File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Amending Taxes Online

State Tax Return FreeAmended Tax Return FormFree 2007 Tax Software DownloadFillable State Tax FormsFree File State And Federal TaxesH&rblock1040ez Form1040ez Forms And InstructionsHow To File 1040nr EzFile Online 1040ez2010 1040 Tax FormsHow To Amend My 2011 TaxesFiling State ReturnsFiling 1040ez OnlineFree State Tax File Online1040ez Free Online FilingIrsPrior Year Tax ReturnsWww Irs Gov Efile 941Free Federal 1040ez EfileForm 1040nr EzE File Amended 1040xWww H & R Block ComInstructions For Form 1040x1040 FormTurbo TaxIrs Gov Form1040x1040nr Ez SoftwareWww Irs Gov 2011freeefileWww.irs.gov1040xFederal Income Tax 1040ez OnlineFree Military TaxesForm 1040x Amended Return1040nr Ez TurbotaxFile A Tax ReturnFiling An Amended Tax Return For 2012How To Amend Your TaxesTax Forms 2012How To Complete A 1040x1090ez

Amending Taxes Online

Amending taxes online Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Amending taxes online A pension is generally a series of payments made to you after you retire from work. Amending taxes online Pension payments are made regularly and are for past services with an employer. Amending taxes online An annuity is a series of payments under a contract. Amending taxes online You can buy the contract alone or you can buy it with the help of your employer. Amending taxes online Annuity payments are made regularly for more than one full year. Amending taxes online Note. Amending taxes online Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Amending taxes online Types of pensions and annuities. Amending taxes online   Particular types of pensions and annuities include: Fixed period annuities. Amending taxes online You receive definite amounts at regular intervals for a definite length of time. Amending taxes online Annuities for a single life. Amending taxes online You receive definite amounts at regular intervals for life. Amending taxes online The payments end at death. Amending taxes online Joint and survivor annuities. Amending taxes online The first annuitant receives a definite amount at regular intervals for life. Amending taxes online After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Amending taxes online The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Amending taxes online Variable annuities. Amending taxes online You receive payments that may vary in amount for a definite length of time or for life. Amending taxes online The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Amending taxes online Disability pensions. Amending taxes online You are under minimum retirement age and receive payments because you retired on disability. Amending taxes online If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Amending taxes online If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Amending taxes online A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Amending taxes online This plan must meet Internal Revenue Code requirements. Amending taxes online It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Amending taxes online However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Amending taxes online A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Amending taxes online A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Amending taxes online   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Amending taxes online A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Amending taxes online It does not qualify for most of the tax benefits of a qualified plan. Amending taxes online Annuity worksheets. Amending taxes online   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Amending taxes online Request for a ruling. Amending taxes online   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Amending taxes online This is treated as a request for a ruling. Amending taxes online See Requesting a Ruling on Taxation of Annuity near the end of this publication. Amending taxes online Withholding tax and estimated tax. Amending taxes online   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Amending taxes online If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Amending taxes online Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Amending taxes online Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Amending taxes online These payments are also known as amounts received as an annuity. Amending taxes online If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Amending taxes online In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Amending taxes online The amount of each payment that is more than the part that represents your net cost is taxable. Amending taxes online Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Amending taxes online These terms are explained in the following discussions. Amending taxes online Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Amending taxes online First, find your net cost of the contract as of the annuity starting date (defined later). Amending taxes online To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Amending taxes online This includes the amounts your employer contributed if you were required to include these amounts in income. Amending taxes online It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Amending taxes online From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Amending taxes online Any additional premiums paid for double indemnity or disability benefits. Amending taxes online Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Amending taxes online The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Amending taxes online Example. Amending taxes online On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Amending taxes online The annuity starting date is July 1. Amending taxes online This is the date you use in figuring your investment in the contract and your expected return (discussed later). Amending taxes online Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Amending taxes online Foreign employment. Amending taxes online   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Amending taxes online The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Amending taxes online Foreign employment contributions while a nonresident alien. Amending taxes online   In determining your cost, special rules apply if you are a U. Amending taxes online S. Amending taxes online citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Amending taxes online Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Amending taxes online Death benefit exclusion. Amending taxes online   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Amending taxes online The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Amending taxes online How to adjust your total cost. Amending taxes online   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Amending taxes online Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Amending taxes online See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Amending taxes online Net cost. Amending taxes online   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Amending taxes online This is the unrecovered investment in the contract as of the annuity starting date. Amending taxes online If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Amending taxes online Refund feature. Amending taxes online   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Amending taxes online Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Amending taxes online   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Amending taxes online Zero value of refund feature. Amending taxes online   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Amending taxes online   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Amending taxes online   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Amending taxes online Examples. Amending taxes online The first example shows how to figure the value of the refund feature when there is only one beneficiary. Amending taxes online Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Amending taxes online In both examples, the taxpayer elects to use Tables V through VIII. Amending taxes online If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Amending taxes online Example 1. Amending taxes online At age 65, Barbara bought for $21,053 an annuity with a refund feature. Amending taxes online She will get $100 a month for life. Amending taxes online Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Amending taxes online In this case, the contract cost and the total guaranteed return are the same ($21,053). Amending taxes online Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Amending taxes online 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Amending taxes online For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Amending taxes online In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Amending taxes online Example 2. Amending taxes online John died while still employed. Amending taxes online His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Amending taxes online John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Amending taxes online John's contributions to the retirement fund totaled $7,559. Amending taxes online 45, with interest on those contributions of $1,602. Amending taxes online 53. Amending taxes online The guarantee or total refund feature of the contract is $9,161. Amending taxes online 98 ($7,559. Amending taxes online 45 plus $1,602. Amending taxes online 53). Amending taxes online The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Amending taxes online 9 $71,614. Amending taxes online 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Amending taxes online 0 5,400. Amending taxes online 00   3) Total expected return   $77,014. Amending taxes online 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Amending taxes online 45   2) Guaranteed amount (contributions of $7,559. Amending taxes online 45 plus interest of $1,602. Amending taxes online 53) $9,161. Amending taxes online 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Amending taxes online 00   4) Net guaranteed amount $3,761. Amending taxes online 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Amending taxes online 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Amending taxes online 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Amending taxes online See the discussion of expected return, later in this publication. Amending taxes online Free IRS help. Amending taxes online   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Amending taxes online Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Amending taxes online The following discussions explain how to figure the expected return with each type of annuity. Amending taxes online A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Amending taxes online Fixed period annuity. Amending taxes online   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Amending taxes online It is the total amount you will get beginning at the annuity starting date. Amending taxes online You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Amending