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Amended Tax Forms

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Amended Tax Forms

Amended tax forms Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Amended tax forms Adjustment for premium. Amended tax forms Adjustment for acquisition premium. Amended tax forms Adjustment for market discount. Amended tax forms Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Amended tax forms “Original issue discount” is defined first. Amended tax forms The other terms are listed alphabetically. Amended tax forms Original issue discount (OID). Amended tax forms   OID is a form of interest. Amended tax forms It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Amended tax forms Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Amended tax forms Accrual period. Amended tax forms   An accrual period is an interval of time used to measure OID. Amended tax forms The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Amended tax forms Acquisition premium. Amended tax forms   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Amended tax forms A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Amended tax forms See Premium, later. Amended tax forms Adjusted issue price. Amended tax forms   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Amended tax forms In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Amended tax forms The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Amended tax forms Debt instrument. Amended tax forms   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Amended tax forms It generally does not include an annuity contract. Amended tax forms Issue price. Amended tax forms   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Amended tax forms Market discount. Amended tax forms   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Amended tax forms An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Amended tax forms The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Amended tax forms Premium. Amended tax forms   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Amended tax forms The premium is the excess of the adjusted basis over the payable amounts. Amended tax forms See Publication 550 for information on the tax treatment of bond premium. Amended tax forms Qualified stated interest. Amended tax forms   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Amended tax forms Stated redemption price at maturity. Amended tax forms   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Amended tax forms Yield to maturity (YTM). Amended tax forms   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Amended tax forms The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Amended tax forms If you do not have this information, consult your broker, tax advisor, or the issuer. Amended tax forms Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Amended tax forms If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Amended tax forms The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Amended tax forms For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Amended tax forms The following discussions explain what information is contained in each section of the list. Amended tax forms Section I. Amended tax forms   This section contains publicly offered, long-term debt instruments. Amended tax forms Section I-A: Corporate Debt Instruments Issued Before 1985. Amended tax forms Section I-B: Corporate Debt Instruments Issued After 1984. Amended tax forms Section I-C: Inflation-Indexed Debt Instruments. Amended tax forms For each publicly offered debt instrument in Section I, the list contains the following information. Amended tax forms The name of the issuer. Amended tax forms The Committee on Uniform Security Identification Procedures (CUSIP) number. Amended tax forms The issue date. Amended tax forms The maturity date. Amended tax forms The issue price expressed as a percent of principal or of stated redemption price at maturity. Amended tax forms The annual stated or coupon interest rate. Amended tax forms (This rate is shown as 0. Amended tax forms 00 if no annual interest payments are provided. Amended tax forms ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Amended tax forms The total OID accrued up to January 1 of a calendar year. Amended tax forms (This information is not available for every instrument. Amended tax forms ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Amended tax forms The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Amended tax forms Section II. Amended tax forms   This section contains stripped coupons and principal components of U. Amended tax forms S. Amended tax forms Treasury and Government-Sponsored Enterprise debt instruments. Amended tax forms These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Amended tax forms This section also includes debt instruments backed by U. Amended tax forms S. Amended tax forms Treasury securities that represent ownership interests in those securities. Amended tax forms   The obligations listed in Section II are arranged by maturity date. Amended tax forms The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Amended tax forms Section III. Amended tax forms   This section contains short-term discount obligations. Amended tax forms Section III-A: Short-Term U. Amended tax forms S. Amended tax forms Treasury Bills. Amended tax forms Section III-B: Federal Home Loan Banks. Amended tax forms Section III-C: Federal National Mortgage Association. Amended tax forms Section III-D: Federal Farm Credit Banks. Amended tax forms Section III-E: Federal Home Loan Mortgage Corporation. Amended tax forms Section III-F: Federal Agricultural Mortgage Corporation. Amended tax forms    Information that supplements Section III-A is available on the Internet at http://www. Amended tax forms treasurydirect. Amended tax forms gov/tdhome. Amended tax forms htm. Amended tax forms   The short-term obligations listed in this section are arranged by maturity date. Amended tax forms For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Amended tax forms Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Amended tax forms Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Amended tax forms U. Amended tax forms S. Amended tax forms savings bonds. Amended tax forms Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Amended tax forms Obligations issued by tax-exempt organizations. Amended tax forms OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Amended tax forms Mortgage-backed securities and mortgage participation certificates. Amended tax forms Long-term OID debt instruments issued before May 28, 1969. Amended tax forms Short-term obligations, other than the obligations listed in Section III. Amended tax forms Debt