A handshake used to seal plenty of deals. Now, the IRS wants paperwork, interest calculations, and in some cases, formal reporting to back it up. Plenty of families and small business owners rely on informal loans. A parent fronts money for a down payment. A friend helps launch a startup. A sibling bridges a cash crunch.
Those transactions may feel personal, but federal tax law does not treat them as casual favors. Over the past few years, several tax changes and enforcement shifts have made it clear that informal loans face tighter scrutiny and clearer reporting expectations.