taxes online To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Amending taxes online Single life annuity. Amending taxes online   If you are to get annuity payments for the rest of your life, find your expected return as follows. Amending taxes online You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Amending taxes online These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Amending taxes online   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Amending taxes online See Adjustments to Tables I, II, V, VI, and VIA following Table I. Amending taxes online Example. Amending taxes online Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Amending taxes online If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Amending taxes online 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Amending taxes online 2 multiple by +. Amending taxes online 1. Amending taxes online His expected return would then be $115,800 ($6,000 × 19. Amending taxes online 3). Amending taxes online Annuity for shorter of life or specified period. Amending taxes online   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Amending taxes online To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Amending taxes online Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Amending taxes online Example. Amending taxes online Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Amending taxes online She was age 65 at her birthday nearest the annuity starting date. Amending taxes online She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Amending taxes online 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Amending taxes online See Special Elections, later. Amending taxes online Joint and survivor annuities. Amending taxes online   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Amending taxes online To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Amending taxes online If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Amending taxes online See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Amending taxes online Example. Amending taxes online John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Amending taxes online At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Amending taxes online The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Amending taxes online 0 Expected return $132,000 Different payments to survivor. Amending taxes online   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Amending taxes online Example 1. Amending taxes online Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Amending taxes online If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Amending taxes online 0 Multiple for Gerald, age 70 (from Table V)   16. Amending taxes online 0 Difference: Multiple applicable to Mary   6. Amending taxes online 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Amending taxes online 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Amending taxes online 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Amending taxes online Your husband died while still employed. Amending taxes online Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Amending taxes online Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Amending taxes online You were 50 years old at the annuity starting date. Amending taxes online Marie was 16 and Jean was 14. Amending taxes online Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Amending taxes online 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Amending taxes online 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Amending taxes online 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Amending taxes online Computation Under the General Rule Note. Amending taxes online Variable annuities use a different computation for determining the exclusion amounts. Amending taxes online See Variable annuities later. Amending taxes online Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Amending taxes online   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Amending taxes online See Death benefit exclusion , earlier. Amending taxes online Step 2. Amending taxes online   Figure your expected return. Amending taxes online Step 3. Amending taxes online   Divide Step 1 by Step 2 and round to three decimal places. Amending taxes online This will give you the exclusion percentage. Amending taxes online Step 4. Amending taxes online   Multiply the exclusion percentage by the first regular periodic payment. Amending taxes online The result is the tax-free part of each pension or annuity payment. Amending taxes online   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Amending taxes online However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Amending taxes online   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Amending taxes online Step 5. Amending taxes online   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Amending taxes online This will give you the tax-free part of the total payment for the year. Amending taxes online    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Amending taxes online This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Amending taxes online Step 6. Amending taxes online   Subtract the tax-free part from the total payment you received. Amending taxes online The rest is the taxable part of your pension or annuity. Amending taxes online Example 1. Amending taxes online You purchased an annuity with an investment in the contract of $10,800. Amending taxes online Under its terms, the annuity will pay you $100 a month for life. Amending taxes online The multiple for your age (age 65) is 20. Amending taxes online 0 as shown in Table V. Amending taxes online Your expected return is $24,000 (20 × 12 × $100). Amending taxes online Your cost of $10,800, divided by your expected return of $24,000, equals 45. Amending taxes online 0%. Amending taxes online This is the percentage you will not have to include in income. Amending taxes online Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Amending taxes online If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Amending taxes online Example 2. Amending taxes online Gerald bought a joint and survivor annuity. Amending taxes online Gerald's investment in the contract is $62,712 and the expected return is $121,200. Amending taxes online The exclusion percentage is 51. Amending taxes online 7% ($62,712 ÷ $121,200). Amending taxes online Gerald will receive $500 a month ($6,000 a year). Amending taxes online Each year, until his net cost is recovered, $3,102 (51. Amending taxes online 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Amending taxes online If Gerald dies, his wife will receive $350 a month ($4,200 a year). Amending taxes online If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Amending taxes online 7%). Amending taxes online Each year, until the entire net cost is recovered, his wife will receive $2,171. Amending taxes online 40 (51. Amending taxes online 7% of her payments received of $4,200) tax free. Amending taxes online She will include $2,028. Amending taxes online 60 ($4,200 − $2,171. Amending taxes online 40) in her income tax return. Amending taxes online Example 3. Amending taxes online Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Amending taxes online Your two daughters each receive annual annuities of $1,800 until they reach age 18. Amending taxes online Your husband contributed $25,576 to the plan. Amending taxes online You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Amending taxes online Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Amending taxes online The exclusion percentage of 18. Amending taxes online 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Amending taxes online Each full year $864 (18. Amending taxes online 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Amending taxes online Each year, until age 18, $324 (18. Amending taxes online 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Amending taxes online Part-year payments. Amending taxes online   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Amending taxes online   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Amending taxes online For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Amending taxes online   If you received a fractional payment, follow Step 5, discussed earlier. Amending taxes online This gives you the tax-free part of your total payment. Amending taxes online Example. Amending taxes online On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Amending taxes online The applicable multiple from Table V is 23. Amending taxes online 3 (age 61). Amending taxes online Her expected return is $34,950 ($125 × 12 × 23. Amending taxes online 3). Amending taxes online Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Amending taxes online 1%. Amending taxes online Each payment received will consist of 63. Amending taxes online 1% return of cost and 36. Amending taxes online 9% taxable income, until her net cost of the contract is fully recovered. Amending taxes online During the first year, Mary received three payments of $125, or $375, of which $236. Amending taxes online 63 (63. Amending taxes online 1% × $375) is a return of cost. Amending taxes online The remaining $138. Amending taxes online 37 is included in income. Amending taxes online Increase in annuity payments. Amending taxes online   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Amending taxes online All increases in the installment payments are fully taxable. Amending taxes online   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Amending taxes online 72-5(a)(5) of the regulations. Amending taxes online Example. Amending taxes online Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Amending taxes online In figuring the taxable part, Joe elects to use Tables V through VIII. Amending taxes online The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Amending taxes online His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Amending taxes online 0 × $1,764 annual payment). Amending taxes online The exclusion percentage is $7,938 ÷ $35,280, or 22. Amending taxes online 5%. Amending taxes online During the year he received 11 monthly payments of $147, or $1,617. Amending taxes online Of this amount, 22. Amending taxes online 5% × $147 × 11 ($363. Amending taxes online 83) is tax free as a return of cost and the balance of $1,253. Amending taxes online 17 is taxable. Amending taxes online Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Amending taxes online The tax-free part is still only 22. Amending taxes online 5% of the annuity payments as of the annuity starting date (22. Amending taxes online 5% × $147 × 12 = $396. Amending taxes online 90 for a full year). Amending taxes online The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Amending taxes online Variable annuities. Amending taxes online   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Amending taxes online   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Amending taxes online If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Amending taxes online Example. Amending taxes online Frank purchased a