Form 1098-VLI's Hidden Homework: Original Use and Final Assembly

By Stephen Swanick, CPA

You can produce an interest report for every account in the book by the end of the week. You have done it every January for years, and the layout has not changed.

Then someone forwards you the draft of Form 1098-VLI. It asks for the year, make, model and VIN of the vehicle behind each of those loans. No report you run answers that.

The form is still stamped as a draft, so waiting feels like the responsible call. It is not, and the reason has nothing to do with trusting an IRS timeline. What the return has to contain is already fixed in documents that carry no draft stamp.

The fields most likely to be missing from your records describe the vehicle rather than the loan, and those are the slowest to recover. The people writing the XML have a reason to watch for the 1098-VLI IRIS schema. The people who own the data do not.

Where the Form 1098-VLI IRIS schema stands today

The IRS publication Tax Year 2026 IRIS ATS Examples says the most about the electronic side, and it sets the boundary in its opening line. "For Tax Year 2026 in Processing Year 2027 there are 43 forms that can be electronically filed using the IRIS Application to Application (A2A) intake method." Table 1 of that document, titled Form Examples, lists Form 1098-VLI among the 43 and gives it a worked example chart of its own.

An asterisk in Table 1 marks the forms that may be filed through the Combined Federal/State Filing Program. The footnote reads "These forms may be filed through the CF/SF Program. The IRS will forward these records to participating states for filers who have been approved for the program." Form 1099-INT carries that asterisk, and so do 1099-MISC, 1099-NEC, 1099-K, 1099-DIV, 1099-G, 1099-B, 1099-OID, 1099-PATR, 1099-R and 5498.

Form 1098-VLI does not carry it, so the forwarding in that footnote does not reach this form. Confirm with your states what they expect rather than assuming the federal file carries it.

Publication 5718, the IRIS A2A specifications, and Publication 5719, the IRIS test package, are both posted in their Processing Year 2026 editions. The change table in Publication 5719 is headed "Changes to TY2025/PY2026 Revision". A full text search of both posted PDFs on September 17, 2026 returned no occurrence of Form 1098-VLI.

The tax year 2026 IRIS schema package is what your developer will eventually build the XML from. Neither posted publication names this form.

At the IRIS Working Group meeting on July 8, 2026 the IRS listed the form under Future Forms TY26/PY27. The agency told the group that draft TY26/PY27 schemas should be available the following week, with final schemas and publications tentatively in August. Both schedule statements were made in July and were forward looking.

IRIS will be the only information returns electronic filing system after January 1, 2027, covering current year, prior year and corrections. The IRS said it stopped accepting new Information Returns (IR) Applications for Transmitter Control Codes on July 21, 2026. Existing applicants can update their applications through December 2026, after which those applications become read only and are kept for historical reference.

Both of those bullets sit under a heading for FIRE System Retirement, and the next bullet names the open route. "Current FIRE users must complete an Information Returns Intake System (IRIS) Application for TCC and transition to IRIS for electronic filing beginning with the 2027 filing season."

Accounts, methods and submissions belong in our guide to filing Form 1098-VLI electronically through IRIS. What follows here is the data side of the same deadline.

Why a draft form is still enough to start a field audit

The objection is fair on its face. The version of Form 1098-VLI posted on the IRS site is stamped as a draft and tells you not to file it. It carries a December 2026 revision, Catalog Number 95868I, OMB Number 1545-2334, and a footer reading Created 8/20/26.

The draft instructions are also marked draft and carry the same December 2026 revision and Catalog Number 95934D. They are dated August 12, 2026.

Treasury and the IRS published the final regulations titled Car Loan Interest Deduction on September 8, 2026, under docket TD 10054. The citation is 91 FR 57214 and the rule takes effect November 9, 2026. A proposed rule under the same title had been published on January 2, 2026.

Both drafts predate that final rule. The abstract reads "This document contains final regulations regarding the deduction for certain taxpayers for an amount up to $10,000 of qualified passenger vehicle loan interest." Nothing in the published record says the drafts are wrong, and I am not going to tell you they are.

Read the record as a sequence of dates. The list of data elements the return must contain does not come from the form at all.

Section 6050AA(b), as recited in IRS Notice 2025-57, requires the return to contain the following.

• The name and address of the individual
• The amount of interest received for the calendar year
• The amount of outstanding principal as of the beginning of the calendar year
• The date of origination
• The year, make, model and VIN of the vehicle
• Such other information as the Secretary may prescribe

Every one of those is a column you can start building today. None of them moves when a draft becomes final. Our explainer on what Section 6050AA requires of lenders covers the obligation itself.

Box 6 and box 7 ask about original use and about final assembly in the United States. Neither appears among the data elements the statute names. Both are also the fields your systems were least likely built to answer, which makes them a reason to start early.

