Are Late fees on Notes considered income and taxable?

[Sandra Hale]

Hi,

I have some notes and the borrower is typically late paying.  Therefore they pay the monthly note (principle and interest) plus a late fee of 5%.  Do I need to include this late fee as income/interest on my taxes?

[Mark Fedorov]

Any income is taxable according to the IRS. So the interest and the fees should be reported, the principal component of the payments are not taxable,