instruments issued at a discount by states or their political subdivisions. Amended tax forms REMIC regular interests and CDOs. Amended tax forms Commercial paper and banker's acceptances issued at a discount. Amended tax forms Obligations issued at a discount by individuals. Amended tax forms Foreign obligations not traded in the United States and obligations not issued in the United States. Amended tax forms Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Amended tax forms In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Amended tax forms You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Amended tax forms See Backup Withholding, later. Amended tax forms If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Amended tax forms File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Amended tax forms Electronic payee statements. Amended tax forms   You can issue Form 1099-OID electronically with the consent of the recipient. Amended tax forms More information. Amended tax forms   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Amended tax forms Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Amended tax forms To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Amended tax forms If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Amended tax forms Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Amended tax forms If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Amended tax forms A special rule is used to determine the original issue price for information reporting on U. Amended tax forms S. Amended tax forms Treasury bills (T-bills) listed in Section III-A. Amended tax forms Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Amended tax forms This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Amended tax forms A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Amended tax forms Example 1. Amended tax forms There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Amended tax forms The price actually paid by the owner cannot be established by owner or middleman records. Amended tax forms You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Amended tax forms The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Amended tax forms Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Amended tax forms For this purpose, you can rely on Section I of the OID list to determine the following information. Amended tax forms Whether a debt instrument has OID. Amended tax forms The OID to be reported on the Form 1099-OID. Amended tax forms In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Amended tax forms You also can report OID on other long-term debt instruments. Amended tax forms Form 1099-OID. Amended tax forms   On Form 1099-OID for a calendar year show the following information. Amended tax forms Box 1. Amended tax forms The OID for the actual dates the owner held the debt instruments during a calendar year. Amended tax forms To determine this amount, see Figuring OID, next. Amended tax forms Box 2. Amended tax forms The qualified stated interest paid or credited during the calendar year. Amended tax forms Interest reported here is not reported on Form 1099-INT. Amended tax forms The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Amended tax forms Box 3. Amended tax forms Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Amended tax forms Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Amended tax forms Box 4. Amended tax forms Any backup withholding for this debt instrument. Amended tax forms Box 7. Amended tax forms The CUSIP number, if any. Amended tax forms If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Amended tax forms 50 2006). Amended tax forms If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Amended tax forms Box 8. Amended tax forms The OID on a U. Amended tax forms S. Amended tax forms Treasury obligation for the part of the year the owner held the debt instrument. Amended tax forms Box 9. Amended tax forms Investment expenses passed on to holders of a single-class REMIC. Amended tax forms Boxes 10-12. Amended tax forms Use to report any state income tax withheld for this debt instrument. Amended tax forms Figuring OID. Amended tax forms   You can determine the OID on a long-term debt instrument by using either of the following. Amended tax forms Section I of the OID list. Amended tax forms The income tax regulations. Amended tax forms Using Section I. Amended tax forms   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Amended tax forms Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Amended tax forms For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Amended tax forms   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Amended tax forms Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Amended tax forms Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Amended tax forms Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Amended tax forms Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Amended tax forms If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Amended tax forms Report the result on Form 1099-OID in box 1. Amended tax forms Using the income tax regulations. Amended tax forms   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Amended tax forms For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Amended tax forms (If you use Section I-B, the OID is figured using 6-month accrual periods. Amended tax forms )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Amended tax forms Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Amended tax forms You must file an information return showing the reportable interest and OID, if any, on the CD. Amended tax forms These rules apply whether or not you sold the CD to the owner. Amended tax forms Report OID on a CD in the same way as OID on other debt instruments. Amended tax forms See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Amended tax forms Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Amended tax forms However, do not report the interest if either of the following apply. Amended tax forms You hold the bond as a nominee for the true owner. Amended tax forms The payee is a foreign person. Amended tax forms See Payments to foreign person under Backup Withholding, later. Amended tax forms Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Amended tax forms The coupon may have been “stripped” (separated) from the bond and separately purchased. Amended tax forms However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Amended tax forms Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Amended tax forms The backup withholding is deducted at the time a cash payment is made. Amended tax forms See Pub. Amended tax forms 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Amended tax forms Backup