The accommodation some lenders remember covered one year only. For interest received in calendar year 2025, Notice 2025-57 offered a different route. A recipient could satisfy the section 6050AA obligation with a statement made available to the individual on or before January 31, 2026.

That statement had to show total interest received in 2025 on a specified passenger vehicle loan. Delivery could be through an online account portal, a regular monthly statement, an annual statement or similar means. The IRS said it would not impose penalties under sections 6721 and 6722 on recipients that did so.

The notice states its effective date as returns and statements related to interest received during calendar year 2025. In the Paperwork Reduction Act section of the same notice, the IRS estimated 35,800 respondents and 8,000,000 responses annually at an average of 0.25 hours per response. The numbers are estimates rather than counts, and the quarter hour describes the response.

The entity blocks in the IRIS example do not sit where you expect

The ATS Examples document defines its own entity words. "IRIS Schemas use 'Issuer' to identify Payer/Filer and 'Recipient' to identify Payee." Hold that against the Form 1098-VLI example chart in the same document.

The rows tagged Issuer are these.

• "Payer of Record's Name, Street Address, City or Town, State or Province, Country, ZIP or Foreign Postal Code, and Telephone Number"
• "Payer of Record's TIN"

The rows tagged Recipient are these.

• "Recipient's/Lender's TIN"
• "Recipient's/Lender's Name, Street Address, City or Town, State or Province, Country, ZIP or Foreign Postal Code"
• "Recipient's Account Number"

The payer of record is your borrower. In that chart the borrower's block is tagged Issuer and your institution's block is tagged Recipient.

Every neighboring chart in the document runs the other way.

• 1098-E, the student loan form. Issuer is the Recipient's/Lender's name and address block and the Recipient's TIN. Recipient is the Borrower's TIN and name and address block.
• 1098. Issuer is the Recipient/Lender's name block and TIN. Recipient is the Payer's/Borrower's TIN and name block.
• 1098-C. Issuer is the Donee and Recipient is the Donor.
• 1098-T. Issuer is the Payer's name block and the Filer's TIN. Recipient is the Student.
• 1099-INT. Issuer is the Payer and Recipient is the Recipient.

Form 1098-VLI is the only chart in that document where the filing institution appears under Recipient. The person who receives the statement appears under Issuer.

On the draft paper form the labels run the familiar way. Your block reads RECIPIENT'S/LENDER'S name and RECIPIENT'S/LENDER'S TIN. The borrower's block reads PAYER OF RECORD'S name and PAYER OF RECORD'S TIN.

The IRS addressed that class of mismatch at the July meeting. It said boxes on paper forms generally correspond with the fields used for the electronic file. Where the form and field instructions do not match, "the guidance in the schema package and IRIS electronic filing specifications supersedes paper form instructions."

So do not resolve this inside a spreadsheet, and do not let a developer resolve it from the paper form. Label your columns with the form's own words, payer of record and recipient or lender. Confirm field level mapping with whoever transmits your file before a single record is built.

The same meeting covered the address block. For forms revised in 2026 the address fields on the paper forms were divided into individual entry boxes. Electronic files will not include the suite or apartment number entry boxes.

If your servicing system keeps an address in two free text lines, that cleanup is cheaper now than in the week of the deadline.

Which loans and which borrowers belong in the file

Scope the population before you audit fields. A field audit against the wrong set of loans wastes the quarter.

The draft instructions state the trigger plainly. "File Form 1098-VLI if you are engaged in a trade or business and in the course of such trade or business you receive from an individual, decedent's estate, or nongrantor trust $600 or more of interest on any one SPVL during the calendar year."

An SPVL is a specified passenger vehicle loan. Section 163(h)(4)(B), as recited in Notice 2025-57, defines it as indebtedness incurred after December 31, 2024 to purchase an applicable passenger vehicle for personal use. The loan is secured by a first lien on that vehicle.

An applicable passenger vehicle, as the draft instructions describe it, meets every one of these.

• Original use begins with the payer of record
• Manufactured primarily for use on public streets, roads and highways
• At least two wheels
• A car, minivan, van, sport utility vehicle, pickup truck or motorcycle
• A gross vehicle weight rating of less than 14,000 pounds
• Final assembly within the United States

The threshold is per loan. "File a separate Form 1098-VLI for each SPVL. The $600 threshold applies separately to each SPVL."

A lender is not required to file for an SPVL carrying less than $600 of interest. The rule holds even where one individual paid more than $600 in total across more than one loan. If your interest report rolls up by customer, it answers a different question than the one the form asks.

The financed amount is not automatically the amount that counts. Amounts customarily financed in a vehicle purchase and directly related to it can form part of an SPVL, and the instructions name these.