variable annuity at age 65. Amending taxes online The total cost of the contract was $12,000. Amending taxes online The annuity starting date is January 1 of the year of purchase. Amending taxes online His annuity will be paid, starting July 1, in variable annual installments for his life. Amending taxes online The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Amending taxes online   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Amending taxes online Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Amending taxes online The result is added to the previously figured periodic tax-free part. Amending taxes online The sum is the amount of each future payment that will be tax free. Amending taxes online Example. Amending taxes online Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Amending taxes online Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Amending taxes online Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Amending taxes online 00 Amount received in second year 500. Amending taxes online 00 Difference $100. Amending taxes online 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Amending taxes online 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Amending taxes online 4) $5. Amending taxes online 43 Revised annual tax-free part for third and later years ($600 + $5. Amending taxes online 43) $605. Amending taxes online 43 Amount taxable in third year ($1,200 − $605. Amending taxes online 43) $594. Amending taxes online 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Amending taxes online 72–4(d)(3) of the Income Tax Regulations. Amending taxes online The statement must also show the following information: The annuity starting date and your age on that date. Amending taxes online The first day of the first period for which you received an annuity payment in the current year. Amending taxes online Your investment in the contract as originally figured. Amending taxes online The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Amending taxes online Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Amending taxes online Exclusion limited to net cost. Amending taxes online   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Amending taxes online This is the unrecovered investment in the contract as of the annuity starting date. Amending taxes online   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Amending taxes online This deduction is not subject to the 2%-of-adjusted-gross-income limit. Amending taxes online Example 1. Amending taxes online Your annuity starting date is after 1986. Amending taxes online Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Amending taxes online There is no refund feature. Amending taxes online Your monthly annuity payment is $833. Amending taxes online 33. Amending taxes online Your exclusion ratio is 12% and you exclude $100 a month. Amending taxes online Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Amending taxes online Thereafter, your annuity payments are fully taxable. Amending taxes online Example 2. Amending taxes online The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Amending taxes online The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Amending taxes online The exclusion ratio is 10. Amending taxes online 8%, and your monthly exclusion is $90. Amending taxes online After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Amending taxes online An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Amending taxes online Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Amending taxes online Exclusion not limited to net cost. Amending taxes online   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Amending taxes online If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Amending taxes online The total exclusion may be more than your investment in the contract. Amending taxes online How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Amending taxes online Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Amending taxes online These tables correspond to the old Tables I through IV. Amending taxes online In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Amending taxes online If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Amending taxes online However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Amending taxes online Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Amending taxes online Contributions made both before July 1986 and after June 1986. Amending taxes online   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Amending taxes online (See the examples below. Amending taxes online )    Making the election. Amending taxes online Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Amending taxes online 72–6 of the Income Tax Regulations. Amending taxes online ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Amending taxes online   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Amending taxes online You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Amending taxes online    Advantages of election. Amending taxes online In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Amending taxes online    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Amending taxes online If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Amending taxes online   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Amending taxes online Example 1. Amending taxes online Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Amending taxes online Payment of the $42,000 contribution is guaranteed under a refund feature. Amending taxes online Bill is 55 years old as of the annuity starting date. Amending taxes online For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Amending taxes online       Pre- July 1986   Post- June 1986 A. Amending taxes online Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Amending taxes online of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Amending taxes online Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Amending taxes online Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Amending taxes online 7   28. Amending taxes online 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Amending taxes online Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Amending taxes online 079   . Amending taxes online 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Amending taxes online The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Amending taxes online If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Amending taxes online Example 2. Amending taxes online Al is age 62 at his nearest birthday to the annuity starting date. Amending taxes online Al's wife is age 60 at her nearest birthday to the annuity starting date. Amending taxes online The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Amending taxes online The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Amending taxes online Al makes the election described in Example 1 . Amending taxes online For purposes of this example, assume the refund feature adjustment is zero. Amending taxes online If an adjustment is required, IRS will figure the amount. Amending taxes online See Requesting a Ruling on Taxation of Annuity near the end of this publication. Amending taxes online       Pre-  July 1986   Post-  June 1986 A. Amending taxes online Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Amending taxes online Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Amending taxes online Expected return         1) Multiple for both annuitants from Tables II and VI 25. Amending taxes online 4   28. Amending taxes online 8   2) Multiple for first annuitant from Tables I and V 16. Amending taxes online 9   22. Amending taxes online 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Amending taxes online 5   6. Amending taxes online 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Amending taxes online Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Amending taxes online 209   . Amending taxes online 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Amending taxes online The taxable part of his annuity is $9,216 ($12,000 − $2,784). Amending taxes online The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Amending taxes online After Al's death, his widow will apply the same exclusion percentages (20. Amending taxes online 9% and 2. Amending taxes online 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Amending taxes online Annuity received after June 30, 1986. Amending taxes online   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Amending taxes online Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Amending taxes online    Make the election by attaching the following statement to your income tax return. Amending taxes online    “I elect, under section 1. Amending taxes online 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Amending taxes online ”   The statement must also include your name, address, and social security number. Amending taxes online   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Amending taxes online Disqualifying form of payment or settlement. Amending taxes online   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Amending taxes online See regulations section 1. Amending taxes online 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Amending taxes online You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Amending taxes online Worksheets for Determining Taxable Annuity Worksheets I and II. Amending taxes online   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Amending taxes online 72–6(d)(6) Election. Amending taxes online Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Amending taxes online 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Amending taxes online   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Amending taxes online )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Amending taxes online If not, the IRS will calculate the refund feature percentage. Amending taxes online             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Amending taxes online   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Amending taxes online   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Amending taxes online   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Amending taxes online     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Amending taxes online 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Amending taxes online   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Amending taxes online )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Amending taxes online If not, the IRS will calculate the refund feature percentage. Amending taxes online             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Amending taxes online   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Amending taxes online   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Amending taxes online Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Amending taxes online   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Amending taxes online   Actuarial Tables Please click here for the text description of the image. Amending taxes