withholding generally applies in the following situations. Amended tax forms The payee does not give you a taxpayer identification number (TIN). Amended tax forms The IRS notifies you that the payee gave an incorrect TIN. Amended tax forms The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Amended tax forms For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Amended tax forms However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Amended tax forms S. Amended tax forms savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Amended tax forms Short-term obligations. Amended tax forms   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Amended tax forms However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Amended tax forms   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Amended tax forms However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Amended tax forms If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Amended tax forms Long-term obligations. Amended tax forms   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Amended tax forms The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Amended tax forms The amount to be withheld is limited to the cash paid. Amended tax forms Registered long-term obligations with cash payments. Amended tax forms   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Amended tax forms The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Amended tax forms If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Amended tax forms For any payment, the required withholding is limited to the cash paid. Amended tax forms Payee not the original owner. Amended tax forms   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Amended tax forms The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Amended tax forms Bearer long-term obligations with cash payments. Amended tax forms   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Amended tax forms For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Amended tax forms For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Amended tax forms The required withholding at maturity is limited to the cash paid. Amended tax forms Sales and redemptions. Amended tax forms   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Amended tax forms Backup withholding applies in the following situations. Amended tax forms The payee does not give you a TIN. Amended tax forms The IRS notifies you that the payee gave an incorrect TIN. Amended tax forms For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Amended tax forms Payments outside the United States to U. Amended tax forms S. Amended tax forms person. Amended tax forms   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Amended tax forms S. Amended tax forms person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Amended tax forms S. Amended tax forms trade or business. Amended tax forms Payments to foreign person. Amended tax forms   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Amended tax forms U. Amended tax forms S. Amended tax forms -source amount. Amended tax forms   Backup withholding and information reporting are not required for payments of U. Amended tax forms S. Amended tax forms -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Amended tax forms A U. Amended tax forms S. Amended tax forms resident is not a foreign person. Amended tax forms For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Amended tax forms Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Amended tax forms S. Amended tax forms person. Amended tax forms   For information about the 28% withholding tax that may apply to payments of U. Amended tax forms S. Amended tax forms -source OID or interest to foreign persons, see Publication 515. Amended tax forms Foreign-source amount. Amended tax forms   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Amended tax forms However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Amended tax forms More information. Amended tax forms   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Amended tax forms 6049-5. Amended tax forms Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Amended tax forms It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Amended tax forms It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Amended tax forms However, the information provided does not cover every situation. Amended tax forms More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Amended tax forms Including OID in income. Amended tax forms   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Amended tax forms Exceptions. Amended tax forms   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Amended tax forms U. Amended tax forms S. Amended tax forms savings bonds. Amended tax forms Tax-exempt obligations. Amended tax forms (However, see Tax-Exempt Bonds and Coupons, later. Amended tax forms ) Obligations issued by individuals before March 2, 1984. Amended tax forms Loans of $10,000 or less between individuals who are not in the business of lending money. Amended tax forms (The dollar limit includes outstanding prior loans by the lender to the borrower. Amended tax forms ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Amended tax forms   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Amended tax forms Publication 550 also discusses rules for holders of REMIC interests and CDOs. Amended tax forms De minimis rule. Amended tax forms   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Amended tax forms 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Amended tax forms Debt instruments with de minimis OID are not listed in this publication. Amended tax forms There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Amended tax forms Also, the de minimis rules generally do not apply to tax-exempt obligations. Amended tax forms Example 2. Amended tax forms You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Amended tax forms One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Amended tax forms Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Amended tax forms Example 3. Amended tax forms Assume the same facts as Example 2, except the debt instrument was issued at $950. Amended tax forms You must report part of the $50 OID each year because it is more than $25. Amended tax forms Choice to report all interest as OID. Amended tax forms   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Amended tax forms See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Amended tax forms   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Amended tax forms For more information, see Regulations section 1. Amended tax forms 1272-3. Amended tax forms Purchase after date of original issue. Amended tax forms   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Amended