I made a loan (investment) to a business of a friend. Note is in writing and signed by both sides. It was to help relocate his business. The savings from the move would allow payment after about 4 months in new location. Loan made in Feb 2013 and was to be paid back in in one lump sum in Aug 2013 with interest. Well the move took longer to happen, taking place 7 months later than planned so agreement was verbally altered to allow more time. Interest was to be paid with the principal repayment at time of due date. I should be paid back fully with interest in March or April of 2014. I have not received anything from the loan in hand yet at all. The loan was a simple interest loan with rate better than any CD in the market.

Question: Do I need to declare anything (interest income) toward my 2013 taxes or just declare the whole income amount on my 2014 taxes when I receive the payment back?

it depends on your accounting method that you use.aslongas you accrual method of accounting, you need to report the interest on your loan each year as it accrues in 2014 even if you have not received anything in 2014;under the cas method of acct., you cannot recognize it until you receive the interest payments from the debtor.since a loan contract does not necessarily need to be written to be binding. Verbal loan contract can also be binding, too.

Being that I am an individual and not a company, I don't really have a set method of accounting. In that case I'll go with the latter option so I will report it on my 2014 taxes assuming I get it paid this year and put nothing down for my 2013 taxes.

Thanks so much.

The more common of the two methods for individual taxpayers is the cash method;however it depends