online Actuarial Tables Please click here for the text description of the image. Amending taxes online Actuarial Tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Please click here for the text description of the image. Amending taxes online Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Amending taxes online If you make this request, you are asking for a ruling. Amending taxes online User fee. Amending taxes online   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Amending taxes online You should call the IRS for the proper fee. Amending taxes online A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Amending taxes online Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Amending taxes online O. Amending taxes online Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Amending taxes online When to make the request. Amending taxes online   Please note that requests sent between February 1 and April 15 may experience some delay. Amending taxes online We process requests in the order received, and we will reply to your request as soon as we can process it. Amending taxes online If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Amending taxes online S. Amending taxes online Individual Income Tax Return, to get an extension of time to file. Amending taxes online Information you must furnish. Amending taxes online   You must furnish the information listed below so the IRS can comply with your request. Amending taxes online Failure to furnish the information will result in a delay in processing your request. Amending taxes online Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Amending taxes online Copies of any documents showing distributions, annuity rates, and annuity options available to you. Amending taxes online A copy of any Form 1099–R you received since your annuity began. Amending taxes online A statement indicating whether you have filed your return for the year for which you are making the request. Amending taxes online If you have requested an extension of time to file that return, please indicate the extension date. Amending taxes online Your daytime phone number. Amending taxes online Your current mailing address. Amending taxes online A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Amending taxes online Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Amending taxes online A completed Tax Information Sheet (or facsimile) shown on the next page. Amending taxes online Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Amending taxes online This statement must be signed by the retiree or the survivor annuitant. Amending taxes online It cannot be signed by a representative. Amending taxes online Tax Information Sheet Please click here for the text description of the image. Amending taxes online Tax Information Sheet Please click here for the text description of the image. Amending taxes online Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Amending taxes online Free help with your tax return. Amending taxes online   You can get free help preparing your return nationwide from IRS-certified volunteers. Amending taxes online The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Amending taxes online The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Amending taxes online Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Amending taxes online In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Amending taxes online To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Amending taxes online gov, download the IRS2Go app, or call 1-800-906-9887. Amending taxes online   As part of the TCE program, AARP offers the Tax-Aide counseling program. Amending taxes online To find the nearest AARP Tax-Aide site, visit AARP's website at www. Amending taxes online aarp. Amending taxes online org/money/taxaide or call 1-888-227-7669. Amending taxes online For more information on these programs, go to IRS. Amending taxes online gov and enter “VITA” in the search box. Amending taxes online Internet. Amending taxes online    IRS. Amending taxes online gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Amending taxes online Download the free IRS2Go app from the iTunes app store or from Google Play. Amending taxes online Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Amending taxes online Check the status of your 2013 refund with the Where's My Refund? application on IRS. Amending taxes online gov or download the IRS2Go app and select the Refund Status option. Amending taxes online The IRS issues more than 9 out of 10 refunds in less than 21 days. Amending taxes online Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Amending taxes online You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Amending taxes online The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Amending taxes online Use the Interactive Tax Assistant (ITA) to research your tax questions. Amending taxes online No need to wait on the phone or stand in line. Amending taxes online The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Amending taxes online When you reach the response screen, you can print the entire interview and the final response for your records. Amending taxes online New subject areas are added on a regular basis. Amending taxes online  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Amending taxes online gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Amending taxes online You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Amending taxes online The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Amending taxes online When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Amending taxes online Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Amending taxes online You can also ask the IRS to mail a return or an account transcript to you. Amending taxes online Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Amending taxes online gov or by calling 1-800-908-9946. Amending taxes online Tax return and tax account transcripts are generally available for the current year and the past three years. Amending taxes online Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Amending taxes online Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Amending taxes online If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Amending taxes online Check the status of your amended return using Where's My Amended Return? Go to IRS. Amending taxes online gov and enter Where's My Amended Return? in the search box. Amending taxes online You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Amending taxes online It can take up to 3 weeks from the date you mailed it to show up in our system. Amending taxes online Make a payment using one of several safe and convenient electronic payment options available on IRS. Amending taxes online gov. Amending taxes online Select the Payment tab on the front page of IRS. Amending taxes online gov for more information. Amending taxes online Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Amending taxes online Figure your income tax withholding with the IRS Withholding Calculator on IRS. Amending taxes online gov. Amending taxes online Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Amending taxes online Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Amending taxes online gov. Amending taxes online Request an Electronic Filing PIN by going to IRS. Amending taxes online gov and entering Electronic Filing PIN in the search box. Amending taxes online Download forms, instructions and publications, including accessible versions for people with disabilities. Amending taxes online Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Amending taxes online gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Amending taxes online An employee can answer questions about your tax account or help you set up a payment plan. Amending taxes online Before you visit, check the Office Locator on IRS. Amending taxes online gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Amending taxes online If you have a special need, such as a disability, you can request an appointment. Amending taxes online Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Amending taxes online Apply for an Employer Identification Number (EIN). Amending taxes online Go to IRS. Amending taxes online gov and enter Apply for an EIN in the search box. Amending taxes online Read the Internal Revenue Code, regulations, or other official guidance. Amending taxes online Read Internal Revenue Bulletins. Amending taxes online Sign up to receive local and national tax news and more by email. Amending taxes online Just click on “subscriptions” above the search box on IRS. Amending taxes online gov and choose from a variety of options. Amending taxes online    Phone. Amending taxes online You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Amending taxes online Download the free IRS2Go app from the iTunes app store or from Google Play. Amending taxes online Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Amending taxes online gov, or download the IRS2Go app. Amending taxes online Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Amending taxes online The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Amending taxes online Mos
Español

Diploma Mills

If you're ever tempted by an e-mail or ad claiming you can "earn a degree based on life experience," don't fall for it. Any company that offers degrees for a flat fee and requires little course work is a diploma mill. If your school is not recognized as an accredited institution by the Secretary of Education, you may not be able to receive financial aid and employers won't recognize it. You can check on a school's accreditation by contacting the Department of Education or search the Council for Higher Education Accreditation's database.

Beware: Scholarship and Financial Aid Scams

Scholarships and financial aid do not require upfront fees. While there are legitimate companies who will help guide you through the financial aid and college application process for a fee, disreputable companies may ask you for money up-front and provide nothing in return. Red flags to watch out for include the following:

  • A "money-back guarantee" to secure a scholarship. Don't believe it. Unscrupulous companies attach conditions that make it impossible to get the refund.
  • "Secret scholarships." If a company claims to have inside knowledge of scholarship money, they're lying. Information on scholarships is available freely to the public. Ask you librarian or school counselor.
  • Telling students they've been selected as "finalists" for awards. If they ask for an up-front fee, head for the nearest exit.
  • Asking for a student's checking account to "confirm eligibility." If they want bank account information or your credit card number to confirm or reserve a scholarship, it's a scam.
  • Quoting a relatively small "monthly" or "weekly" fee. Then asking for authorization to debit your checking account for an unspecified length of time. Ongoing fees are a sure sign of a scam.
  • Unsolicited offers. Whether it's an e-mail, phone call, or it arrived in your mailbox, if you didn't request the information, ignore the offer.