tax forms If so, the OID reported to you on Form 1099-OID may have to be adjusted. Amended tax forms For more information, see Showing an OID adjustment under How To Report OID, later. Amended tax forms The following rules generally do not apply to contingent payment debt instruments. Amended tax forms Adjustment for premium. Amended tax forms   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Amended tax forms Your adjustment is the total OID shown on your Form 1099-OID. Amended tax forms Adjustment for acquisition premium. Amended tax forms   If your debt instrument has acquisition premium, reduce the OID you report. Amended tax forms Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Amended tax forms Adjustment for market discount. Amended tax forms   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Amended tax forms Your adjustment is the accrued market discount for the year. Amended tax forms See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Amended tax forms If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Amended tax forms The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Amended tax forms For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Amended tax forms 1275-7. Amended tax forms Sale, exchange, or redemption. Amended tax forms   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Amended tax forms If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Amended tax forms Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Amended tax forms   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Amended tax forms Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Amended tax forms In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Amended tax forms   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Amended tax forms Example 4. Amended tax forms Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Amended tax forms 00 on November 1 of Year 1. Amended tax forms The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Amended tax forms The debt instrument provides for semiannual payments of interest at 10%. Amended tax forms Assume the debt instrument is a capital asset in Larry's hands. Amended tax forms The debt instrument has $13,765. Amended tax forms 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Amended tax forms 00 issue price). Amended tax forms Larry sold the debt instrument for $90,000 on November 1 of Year 4. Amended tax forms Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Amended tax forms 00 of OID in income and has increased his basis by that amount to $90,791. Amended tax forms 00. Amended tax forms Larry has realized a loss of $791. Amended tax forms 00. Amended tax forms All of Larry's loss is capital loss. Amended tax forms Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Amended tax forms Form 1099-OID shows all OID income in box 1 except OID on a U. Amended tax forms S. Amended tax forms Treasury obligation, which is shown in box 8. Amended tax forms It also shows, in box 2, any qualified stated interest you must include in income. Amended tax forms (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Amended tax forms ) A copy of Form 1099-OID will be sent to the IRS. Amended tax forms Do not attach your copy to your tax return. Amended tax forms Keep it for your records. Amended tax forms If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Amended tax forms A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Amended tax forms Form 1099-OID not received. Amended tax forms   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Amended tax forms Refiguring OID. Amended tax forms   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Amended tax forms You bought the debt instrument at a premium or at an acquisition premium. Amended tax forms The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Amended tax forms S. Amended tax forms Treasury securities). Amended tax forms The debt instrument is a contingent payment or inflation-indexed debt instrument. Amended tax forms See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Amended tax forms Refiguring interest. Amended tax forms   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Amended tax forms Nominee. Amended tax forms   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Amended tax forms ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Amended tax forms Show the owner of the debt instrument as the “recipient” and you as the “payer. Amended tax forms ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Amended tax forms You must also give a copy of the Form 1099-OID to the actual owner. Amended tax forms However, you are not required to file a nominee return to show amounts belonging to your spouse. Amended tax forms See the Form 1099 instructions for more information. Amended tax forms   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Amended tax forms How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Amended tax forms Form 1040 or Form 1040A required. Amended tax forms   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Amended tax forms You received a Form 1099-OID as a nominee for the actual owner. Amended tax forms Your total interest and OID income for the year was more than $1,500. Amended tax forms Form 1040 required. Amended tax forms   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Amended tax forms For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Amended tax forms Also, you must use Form 1040 if you were charged an early withdrawal penalty. Amended tax forms Where to report. Amended tax forms   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Amended tax forms Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Amended tax forms Also include any other OID and interest income for which you did not receive a Form 1099. Amended tax forms Showing an OID adjustment. Amended tax forms   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Amended tax forms   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Amended tax forms If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Amended tax forms Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Amended tax forms Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Amended tax forms Subtract that OID from the subtotal and enter the result on line 2. Amended tax forms If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Amended tax forms Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Amended tax forms Below the subtotal, write “OID Adjustment” and show the additional OID. Amended tax forms Add that OID to the subtotal and enter the result on line 2. Amended tax forms Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Amended tax forms It also may depend on the type of the debt instrument. Amended tax forms There are