• Service contracts and mechanical repair coverage
• Vehicle protection products including tire, wheel, paint and interior protection
• Key fob replacement plans
• Warranties and extended warranties
• Guaranteed asset protection waivers or insurance
• Credit insurance products including credit related accident, health and life products
• Sales taxes
• Vehicle related fees including title and registration fees
• Vehicle related accessories that are components of the vehicle purchased as part of the transaction

Debt incurred to repay negative equity on a loan secured by a trade in vehicle is not an SPVL. Neither is debt to buy collision and liability insurance that is not a credit insurance product. Debt for property or services unrelated to the vehicle, such as a trailer or a boat, falls outside the definition as well.

Where a debt mixes qualifying and nonqualifying amounts the instructions require allocation, and only the interest attributable to the qualifying portion is reported. A loan owed by a person related to the lender within the meaning of section 267(b) or 707(b)(1) is not an SPVL.

The payer of record is the person carried on your books and records as the principal borrower. Where the books do not indicate which borrower that is, you must designate one. The payer of record has to be an individual, a nongrantor trust or a decedent's estate.

Where a loan has more than one borrower, one form goes to the payer of record and shows the total interest received on the loan. No form is filed where the payer of record is a nonresident alien individual, a foreign nongrantor trust or a foreign estate.

Every field on the draft form, and where to look for it in your systems

The draft form carries numbered boxes 1 through 7 plus an account number field. Box 1 is vehicle loan interest received by lender, and boxes 2a, 2b, 2c and 2d are Year, Make, Model and VIN. Box 3a is loan origination date and box 3b is loan acquisition date.

Box 4 is outstanding principal and box 5 is refund of overpaid interest. Box 6 is checked if original use of the vehicle began with the payer of record. Box 7 is checked if final assembly of the vehicle occurred within the United States.

Our line by line read of the form walks each one for both sides of the loan. What follows is the lender-side reference, written for whoever has to populate the data.

Box 4 is the outstanding principal on the loan as of January 1 of the calendar year the form is filed for. Where the loan was originated during that year, the figure is the principal as of the origination date, and a loan acquired during the year takes the outstanding principal as of the acquisition date.

Box 3a is the origination date with the original lender, so a lender that bought the loan does not put its acquisition date there. Box 3b carries that acquisition date and stays blank where nothing was acquired.

Box 5 reports reimbursements of overpaid interest totaling $600 or more in the year the reimbursement is made. The prior year form does not change. Where a financial institution or its middleman pays interest of $10 or more on that reimbursement, the interest goes on Form 1099-INT.

That interest must not be included on Form 1098-VLI.

Box 1 carries a timing rule of its own. Prepaid interest is reported only in the year in which it properly accrues. Interest received this year may be reported this year where it properly accrues in full by January 15 of the following year.

Where any part of the payment accrues after January 15, the current year takes only the amount that properly accrues by December 31. The rule sits under Prepaid SPVL Interest in the draft instructions, citing Regulations section 1.6050AA-1(f)(2).

An account number is required when you keep multiple accounts for one payer of record and file more than one form for them. The IRS encourages a designated account number on every Form 1098-VLI filed.

A payee's TIN may be truncated on payee statements, and truncation is not allowed on documents filed with the IRS. The recipient's or lender's TIN may not be truncated on any form.

The example chart lists a short set of suggested fields to test. It names line items 1, 2a "Vehicle model year", 2d "Vehicle or other identification number", 3a, 3b and 4. Line items 2b, 2c, 5, 6 and 7 are not on that list.

The chart's preamble states that all indicators are required fields even though the table does not list them. A record must also contain at least one non-zero payment amount. The labels differ slightly from the paper form, and a shorter test list is not a shorter filing list.

The two boxes your loan origination system was never built to answer

Box 6 and box 7 are checkboxes, which makes them look like the smallest fields on the form. They will take the longest. A loan origination system records what was financed, and who first took delivery of the car sits outside that record.

The draft instructions define original use as beginning with the first person that takes delivery after the vehicle is sold, registered or titled. Original use does not begin with a purchaser who incurs debt to buy the vehicle. It begins with that purchaser only where the vehicle is treated as a new vehicle under the loan documentation.

A dealer holding a vehicle primarily for sale to customers in the ordinary course of its trade or business does not begin its original use. A purchaser who is not a dealer may return a vehicle to the seller within 30 days of taking delivery. That purchaser is not treated as the first person to take delivery.

Box 6 also covers a case that has nothing to do with the sale. The box is checked where the payer of record became an obligor of the loan because a previous obligor died.

Box 7 has a defined path. The draft instructions let a lender rely on the vehicle's plant of manufacture as reported in the VIN. They name the National Highway Traffic Safety Administration VIN Decoder at nhtsa.gov/vin-decoder.

A lender may also rely on the final assembly point reported on the label affixed to the vehicle on a dealer's premises. The instructions cite Regulations section 1.163-16(e)(3).