The Amending Taxes Online

Amending taxes online 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. Amending taxes online Adjustment for premium. Amending taxes online Adjustment for acquisition premium. Amending taxes online Adjustment for market discount. Amending taxes online 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. Amending taxes online “Original issue discount” is defined first. Amending taxes online The other terms are listed alphabetically. Amending taxes online Original issue discount (OID). Amending taxes online   OID is a form of interest. Amending taxes online 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). Amending taxes online Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Amending taxes online Accrual period. Amending taxes online   An accrual period is an interval of time used to measure OID. Amending taxes online The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Amending taxes online Acquisition premium. Amending taxes online   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. Amending taxes online A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Amending taxes online See Premium, later. Amending taxes online Adjusted issue price. Amending taxes online   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. Amending taxes online In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Amending taxes online 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. Amending taxes online Debt instrument. Amending taxes online   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). Amending taxes online It generally does not include an annuity contract. Amending taxes online Issue price. Amending taxes online   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. Amending taxes online Market discount. Amending taxes online   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. Amending taxes online 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. Amending taxes online The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Amending taxes online Premium. Amending taxes online   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. Amending taxes online The premium is the excess of the adjusted basis over the payable amounts. Amending taxes online See Publication 550 for information on the tax treatment of bond premium. Amending taxes online Qualified stated interest. Amending taxes online   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. Amending taxes online Stated redemption price at maturity. Amending taxes online   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. Amending taxes online Yield to maturity (YTM). Amending taxes online   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. Amending taxes online The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Amending taxes online If you do not have this information, consult your broker, tax advisor, or the issuer. Amending taxes online 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. Amending taxes online 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. Amending taxes online The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Amending taxes online 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. Amending taxes online The following discussions explain what information is contained in each section of the list. Amending taxes online Section I. Amending taxes online   This section contains publicly offered, long-term debt instruments. Amending taxes online Section I-A: Corporate Debt Instruments Issued Before 1985. Amending taxes online Section I-B: Corporate Debt Instruments Issued After 1984. Amending taxes online Section I-C: Inflation-Indexed Debt Instruments. Amending taxes online For each publicly offered debt instrument in Section I, the list contains the following information. Amending taxes online The name of the issuer. Amending taxes online The Committee on Uniform Security Identification Procedures (CUSIP) number. Amending taxes online The issue date. Amending taxes online The maturity date. Amending taxes online The issue price expressed as a percent of principal or of stated redemption price at maturity. Amending taxes online The annual stated or coupon interest rate. Amending taxes online (This rate is shown as 0. Amending taxes online 00 if no annual interest payments are provided. Amending taxes online ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Amending taxes online The total OID accrued up to January 1 of a calendar year. Amending taxes online (This information is not available for every instrument. Amending taxes online ) 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. Amending taxes online The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Amending taxes online Section II. Amending taxes online   This section contains stripped coupons and principal components of U. Amending taxes online S. Amending taxes online Treasury and Government-Sponsored Enterprise debt instruments. Amending taxes online 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. Amending taxes online This section also includes debt instruments backed by U. Amending taxes online S. Amending taxes online Treasury securities that represent ownership interests in those securities. Amending taxes online   The obligations listed in Section II are arranged by maturity date. Amending taxes online The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Amending taxes online Section III. Amending taxes online   This section contains short-term discount obligations. Amending taxes online Section III-A: Short-Term U. Amending taxes online S. Amending taxes online Treasury Bills. Amending taxes online Section III-B: Federal Home Loan Banks. Amending taxes online Section III-C: Federal National Mortgage Association. Amending taxes online Section III-D: Federal Farm Credit Banks. Amending taxes online Section III-E: Federal Home Loan Mortgage Corporation. Amending taxes online Section III-F: Federal Agricultural Mortgage Corporation. Amending taxes online    Information that supplements Section III-A is available on the Internet at http://www. Amending taxes online treasurydirect. Amending taxes online gov/tdhome. Amending taxes online htm. Amending taxes online   The short-term obligations listed in this section are arranged by maturity date. Amending taxes online 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. Amending taxes online 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. Amending taxes online Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Amending taxes online U. Amending taxes online S. Amending taxes online savings bonds. Amending taxes online Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Amending taxes online Obligations issued by tax-exempt organizations. Amending taxes online OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Amending taxes online Mortgage-backed securities and mortgage participation certificates. Amending taxes online Long-term OID debt instruments issued before May 28, 1969. Amending taxes online Short-term obligations, other than the obligations listed in Section III. Amending taxes online Debt instruments issued at a discount by states or their political subdivisions. Amending taxes online REMIC regular interests and CDOs. Amending taxes online Commercial paper and banker's acceptances issued at a discount. Amending taxes online Obligations issued at a discount by individuals. Amending taxes online Foreign obligations not traded in the United States and obligations not issued in the United States. Amending taxes online 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. Amending taxes online 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. Amending taxes online 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. Amending taxes online See Backup Withholding, later. Amending taxes online 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. Amending taxes online 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). Amending taxes online Electronic payee statements. Amending taxes online   You can issue Form 1099-OID electronically with the consent of the recipient. Amending taxes online More information. Amending taxes online   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. Amending taxes online 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. Amending taxes online 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. Amending taxes online If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Amending taxes online Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Amending taxes online 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. Amending taxes online A special rule is used to determine the original issue price for information reporting on U. Amending taxes online S. Amending taxes online Treasury bills (T-bills) listed in Section III-A. Amending taxes online 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. Amending taxes online This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Amending taxes online 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. Amending taxes online Example 1. Amending taxes online There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Amending taxes online The price actually paid by the owner cannot be established by owner or middleman records. Amending taxes online 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. Amending taxes online The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Amending taxes online 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. Amending taxes online For this purpose, you can rely on Section I of the OID list to determine the following information. Amending taxes online Whether a debt instrument has OID. Amending taxes online The OID to be reported on the Form 1099-OID. Amending taxes online In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Amending taxes online You also can report OID on other long-term debt instruments. Amending taxes online Form 1099-OID. Amending taxes online   On Form 1099-OID for a calendar year show the following information. Amending taxes online Box 1. Amending taxes online The OID for the actual dates the owner held the debt instruments during a calendar year. Amending taxes online To determine this amount, see Figuring OID, next. Amending taxes online Box 2. Amending taxes online The qualified stated interest paid or credited during the calendar year. Amending taxes online Interest reported here is not reported on Form 1099-INT. Amending taxes online The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Amending taxes online Box 3. Amending taxes online Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Amending taxes online Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Amending taxes online Box 4. Amending taxes online Any backup withholding for this debt instrument. Amending taxes online Box 7. Amending taxes online The CUSIP number, if any. Amending taxes online 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. Amending taxes online 50 2006). Amending taxes online If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Amending taxes online Box 8. Amending taxes online The OID on a U. Amending taxes online S. Amending taxes online Treasury obligation for the part of the year the owner held the debt instrument. Amending taxes online Box 9. Amending taxes online Investment expenses passed on to holders of a single-class REMIC. Amending taxes online Boxes 10-12. Amending taxes online Use to report any state income tax withheld for this debt instrument. Amending taxes online Figuring OID. Amending taxes online   You can determine the OID on a long-term debt instrument by using either of the following. Amending taxes online Section I of the OID list. Amending taxes online The income tax regulations. Amending taxes online Using Section I. Amending taxes online   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Amending taxes online 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. Amending taxes online For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Amending taxes online   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Amending taxes online Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Amending taxes online Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Amending taxes online Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Amending taxes online Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Amending taxes online If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Amending taxes online Report the result on Form 1099-OID in box 1. Amending taxes online Using the income tax regulations. Amending taxes online   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Amending taxes online 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. Amending taxes online (If you use Section I-B, the OID is figured using 6-month accrual periods. Amending taxes