about $100. This was true of the initial 1099-OID also, but it looks like service fees have already been deducted. No need for Sched A line 23, which was subject to 2% limit anyways.

[Peter]

from: PennySaved on February 19, 2013, 04:50:04 PM

[mindbowels]

For me, I'm seeing an amount on the 1099 OID of 406.98
On the year end summary, I have a net gain of 332.36 (after 74.62 of write offs).

So working backwards, it seems like the OID doesn't include the writeoffs in it?  Where do those go?

Looking forward to the blog post!

[brycemason]

LC does not issue you anything for the charge offs. I remember reading something in the prospectus that they reserve the tax advantage. But I'll claim it anyway, because that doesn't seem fair.

[TravelingPennies]

My LC interest OID originally reported was $1256.97 and the corrected interest OID reported was $1254.89, a difference of $2.08.   From looking carefully at my 21 charged off loans, I can see that $1.38 of this $2.08 difference was 2011 interest on my charged off loans that was included with the 2012 interest.  So that has been corrected.  So that leave a correction of $0.70 less interest on my current loans and I don't care to investigate what the error was.  OID does not appear to include any accrued interest for months that borrowers did not make payments on notes, as far as I can tell for my charged off loans, so I do not need to make any adjustments to my tax basis (the unpaid principal) for taking a loss on my tax return.

And yes, the OID interest does reflect that the service charges have been deducted from the interest reported on the 1099-OID. So that helps since many of us cannot deduct that otherwise.  This is how capital gains and dividends are reported on 1099s from mutual funds.   The returns are net of the service fees, since they are deducted from your gains before your receive them.

I diligently reported each of my 21 of my charged off notes on Form 8949 line by line  using the Lending Club Note ID with statement "Bad Debt Statement Attached".  Date sold or disposed is the charge off date.  Cost or other basis on Form 8949 is the amount of unpaid principal.  All bad debt gets reported as short term loss on Form 8949 per IRS instructions.Then appropriate subtotals from Form 8949 get reported on Schedule D per instructions.  I will attach a document to Form 8949 explaining the bad debt, how the LC notes system works, how I don't know the identity of each borrower except their borrower ID, and why I think each note is bad debt, uncollectable and deemed worthless. I have copied that statement below if anyone else finds it useful.  I explain that LC has a collections effort and that they usually charge off notes that they cannot get payments from after 120 days or if the borrower has declared bankruptcy.  I will also attach to Form 8949, a table with each note ID, Original Note amount, loan term, date issued, unpaid principal remaining, date of last payment, date of chargeoff and reason for chargeoff per LC collection log.  I will hold off on filing and see if there are any changes I need to make.  I want to read what Peter is going to post regarding taxes.  I also had to report $1.90 in recoveries on a few loans, that also gets reported on Form 8949.  Strange to report recoveries on loans that were declared bad debt in the same year, 2012, but I don't see any other reasonable way or time to report it.

Attached Statement for Form 8949, Tax Year 2012
My Name and  SSN

LendingClub Bad Debt on Defaulted Notes for Consumer Loans

The bad debt of $487.80 I am reporting on IRS Form 8949 for tax year 2012 is for 21 notes issued by LendingClub for  “peer-to-peer” consumer loans now in default of payment and charged off by LendingClub in 2012 after unsuccessful collection attempts.  LendingClub (www.lendingclub.com) acts as an agent between the lender (myself) and the borrower. For each loan LendingClub makes to a borrower, it issues notes to individual lenders investing in the loan.

Most of the defaulted notes were issued for loans for borrowers wishing to consolidate existing credit card debt.  LendingClub employs a collection agency which made several attempts to collect payments on the loans.  Loans are usually charged off by LendingClub if payment collection is unsuccessful after 120 days or if the borrower has declared bankruptcy.  All collection activities are noted in the LendingClub collection log notes and payment loan history online.

I do not know the names of the debtors. Only LendingClub knows the names of the debtors. I only know the debtors by their LendingClub Borrower ID, Loan ID and Note ID.    Also I do not have any family relations to any debtor.
Please see attached table for further detail of each charged-off note, which includes Borrower  ID, Loan ID and Note ID, date of loan issue, original amount of note, repayment term (36 or 60 mos.), date of last payment made, remaining unpaid principal, charge-off date and reason for charge-off. 

Since the debt is not collateralized I do not expect to receive anything from any bankruptcy proceeds. I therefore deem this debt worthless.  Any amounts of charged-off notes that LendingClub has recovered from these bad debts and reported on Form 1099-B will be reported by me as capital gains on Form 8949 and Schedule D.

LendingClub contact info:  LendingClub Corporation, 71 Stevenson St., Suite 300, San Francisco, CA  94105 (888) 596-3159

My Name _______________________________   Date__________________   
         (signature)

[TravelingPennies]

For those that don't already know how to report bad debts, refer to page 58 of 2012 IRS Publication 550 Investment Income and Expenses (Including Capital Gains and Losses).  Deduct as short term capital losses.  On Form 8949, Part 1, line 1, enter the name of the debtor (I used the Lending Club note ID instead of a name) and "bad debt statement attached" in column (a).  Enter your basis in the bad debt in column (e) and enter zero in column (d).  Use a separate line for each bad debt.  Pub 550 Instructions say for each bad debt, attach a statement to your return that contains:

A description of the debt, including the amount and when it came due.
The name of the debtor, and any business or family relationship between you and the debtor
The efforts you made to collect the debt
Why you decided the debt was worthless.  For example, you could show that the borrower has declared bankruptcy, or that lega action to collect would probably not result in payment of any part of the debt.