Both routes start at the vehicle, and the VIN route is the one that scales across a portfolio. A missing or malformed VIN is worse than it first appears. Our walkthrough on reading a VIN for United States final assembly goes through that check.

Run both boxes against a sample of a hundred loans before you scope the whole book. The number of rows that come back blank is the size of the project.

The dates that decide how much runway you have

The Guide to Information Returns in Publication 1099 (2026) gives Form 1098-VLI, Vehicle Loan Interest Statement, an amount to report of $600 or more. The due date to the recipient is January 31. The due date to the IRS is February 28, and the table's footnote adds that the due date is March 31 if filed electronically.

Section 6050AA(c) requires the written statement to be furnished on or before January 31 of the year following the calendar year the return covers. The same page states the weekend rule. "If any filing due date in these instructions falls on a Saturday, Sunday, or a legal holiday, you will be considered to have timely filed if you file by the next day that is not a Saturday, Sunday, or a legal holiday."

In 2027, January 31 and February 28 both fall on a Sunday and March 31 falls on a Wednesday. The borrower statement date moves to Monday February 1, 2027, and the paper filing date moves to Monday March 1, 2027. The electronic filing date stays Wednesday March 31, 2027.

Extending the filing date does not move the date the borrower copy is due. Moving that one is a separate request on Form 15397, Application for Extension of Time to Furnish Recipient Statements. Our full treatment of the filing dates sets the dates out together.

Questions that come up before the first record is built

Is Form 1098-VLI live in IRIS today?

Not in the posted specifications. Table 1 of the Tax Year 2026 IRIS ATS Examples lists the form among the 43 forms available through the A2A intake method. That list is for TY2026 in PY2027. The A2A specifications and the test package, as posted, are Processing Year 2026 editions that do not name it.

The IRS placed the form under Future Forms TY26/PY27 on July 8, 2026. It said draft schemas were due the following week, with final schemas and publications tentatively in August. No IRS document reviewed states a schema version number or a release date.

Does a lender need a Transmitter Control Code?

The application that closed in July was the legacy one. The IRS stopped accepting new Information Returns (IR) Applications for Transmitter Control Codes on July 21, 2026. Existing applicants can update theirs through December 2026, and those applications then become read only.

The route the IRS names for the season ahead is the IRIS Application for TCC. Current FIRE users must complete it and transition to IRIS for electronic filing beginning with the 2027 filing season. A filer using the A2A method also needs an Application Program Interface Client ID in addition to a Transmitter Control Code.

What happens when the core system has no VIN on an older loan?

A missing VIN costs you box 2d and box 7 at the same time. Box 2d is the VIN, and the statute itself names the VIN among the required data elements.

Final assembly may be determined from the plant of manufacture as reported in the VIN, using the NHTSA VIN Decoder, or from the final assembly point on the label affixed to the vehicle on a dealer's premises. Without a VIN, the cheaper of those two routes is gone.

Where a substitute vehicle replaced the original after an unforeseen intervening event, the VIN reported is the substitute vehicle's.

What happens when a field the schema requires is blank?

No source reviewed publishes the business rules or the error codes for this form yet. The example chart does not print the 1098-VLI XML required fields either. Its preamble states that all indicators are required fields even though the table does not list them, and that a record must contain at least one payment amount other than zero.

In production a submission can come back Accepted with Errors, which requires a correction transmission, or Rejected, which requires a replacement transmission. Where the form and field instructions do not match, the schema package and the IRIS electronic filing specifications supersede the paper form instructions. Confirm the mapping with whoever transmits your file.

Is assurance testing required of a lender?

The requirement as written attaches to A2A software and to transmitters and issuers. "The IRS requires testing for all IRIS A2A software and a one-time communication test for all Transmitters/Issuers. You are required to pass IRIS ATS before you can transmit to the production environment."

ATS testing runs in an environment that is open year round. Live taxpayer data must not be submitted to it, because the environment is not secure, and testing live TINs results in rejection. Test TINs begin with three zeros.

The field audit to run this quarter

You do not need a core system integration to answer the question in front of you. You need one row per loan and an honest count of the blanks. Work down this list against an extract you can pull today.

A blank field, a VIN the collateral record never carried, a delivery fact the loan file never recorded, and a principal balance nobody measured on January 1 all end as values someone has to supply by hand. A core system integration will not produce a number your records never held.

Our filing service for lenders is $3.00 per form on the eFile Only tier and $4.50 per form on the eFile plus Print and Mail tier, both carrying a $750 annual minimum. At $3.00 per form that minimum covers 250 filings, and at $4.50 per form it covers 167. There is no monthly subscription and payment is per form.

You upload borrower data, the forms are generated, and they are e-filed with the IRS, so the spreadsheet is where a column your system never held becomes a value you supply. Our upload walkthrough shows what that spreadsheet needs.

The lender path begins by creating a filing account. Do that while the audit is still running, so the only open item left is the data.