different rules for each of the following debt instruments. Amended tax forms Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Amended tax forms Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Amended tax forms Debt instruments issued after July 1, 1982, and before 1985. Amended tax forms Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Amended tax forms Contingent payment debt instruments issued after August 12, 1996. Amended tax forms Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Amended tax forms Zero coupon bonds. Amended tax forms   The rules for figuring OID on zero coupon bonds backed by U. Amended tax forms S. Amended tax forms Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Amended tax forms Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Amended tax forms The OID, which is taxed as ordinary income, generally equals the following amount. Amended tax forms   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Amended tax forms If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Amended tax forms Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Amended tax forms For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Amended tax forms Your basis in the debt instrument is increased by the OID you include in income. Amended tax forms Form 1099-OID. Amended tax forms   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Amended tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amended tax forms See Reduction for acquisition premium, later. Amended tax forms If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Amended tax forms irs. Amended tax forms gov/pub1212 by clicking the link under Recent Developments. Amended tax forms Form 1099-OID not received. Amended tax forms    The OID listed is for each $1,000 of redemption price. Amended tax forms You must adjust the listed amount if your debt instrument has a different principal amount. Amended tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amended tax forms   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Amended tax forms (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Amended tax forms ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Amended tax forms Divide the OID shown by 12. Amended tax forms Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Amended tax forms This is the OID to include in income unless you paid an acquisition premium. Amended tax forms The reduction for acquisition premium is discussed next. Amended tax forms Reduction for acquisition premium. Amended tax forms   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Amended tax forms Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Amended tax forms This is the monthly OID. Amended tax forms Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Amended tax forms (If the result is zero or less, stop here. Amended tax forms You did not pay an acquisition premium. Amended tax forms ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Amended tax forms Subtract the amount figured in (3) from the amount figured in (1). Amended tax forms This is the OID to include in income for each month you hold the debt instrument during the year. Amended tax forms Transfers during the month. Amended tax forms   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Amended tax forms Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Amended tax forms Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Amended tax forms For information about showing the correct OID on your tax return, see How To Report OID, earlier. Amended tax forms Form 1099-OID. Amended tax forms   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Amended tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amended tax forms See Constant yield method and the discussions on acquisition premium that follow, later. Amended tax forms If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Amended tax forms irs. Amended tax forms gov/pub1212 by clicking the link under Recent Developments. Amended tax forms Form 1099-OID not received. Amended tax forms    The OID listed is for each $1,000 of redemption price. Amended tax forms You must adjust the listed amount if your debt instrument has a different principal amount. Amended tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amended tax forms   If you held the debt instrument the entire year, use the OID shown in Section I-A. Amended tax forms (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Amended tax forms ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Amended tax forms Method 1. Amended tax forms    Divide the total OID for a calendar year by 365 (366 for leap years). Amended tax forms Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Amended tax forms  This computation is an approximation and may result in a slightly higher OID than Method 2. Amended tax forms Method 2. Amended tax forms    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Amended tax forms (See Accrual period under Constant yield method, next. Amended tax forms ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Amended tax forms If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Amended tax forms Add the results of (2) and (3). Amended tax forms This is the OID to include in income, unless you paid an acquisition premium. Amended tax forms (The reduction for acquisition premium is discussed later. Amended tax forms ) Constant yield method. Amended tax forms   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Amended tax forms OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Amended tax forms   Figure the OID allocable to any accrual period as follows. Amended tax forms Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Amended tax forms Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Amended tax forms Accrual period. Amended tax forms   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Amended tax forms Your tax year will usually include parts of two accrual periods. Amended tax forms Daily OID. Amended tax forms   The OID for any accrual period is allocated equally to each day in the accrual period. Amended tax forms You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Amended tax forms If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Amended tax forms Figuring daily OID. Amended tax forms   The daily OID for the initial accrual period is figured using the following formula. Amended tax forms   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Amended tax forms Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Amended tax forms   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Amended tax forms Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Amended tax forms Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Amended tax forms   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Amended