I would like to ask my employer for a loan. I know IRS guidelines expect it to run at the APR with regards to interest. However, before I ask I would like to be as educated as possible as to what type of affect this could have on my employer. Will he have to pay taxes on the interest gained from the loan payback.
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4Why would you want to borrow money from your boss??– LCIIIMay 6, 2016 at 16:22
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3I think this question needs a prerequisite question: "How can asking my employer for a loan affect my job, life, and overall well-being?" However, if you work for a bank then this process might not be so awkward :-)– MonkeyZeusMay 6, 2016 at 16:51
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1Also, I don't think it's your place to worry about how a loan would affect the course of business; that discussion will be had behind closed doors and they will simply come back to you with a yay or nay. So if you were to default on your loan then is your boss going to give you a raise in order to get the loan money back?– MonkeyZeusMay 6, 2016 at 16:54
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@LCIII it is not uncommon (especially for commissioned sales positions) for there to be a "draw" or "advance" available against future earnings.– user662852May 6, 2016 at 19:54
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I've heard of a advance against a future paycheck (no interest needed then) or a loan against a 401K plan, then beyond an originating fee to the administrator, you pay interest to yourself. If it's a small company, I think a loan with interest would be more likely than at a medium to large company.– mkennedyMay 6, 2016 at 21:17
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1 Answer
Will he have to pay taxes on the interest gained from the loan payback
Yes. This is income for the employer and must be declared as income. If their Accounting Dept can find creative (not illegal) ways to handle the loan and associated interest income, then how they file and for how much could vary.
Same concept applies to making a personal loan to family/friends. All of which are highly discouraged because it puts you in a potentially awkward and difficult situation if you default. It would have to be a pretty extreme circumstance for me to consider borrowing money from my employer. There's a lot of potential for things to go south.