online )   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. Amending taxes online 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. Amending taxes online You must file an information return showing the reportable interest and OID, if any, on the CD. Amending taxes online These rules apply whether or not you sold the CD to the owner. Amending taxes online Report OID on a CD in the same way as OID on other debt instruments. Amending taxes online See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Amending taxes online 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. Amending taxes online However, do not report the interest if either of the following apply. Amending taxes online You hold the bond as a nominee for the true owner. Amending taxes online The payee is a foreign person. Amending taxes online See Payments to foreign person under Backup Withholding, later. Amending taxes online 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. Amending taxes online The coupon may have been “stripped” (separated) from the bond and separately purchased. Amending taxes online 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. Amending taxes online 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%. Amending taxes online The backup withholding is deducted at the time a cash payment is made. Amending taxes online See Pub. Amending taxes online 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Amending taxes online Backup withholding generally applies in the following situations. Amending taxes online The payee does not give you a taxpayer identification number (TIN). Amending taxes online The IRS notifies you that the payee gave an incorrect TIN. Amending taxes online The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Amending taxes online 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. Amending taxes online However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Amending taxes online S. Amending taxes online 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. Amending taxes online Short-term obligations. Amending taxes online   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Amending taxes online However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Amending taxes online   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. Amending taxes online 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. Amending taxes online If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Amending taxes online Long-term obligations. Amending taxes online   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Amending taxes online The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Amending taxes online The amount to be withheld is limited to the cash paid. Amending taxes online Registered long-term obligations with cash payments. Amending taxes online   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Amending taxes online 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. Amending taxes online 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. Amending taxes online For any payment, the required withholding is limited to the cash paid. Amending taxes online Payee not the original owner. Amending taxes online   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). Amending taxes online The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Amending taxes online Bearer long-term obligations with cash payments. Amending taxes online   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Amending taxes online 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. Amending taxes online 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. Amending taxes online The required withholding at maturity is limited to the cash paid. Amending taxes online Sales and redemptions. Amending taxes online   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. Amending taxes online Backup withholding applies in the following situations. Amending taxes online The payee does not give you a TIN. Amending taxes online The IRS notifies you that the payee gave an incorrect TIN. Amending taxes online 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. Amending taxes online Payments outside the United States to U. Amending taxes online S. Amending taxes online person. Amending taxes online   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Amending taxes online S. Amending taxes online 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. Amending taxes online S. Amending taxes online trade or business. Amending taxes online Payments to foreign person. Amending taxes online   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Amending taxes online U. Amending taxes online S. Amending taxes online -source amount. Amending taxes online   Backup withholding and information reporting are not required for payments of U. Amending taxes online S. Amending taxes online -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. Amending taxes online A U. Amending taxes online S. Amending taxes online resident is not a foreign person. Amending taxes online 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. Amending taxes online 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. Amending taxes online S. Amending taxes online person. Amending taxes online   For information about the 28% withholding tax that may apply to payments of U. Amending taxes online S. Amending taxes online -source OID or interest to foreign persons, see Publication 515. Amending taxes online Foreign-source amount. Amending taxes online   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Amending taxes online 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. Amending taxes online More information. Amending taxes online   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Amending taxes online 6049-5. Amending taxes online Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Amending taxes online It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Amending taxes online 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. Amending taxes online However, the information provided does not cover every situation. Amending taxes online More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Amending taxes online Including OID in income. Amending taxes online   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Amending taxes online Exceptions. Amending taxes online   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Amending taxes online U. Amending taxes online S. Amending taxes online savings bonds. Amending taxes online Tax-exempt obligations. Amending taxes online (However, see Tax-Exempt Bonds and Coupons, later. Amending taxes online ) Obligations issued by individuals before March 2, 1984. Amending taxes online Loans of $10,000 or less between individuals who are not in the business of lending money. Amending taxes online (The dollar limit includes outstanding prior loans by the lender to the borrower. Amending taxes online ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Amending taxes online   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. Amending taxes online Publication 550 also discusses rules for holders of REMIC interests and CDOs. Amending taxes online De minimis rule. Amending taxes online   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Amending taxes online 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Amending taxes online Debt instruments with de minimis OID are not listed in this publication. Amending taxes online 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. Amending taxes online Also, the de minimis rules generally do not apply to tax-exempt obligations. Amending taxes online Example 2. Amending taxes online 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. Amending taxes online 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. Amending taxes online Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Amending taxes online Example 3. Amending taxes online Assume the same facts as Example 2, except the debt instrument was issued at $950. Amending taxes online You must report part of the $50 OID each year because it is more than $25. Amending taxes online Choice to report all interest as OID. Amending taxes online   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. Amending taxes online See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Amending taxes online   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. Amending taxes online For more information, see Regulations section 1. Amending taxes online 1272-3. Amending taxes online Purchase after date of original issue. Amending taxes online   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Amending taxes online If so, the OID reported to you on Form 1099-OID may have to be adjusted. Amending taxes online For more information, see Showing an OID adjustment under How To Report OID, later. Amending taxes online The following rules generally do not apply to contingent payment debt instruments. Amending taxes online Adjustment for premium. Amending taxes online   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Amending taxes online Your adjustment is the total OID shown on your Form 1099-OID. Amending taxes online Adjustment for acquisition premium. Amending taxes online   If your debt instrument has acquisition premium, reduce the OID you report. Amending taxes online 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. Amending taxes online Adjustment for market discount. Amending taxes online   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Amending taxes online Your adjustment is the accrued market discount for the year. Amending taxes online 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. Amending taxes online If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Amending taxes online The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Amending taxes online For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Amending taxes online 1275-7. Amending taxes online Sale, exchange, or redemption. Amending taxes online   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. Amending taxes online If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Amending taxes online Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Amending taxes online   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. Amending taxes online Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Amending taxes online 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. Amending taxes online   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Amending taxes online Example 4. Amending taxes online Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Amending taxes online 00 on November 1 of Year 1. Amending taxes online The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Amending taxes online The debt instrument provides for semiannual payments of interest at 10%. Amending taxes online Assume the debt instrument is a capital asset in Larry's hands. Amending taxes online The debt instrument has $13,765. Amending taxes online 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Amending taxes online 00 issue price). Amending taxes online Larry sold the debt instrument for $90,000 on November 1 of Year 4. Amending taxes online Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Amending taxes online 00 of OID in income and has increased his basis by that amount to $90,791. Amending taxes online 00. Amending taxes online Larry has realized a loss of $791. Amending taxes online 00. Amending taxes online All of Larry's loss is capital loss. Amending taxes online 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. Amending taxes online Form 1099-OID shows all OID income in box 1 except OID on a U. Amending taxes online S. Amending taxes online Treasury obligation, which is shown in box 8. Amending taxes online It also shows, in box 2, any qualified stated interest you must include in income. Amending taxes online (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Amending taxes online ) A copy of Form 1099-OID will be sent to the IRS. Amending taxes online Do not attach your copy to your tax return. Amending taxes online Keep it for your records. Amending taxes online 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. Amending taxes online 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. Amending taxes online Form 1099-OID not received. Amending taxes online   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. Amending taxes online Refiguring OID. Amending taxes online   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. Amending taxes online You bought the debt instrument at a premium or at an acquisition premium. Amending taxes online The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Amending taxes online S. Amending taxes online Treasury securities). Amending taxes online The debt instrument