tax forms However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Amended tax forms To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Amended tax forms The numerator is the acquisition premium. Amended tax forms The denominator is the total OID remaining for the debt instrument after your purchase date. Amended tax forms Section I-A is available at www. Amended tax forms irs. Amended tax forms gov/pub1212 and clicking the link under Recent Developments. Amended tax forms Using Section I-A to figure accumulated OID. Amended tax forms   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Amended tax forms The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Amended tax forms The OID from January 1 of a calendar year to the date of purchase, figured as follows. Amended tax forms Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Amended tax forms Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Amended tax forms Add the amounts figured in (2a) and (2b). Amended tax forms Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Amended tax forms You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Amended tax forms Your basis in the debt instrument is increased by the OID you include in income. Amended tax forms For information about showing the correct OID on your tax return, see How To Report OID, earlier. Amended tax forms Form 1099-OID. Amended tax forms   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Amended tax forms However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amended tax forms See Constant yield method and Reduction for acquisition premium, later. Amended tax forms   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Amended tax forms See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Amended tax forms If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Amended tax forms irs. Amended tax forms gov/pub1212 by clicking the link under Recent Developments. Amended tax forms Form 1099-OID not received. Amended tax forms   The OID listed is for each $1,000 of redemption price. Amended tax forms You must adjust the listed amount if your debt instrument has a different principal amount. Amended tax forms For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amended tax forms   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Amended tax forms (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Amended tax forms ) If you did not hold the debt instrument the entire year, figure your OID as follows. Amended tax forms Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Amended tax forms (See Accrual period under Constant yield method, later. Amended tax forms ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Amended tax forms Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Amended tax forms Add the results of (2) and (3). Amended tax forms This is the OID to include in income for that year, unless you paid an acquisition premium. Amended tax forms (The reduction for acquisition premium is discussed later. Amended tax forms ) Tax-exempt bond. Amended tax forms   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Amended tax forms You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Amended tax forms In general, use the rules that follow to determine your OID. Amended tax forms Constant yield method. Amended tax forms   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Amended tax forms (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Amended tax forms ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Amended tax forms   Figure the OID allocable to any accrual period as follows. Amended tax forms Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Amended tax forms The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Amended tax forms The yield must be stated appropriately taking into account the length of the particular accrual period. Amended tax forms Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Amended tax forms Accrual period. Amended tax forms   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Amended tax forms For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Amended tax forms Any short period is included as the first accrual period. Amended tax forms   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Amended tax forms However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Amended tax forms Daily OID. Amended tax forms   The OID for any accrual period is allocated equally to each day in the accrual period. Amended tax forms Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Amended tax forms Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Amended tax forms If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Amended tax forms Figuring daily OID. Amended tax forms   The daily OID for the initial accrual period is figured using the following formula. Amended tax forms   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Amended tax forms Example 5. Amended tax forms On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Amended tax forms 17. Amended tax forms According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Amended tax forms The yield to maturity is 12%, compounded semiannually. Amended tax forms The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Amended tax forms The accrual periods are the 6-month periods ending on each of these dates. Amended tax forms The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Amended tax forms The daily OID for the first accrual period is figured as follows. Amended tax forms   ($86,235. Amended tax forms 17 x . Amended tax forms 12/2) – $5,000     181 days     = $174. Amended tax forms 11020 = $. Amended tax forms 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Amended tax forms 17 + $174. Amended tax forms 11), or $86,409. Amended tax forms 28. Amended tax forms The number of days for the second accrual period (July 1 through December 31) is 184 days. Amended tax forms The daily OID for the second accrual period is figured as follows. Amended tax forms   ($86,409. Amended tax forms 28 x . Amended tax forms 12/2) – $5,000     184 days     = $184. Amended tax forms 55681 = $1. Amended tax forms 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Amended tax forms 11 ($. Amended tax forms 95665 × 182 days) plus $184. Amended tax forms 56 ($1. Amended tax forms 00303 × 184 days), or $358. Amended tax forms 67. Amended tax forms Add the OID to the $10,000 interest you report on your income tax return for Year 1. Amended tax forms Example 6. Amended tax forms Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Amended tax forms Also, the interest payment dates are October 31 and April 30 of each calendar year. Amended tax forms The accrual periods are the 6-month periods ending on each of these dates. Amended tax forms The number of days for the first accrual period (May 1 through October 31) is 184 days. Amended tax forms The daily OID for the first accrual period is figured as follows. Amended tax forms   ($86,235. Amended tax forms 17 x . Amended tax forms 12/2) – $5,000     184 days     = $174. Amended tax forms 11020 = $. Amended tax forms 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Amended tax forms The daily OID for the second accrual period is figured as follows. Amended tax forms   ($86,409. Amended tax forms 28 x . Amended tax forms 12/2) – $5,000     181 days     = $184. Amended tax forms 55681 = $1. Amended tax forms 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Amended tax forms 31 of OID in income. Amended tax forms This is $174. Amended tax forms 11 ($. Amended tax forms 94625 × 184 days) for the period May 1 through October 31 plus $62. Amended tax forms 20 ($1. Amended tax forms 01965 × 61 days) for the period November 1 through December 31. Amended tax forms The OID is added to the $5,000 interest income paid on October 31 of Year 1. Amended tax forms Your basis in the debt instrument is increased by the OID you include in income. Amended tax forms On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Amended tax forms 48 ($86,235. Amended tax forms 17 + $236. Amended tax forms 31). Amended tax forms Short first accrual period. Amended tax forms   You may have to make adjustments if a debt instrument has a short first accrual period. Amended tax forms For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Amended tax forms (The remaining accrual periods begin on May 1 and November 1. Amended tax forms ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Amended tax forms You may use any reasonable compounding method in determining OID for a short period. Amended tax forms Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Amended tax forms Consult your tax advisor for more information about making this computation. Amended tax forms   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Amended tax forms Reduction for acquisition premium. Amended tax forms   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Amended tax forms To figure the daily acquisition premium, multiply the daily OID by the following fraction. Amended tax forms The numerator is the acquisition premium. Amended tax forms The denominator is the total OID remaining for the debt instrument after your purchase date. Amended tax forms Example 7. Amended tax forms Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Amended tax forms The adjusted issue price on November 1 of Year 1 is $86,409. Amended tax forms 28 ($86,235. Amended tax forms 17 + $174. Amended tax forms 11). Amended tax forms In this case, you paid an acquisition premium of $590. Amended tax forms 72 ($87,000 − $86,409. Amended tax forms 28). Amended tax forms The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Amended tax forms 1) Daily OID on date of purchase (2nd accrual period) $1. Amended tax forms 01965*  2)  Acquisition premium $590. Amended tax forms 72    3)  Total OID remaining after purchase date ($13,764. Amended tax forms 83 − $174. Amended tax forms 11) 13,590. Amended tax forms 72   4) Line 2 ÷ line 3 . Amended tax forms 04346  5)  Line 1 × line 4 . Amended tax forms 04432  6)  Daily OID reduced for the acquisition premium. Amended tax forms Line 1 − line 5 $0. Amended tax forms 97533  * As shown in Example 6. Amended tax forms The total OID to include in income for Year 1 is $59. Amended tax forms 50 ($. Amended tax forms 97533 × 61 days). Amended tax forms Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Amended tax forms In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Amended tax forms If you hold a contingent payment bond, you must report OID as it accrues each year. Amended tax forms Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Amended tax forms To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Amended tax forms Noncontingent bond method. Amended tax forms    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Amended tax forms In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Amended tax forms When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Amended tax forms If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Amended tax forms If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Amended tax forms Form 1099-OID. Amended tax forms   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Amended tax forms For example, the amount may not be correct if the contingent payment was different from the projected amount. Amended tax forms If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Amended tax forms For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Amended tax forms Figuring OID. Amended tax forms   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Amended tax forms The issuer must make these available to you. Amended tax forms Comparable yield. Amended tax forms   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Amended tax forms The comparable yield is determined as of the debt instrument's issue date. Amended tax forms Projected payment schedule. Amended tax forms   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Amended tax forms The projected payment schedule is created by the issuer as of the debt instrument's issue date. Amended tax forms It is used to determine the issuer's and holder's interest accruals and adjustments. Amended tax forms Steps for figuring OID. Amended tax forms   Figure the OID on a contingent payment debt instrument in two steps. Amended tax forms Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Amended tax forms Use the comparable yield as the yield to maturity. Amended tax forms In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Amended tax forms Do not treat any amount payable as qualified stated interest. Amended tax forms Adjust the OID in (1) to account for actual contingent payments. Amended tax forms If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Amended tax forms If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Amended tax forms Net positive adjustment. Amended tax forms   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Amended tax forms Treat a net positive adjustment as additional OID for the tax year. Amended tax forms Net negative adjustment. Amended tax forms   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Amended tax forms Use a net negative adjustment to offset OID on the debt instrument for the tax year. Amended tax forms If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Amended tax forms However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Amended tax forms You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Amended tax forms