is a contingent payment or inflation-indexed debt instrument. Amending taxes online See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Amending taxes online Refiguring interest. Amending taxes online   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. Amending taxes online Nominee. Amending taxes online   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. Amending taxes online ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Amending taxes online Show the owner of the debt instrument as the “recipient” and you as the “payer. Amending taxes online ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Amending taxes online You must also give a copy of the Form 1099-OID to the actual owner. Amending taxes online However, you are not required to file a nominee return to show amounts belonging to your spouse. Amending taxes online See the Form 1099 instructions for more information. Amending taxes online   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Amending taxes online 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. Amending taxes online Form 1040 or Form 1040A required. Amending taxes online   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Amending taxes online You received a Form 1099-OID as a nominee for the actual owner. Amending taxes online Your total interest and OID income for the year was more than $1,500. Amending taxes online Form 1040 required. Amending taxes online   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. Amending taxes online 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. Amending taxes online Also, you must use Form 1040 if you were charged an early withdrawal penalty. Amending taxes online Where to report. Amending taxes online   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. Amending taxes online Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Amending taxes online Also include any other OID and interest income for which you did not receive a Form 1099. Amending taxes online Showing an OID adjustment. Amending taxes online   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. Amending taxes online   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. Amending taxes online If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Amending taxes online Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Amending taxes online Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Amending taxes online Subtract that OID from the subtotal and enter the result on line 2. Amending taxes online If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Amending taxes online Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Amending taxes online Below the subtotal, write “OID Adjustment” and show the additional OID. Amending taxes online Add that OID to the subtotal and enter the result on line 2. Amending taxes online 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. Amending taxes online It also may depend on the type of the debt instrument. Amending taxes online There are different rules for each of the following debt instruments. Amending taxes online Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Amending taxes online Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Amending taxes online Debt instruments issued after July 1, 1982, and before 1985. Amending taxes online Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Amending taxes online Contingent payment debt instruments issued after August 12, 1996. Amending taxes online Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Amending taxes online Zero coupon bonds. Amending taxes online   The rules for figuring OID on zero coupon bonds backed by U. Amending taxes online S. Amending taxes online Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Amending taxes online 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. Amending taxes online The OID, which is taxed as ordinary income, generally equals the following amount. Amending taxes online   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. Amending taxes online If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Amending taxes online 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. Amending taxes online For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Amending taxes online Your basis in the debt instrument is increased by the OID you include in income. Amending taxes online Form 1099-OID. Amending taxes online   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Amending taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amending taxes online See Reduction for acquisition premium, later. Amending taxes online 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. Amending taxes online irs. Amending taxes online gov/pub1212 by clicking the link under Recent Developments. Amending taxes online Form 1099-OID not received. Amending taxes online    The OID listed is for each $1,000 of redemption price. Amending taxes online You must adjust the listed amount if your debt instrument has a different principal amount. Amending taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amending taxes online   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Amending taxes online (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. Amending taxes online ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Amending taxes online Divide the OID shown by 12. Amending taxes online 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. Amending taxes online This is the OID to include in income unless you paid an acquisition premium. Amending taxes online The reduction for acquisition premium is discussed next. Amending taxes online Reduction for acquisition premium. Amending taxes online   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Amending taxes online 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. Amending taxes online This is the monthly OID. Amending taxes online Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Amending taxes online (If the result is zero or less, stop here. Amending taxes online You did not pay an acquisition premium. Amending taxes online ) 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. Amending taxes online Subtract the amount figured in (3) from the amount figured in (1). Amending taxes online This is the OID to include in income for each month you hold the debt instrument during the year. Amending taxes online Transfers during the month. Amending taxes online   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. Amending taxes online Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Amending taxes online 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. Amending taxes online For information about showing the correct OID on your tax return, see How To Report OID, earlier. Amending taxes online Form 1099-OID. Amending taxes online   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Amending taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amending taxes online See Constant yield method and the discussions on acquisition premium that follow, later. Amending taxes online 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. Amending taxes online irs. Amending taxes online gov/pub1212 by clicking the link under Recent Developments. Amending taxes online Form 1099-OID not received. Amending taxes online    The OID listed is for each $1,000 of redemption price. Amending taxes online You must adjust the listed amount if your debt instrument has a different principal amount. Amending taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amending taxes online   If you held the debt instrument the entire year, use the OID shown in Section I-A. Amending taxes online (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. Amending taxes online ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Amending taxes online Method 1. Amending taxes online    Divide the total OID for a calendar year by 365 (366 for leap years). Amending taxes online Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Amending taxes online  This computation is an approximation and may result in a slightly higher OID than Method 2. Amending taxes online Method 2. Amending taxes online    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Amending taxes online (See Accrual period under Constant yield method, next. Amending taxes online ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Amending taxes online If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Amending taxes online Add the results of (2) and (3). Amending taxes online This is the OID to include in income, unless you paid an acquisition premium. Amending taxes online (The reduction for acquisition premium is discussed later. Amending taxes online ) Constant yield method. Amending taxes online   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Amending taxes online OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Amending taxes online   Figure the OID allocable to any accrual period as follows. Amending taxes online Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Amending taxes online Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Amending taxes online Accrual period. Amending taxes online   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. Amending taxes online Your tax year will usually include parts of two accrual periods. Amending taxes online Daily OID. Amending taxes online   The OID for any accrual period is allocated equally to each day in the accrual period. Amending taxes online You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Amending taxes online If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Amending taxes online Figuring daily OID. Amending taxes online   The daily OID for the initial accrual period is figured using the following formula. Amending taxes online   (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. Amending taxes online Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Amending taxes online   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. Amending taxes online 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. Amending taxes online Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Amending taxes online   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. Amending taxes online However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Amending taxes online To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Amending taxes online The numerator is the acquisition premium. Amending taxes online The denominator is the total OID remaining for the debt instrument after your purchase date. Amending taxes online Section I-A is available at www. Amending taxes online irs. Amending taxes online gov/pub1212 and clicking the link under Recent Developments. Amending taxes online Using Section I-A to figure accumulated OID. Amending taxes online   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. Amending taxes online The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Amending taxes online The OID from January 1 of a calendar year to the date of purchase, figured as follows. Amending taxes online 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. Amending taxes online 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. Amending taxes online Add the amounts figured in (2a) and (2b). Amending taxes online 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. Amending taxes online You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Amending taxes online Your basis in the debt instrument is increased by the OID you include in income. Amending taxes online For information about showing the correct OID on your tax return, see How To Report OID, earlier. Amending taxes online Form 1099-OID. Amending taxes online   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Amending taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Amending taxes online See Constant yield method and Reduction for acquisition premium, later. Amending taxes online   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. Amending taxes online See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Amending taxes online 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. Amending taxes online irs. Amending taxes online gov/pub1212 by clicking the link under Recent Developments. Amending taxes online Form 1099-OID not received. Amending taxes online   The OID listed is for each $1,000 of redemption price. Amending taxes online You must adjust the listed amount if your debt instrument has a different principal amount. Amending taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Amending taxes online   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Amending taxes online (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. Amending taxes online ) If you did not hold the debt instrument the entire year, figure your OID as follows. Amending taxes online Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Amending taxes online (See Accrual period under Constant yield method, later. Amending taxes online ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Amending taxes online Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Amending taxes online Add the results of (2) and (3). Amending taxes online This is the OID to include in income for that year, unless you paid an acquisition premium. Amending taxes online (The reduction for acquisition premium is discussed later. Amending taxes online ) Tax-exempt bond. Amending taxes online   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. Amending taxes online You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Amending taxes online In general, use the rules that follow to determine your OID. Amending taxes online Constant yield method. Amending taxes online   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Amending taxes online (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Amending taxes online ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Amending taxes online   Figure the OID allocable to any accrual period as follows. Amending taxes online Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Amending taxes online The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Amending taxes online The yield must be stated appropriately taking into account the length of the particular accrual period. Amending taxes online Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Amending taxes online Accrual period. Amending taxes online   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. Amending taxes online For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Amending taxes online Any short period is included as the first accrual period. Amending taxes online   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. Amending taxes online However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Amending taxes online Daily OID. Amending taxes online   The OID for any accrual period is allocated equally to each day in the accrual period. Amending taxes online Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Amending taxes online 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. Amending taxes online 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. Amending taxes online Figuring daily OID. Amending taxes online   The daily OID for the initial accrual period is figured using the following formula. Amending taxes online   (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. Amending taxes online Example 5. Amending taxes online On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Amending taxes online 17. Amending taxes online According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Amending taxes online The yield to maturity is 12%, compounded semiannually. Amending taxes online The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Amending taxes online The accrual periods are the 6-month periods ending on each of these dates. Amending taxes online The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Amending taxes online The daily OID for the first accrual period is figured as follows. Amending taxes online   ($86,235. Amending taxes online 17 x . Amending taxes online 12/2) – $5,000     181 days     = $174. Amending taxes online 11020 = $. Amending taxes online 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. Amending taxes online 17 + $174. Amending taxes online 11), or $86,409. Amending taxes online 28. Amending taxes online The number of days for the second accrual period (July 1 through December 31) is 184 days. Amending taxes online The daily OID for the second accrual period is figured as follows. Amending taxes online   ($86,409. Amending taxes online 28 x . Amending taxes online 12/2) – $5,000     184 days     = $184. Amending taxes online 55681 = $1. Amending taxes online 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, $174. Amending taxes online 11 ($. Amending taxes online 95665 × 182 days) plus $184. Amending taxes online 56 ($1. Amending taxes online 00303 × 184 days), or $358. Amending taxes online 67. Amending taxes online Add the OID to the $10,000 interest you report on your income tax return for Year 1. Amending taxes online Example 6. Amending taxes online 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. Amending taxes online Also, the interest payment dates are October 31 and April 30 of each calendar year. Amending taxes online The accrual periods are the 6-month periods ending on each of these dates. Amending taxes online The number of days for the first accrual period (May 1 through October 31) is 184 days. Amending taxes online The daily OID for the first accrual period is figured as follows. Amending taxes online   ($86,235. Amending taxes online 17 x . Amending taxes online 12/2) – $5,000     184 days     = $174. Amending taxes online 11020 = $. Amending taxes online 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Amending taxes online The daily OID for the second accrual period is figured as follows. Amending taxes online   ($86,409. Amending taxes online 28 x . Amending taxes online 12/2) – $5,000     181 days     = $184. Amending taxes online 55681 = $1. Amending taxes online 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Amending taxes online 31 of OID in income. Amending taxes online This is $174. Amending taxes online 11 ($. Amending taxes online 94625 × 184 days) for the period May 1 through October 31 plus $62. Amending taxes online 20 ($1. Amending taxes online 01965 × 61 days) for the period November 1 through December 31. Amending taxes online The OID is added to the $5,000 interest income paid on October 31 of Year 1. Amending taxes online Your basis in the debt instrument is increased by the OID you include in income. Amending taxes online On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Amending taxes online 48 ($86,235. Amending taxes online 17 + $236. Amending taxes online 31). Amending taxes online Short first accrual period. Amending taxes online   You may have to make adjustments if a debt instrument has a short first accrual period. Amending taxes online 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. Amending taxes online (The remaining accrual periods begin on May 1 and November 1. Amending taxes online ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Amending taxes online You may use any reasonable compounding method in determining OID for a short period. Amending taxes online Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Amending taxes online Consult your tax advisor for more information about making this computation. Amending taxes online   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. Amending taxes online Reduction for acquisition premium. Amending taxes online   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. Amending taxes online To figure the daily acquisition premium, multiply the daily OID by the following fraction. Amending taxes online The numerator is the acquisition premium. Amending taxes online The denominator is the total OID remaining for the debt instrument after your purchase date. Amending taxes online Example 7. Amending taxes online 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. Amending taxes online The adjusted issue price on November 1 of Year 1 is $86,409. Amending taxes online 28 ($86,235. Amending taxes online 17 + $174. Amending taxes online 11). Amending taxes online In this case, you paid an acquisition premium of $590. Amending taxes online 72 ($87,000 − $86,409. Amending taxes online 28). Amending taxes online The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Amending taxes online 1) Daily OID on date of purchase (2nd accrual period) $1. Amending taxes online 01965*  2)  Acquisition premium $590. Amending taxes online 72    3)  Total OID remaining after purchase date ($13,764. Amending taxes online 83 − $174. Amending taxes online 11) 13,590. Amending taxes online 72   4) Line 2 ÷ line 3 . Amending taxes online 04346  5)  Line 1 × line 4 . Amending taxes online 04432  6)  Daily OID reduced for the acquisition premium. Amending taxes online Line 1 − line 5 $0. Amending taxes online 97533  * As shown in Example 6. Amending taxes online The total OID to include in income for Year 1 is $59. Amending taxes online 50 ($. Amending taxes online 97533 × 61 days). Amending taxes online 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. Amending taxes online In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Amending taxes online If you hold a contingent payment bond, you must report OID as it accrues each year. Amending taxes online 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. Amending taxes online To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Amending taxes online Noncontingent bond method. Amending taxes online    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. Amending taxes online In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Amending taxes online When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Amending taxes online If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Amending taxes online If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Amending taxes online Form 1099-OID. Amending taxes online   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. Amending taxes online For example, the amount may not be correct if the contingent payment was different from the projected amount. Amending taxes online If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Amending taxes online For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Amending taxes online Figuring OID. Amending taxes online   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Amending taxes online The issuer must make these available to you. Amending taxes online Comparable yield. Amending taxes online   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. Amending taxes online The comparable yield is determined as of the debt instrument's issue date. Amending taxes online Projected payment schedule. Amending taxes online   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. Amending taxes online The projected payment schedule is created by the issuer as of the debt instrument's issue date. Amending taxes online It is used to determine the issuer's and holder's interest accruals and adjustments. Amending taxes online Steps for figuring OID. Amending taxes online   Figure the OID on a contingent payment debt instrument in two steps. Amending taxes online Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Amending taxes online Use the comparable yield as the yield to maturity. Amending taxes online 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). Amending taxes online Do not treat any amount payable as qualified stated interest. Amending taxes online Adjust the OID in (1) to account for actual contingent payments. Amending taxes online If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Amending taxes online If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Amending taxes online Net positive adjustment. Amending taxes online   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. Amending taxes online Treat a net positive adjustment as additional OID for the tax year. Amending taxes online Net negative adjustment. Amending taxes online   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. Amending taxes online Use a net negative adjustment to offset OID on the debt instrument for the tax year. Amending taxes online 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. Amending taxes online 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. Amending taxes online 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. Amending taxes online Basis adjustments. Amending taxes online   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Amending taxes online Your basis, however, is not affected by any negative or positive adjustments. Amending taxes online Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Amending taxes online Treatment of gain or loss on sale or exchange. Amending taxes online   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. Amending taxes online 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. Amending taxes online If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Amending taxes online See Regulations section 1. Amending taxes online 1275-4 for exceptions to these rules. Amending taxes online Premium, acquisition premium, and market discount. Amending taxes online   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Amending taxes online See Regulations section 1. Amending taxes online 1275-4 to determine how to account for these items. Amending taxes online Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Amending taxes online An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d