Basis adjustments. Amended tax forms   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Amended tax forms Your basis, however, is not affected by any negative or positive adjustments. Amended tax forms Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Amended tax forms Treatment of gain or loss on sale or exchange. Amended tax forms   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Amended tax forms If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Amended tax forms If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Amended tax forms See Regulations section 1. Amended tax forms 1275-4 for exceptions to these rules. Amended tax forms Premium, acquisition premium, and market discount. Amended tax forms   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Amended tax forms See Regulations section 1. Amended tax forms 1275-4 to determine how to account for these items. Amended tax forms Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Amended tax forms An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d
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The Amended Tax Forms

Amended tax forms Publication 571 - Introductory Material Table of Contents Future Developments What's New for 2013 What's New for 2014 Reminder IntroductionOrdering forms and publications. Amended tax forms Tax questions. Amended tax forms Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 571 and its instructions, such as legislation enacted after they were published, go to www. Amended tax forms irs. Amended tax forms gov/pub571. Amended tax forms What's New for 2013 Retirement savings contributions credit. Amended tax forms  For 2013, the adjusted gross income limitations have increased from $57,500 to $59,000 for married filing jointly filers, from $43,125 to $44,250 for head of household filers, and from $28,750 to $29,500 for single, married filing separately, or qualifying widow(er) with dependent child filers. Amended tax forms See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. Amended tax forms Limit on elective deferrals. Amended tax forms  For 2013, the limit on elective deferrals has increased from $17,000 to $17,500. Amended tax forms Limit on annual additions. Amended tax forms  For 2013, the limit on annual additions has increased from $50,000 to $51,000. Amended tax forms What's New for 2014 Retirement savings contributions credit. Amended tax forms  For 2014, the adjusted gross income limitations have increased from $59,000 to $60,000 for married filing jointly filers, from $44,250 to $45,000 for head of household filers, and from $29,500 to $30,000 for single, married filing separately, or qualifying widow(er) with dependent child filers. Amended tax forms See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. Amended tax forms Limit on elective deferrals. Amended tax forms  For 2014, the limit on elective deferrals remains unchanged at $17,500. Amended tax forms Limit on annual additions. Amended tax forms  For 2014, the limit on annual additions has increased from $51,000 to $52,000. Amended tax forms Reminder Photographs of missing children. Amended tax forms  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Amended tax forms Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Amended tax forms You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Amended tax forms Introduction This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan. Amended tax forms In this publication, you will find information to help you: Determine the maximum amount that can be contributed to your 403(b) account in 2014. Amended tax forms Determine the maximum amount that could have been contributed to your 403(b) account in 2013. Amended tax forms Identify excess contributions. Amended tax forms Understand the basic rules for claiming the retirement savings contributions credit. Amended tax forms Understand the basic rules for distributions and rollovers from 403(b) accounts. Amended tax forms This publication does not provide specific information on the following topics. Amended tax forms Distributions from 403(b) accounts. Amended tax forms This is covered in Publication 575, Pension and Annuity Income. Amended tax forms Rollovers. Amended tax forms This is covered in Publication 590, Individual Retirement Arrangements (IRAs). Amended tax forms How to use this publication. Amended tax forms   This publication is organized into chapters to help you find information easily. Amended tax forms    Chapter 1 answers questions frequently asked by 403(b) plan participants. Amended tax forms    Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2013 and the maximum amount that can be contributed to your 403(b) account in 2014. Amended tax forms    Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account. Amended tax forms    Chapter 8 provides general information on distributions, transfers, and rollovers. Amended tax forms    Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. Amended tax forms Filled-in samples of most of these worksheets can be found throughout this publication. Amended tax forms    Chapter 10 explains the rules for claiming the retirement savings contributions credit (saver's credit). Amended tax forms Comments and suggestions. Amended tax forms   We welcome your comments about this publication and your suggestions for future editions. Amended tax forms   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Amended tax forms NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Amended tax forms Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Amended tax forms   You can send your comments from www. Amended tax forms irs. Amended tax forms gov/formspubs/. Amended tax forms Click on “More Information” and then on “Comment on Tax Forms and Publications. Amended tax forms ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Amended tax forms Ordering forms and publications. Amended tax forms   Visit www. Amended tax forms irs. Amended tax forms gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Amended tax forms  Internal Revenue Service 1201 N. Amended tax forms Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Amended tax forms   If you have a tax question, check the information available on IRS. Amended tax forms gov or call 1-800-829-1040. Amended tax forms We cannot answer tax questions sent to either of the above addresses. Amended tax forms Useful Items - You may want to see: Publication 517 Social Security and Other Information for Members of the Clergy and Religious Workers 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) W-2 Wage and Tax Statement 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Amended tax forms 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans Prev  Up  Next   Home   More Online Publications