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E-file State Tax Only

E-file state tax only 11. E-file state tax only   Patient-Centered Outcomes Research Fee Table of Contents The patient-centered outcomes research fee is imposed on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4376) for policy and plan years ending on or after October 1, 2012. E-file state tax only Generally, references to taxes on Form 720 include this fee. E-file state tax only Specified health insurance policies. E-file state tax only   For issuers of specified health insurance policies, the fee for a policy year ending before October 1, 2013, is $1. E-file state tax only 00, multiplied by the average number of lives covered under the policy for that policy year. E-file state tax only Generally, issuers of specified health insurance polices must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year. E-file state tax only The actual count method. E-file state tax only For policy years that end on or after October 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as of May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year. E-file state tax only The snapshot method. E-file state tax only For policy years that end on or after October 1, 2012, but that began before May 14, 2012, issuers using the snapshot method may use counts from quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy. E-file state tax only The member months method. E-file state tax only And, 4. E-file state tax only The state form method. E-file state tax only The member months data and the data reported on state forms are based on the calendar year. E-file state tax only To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. E-file state tax only For example, issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012. E-file state tax only Applicable self-insured health plans. E-file state tax only   For plan sponsors of applicable self-insured health plans, the fee for a plan year ending on or after October 1, 2012, and ending before October 1, 2013 is $1. E-file state tax only 00, multiplied by the average number of lives covered under the plan for that plan year. E-file state tax only Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year. E-file state tax only Actual count method. E-file state tax only Snapshot method. E-file state tax only Form 5500 method. E-file state tax only However, for plan years beginning before July 11, 2012, and ending on or after October 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method. E-file state tax only Reporting and paying the fee. E-file state tax only   File Form 720 annually to report and pay the fee on the second quarter Form 720, no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. E-file state tax only If you file Form 720 only to report the fee, do not file Form 720 for the 1st, 3rd, or 4th quarters of the year. E-file state tax only If you file Form 720 to report quarterly excise tax liability for the 1st, 3rd, or 4th quarter of the year (for example, filers reporting the foreign insurance tax (IRS No. E-file state tax only 30)), do not make an entry on the line for IRS No. E-file state tax only 133 on those filings. E-file state tax only   Deposits are not required for this fee, so issuers and plan sponsors are not required to pay the fee using Electronic Federal Tax Payment System (EFTPS). E-file state tax only   However, if the fee is paid using EFTPS, the payment should be applied to the second quarter. E-file state tax only See Electronic deposit requirement under How To Make Deposits in chapter 13, later. E-file state tax only More information. E-file state tax only   For more information, including methods for calculating the average number of lives covered, see sections 4375, 4376, and 4377; also see T. E-file state tax only D. E-file state tax only 9602, which is on page 746 of I. E-file state tax only R. E-file state tax only B. E-file state tax only 2012-52 at www. E-file state tax only irs. E-file state tax only gov/pub/irs-irbs/irb12-52. E-file state tax only pdf. E-file state tax only Prev  Up  Next   Home   More Online Publications
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Consumer Resources for Military Personnel

Today's military family faces many common consumer challenges, as well as the additional stress associated with frequent separation. To ease such difficulties, Family Centers, along with the other programs described below, provide help and support for military families.


U.S. Military Family Centers

Located on most military installations, Family Centers provide information, life skills education, and support services to military members and their families. One key function of a Family Center is to link people with appropriate services available in the local community and/or through state and federal assistance programs such as those related to health and human services, school systems, employment assistance, law enforcement and recreation.

Airman and Family Readiness Centers (A&FRC)
A&FRCs are located on every Air Force Installation and offer a wealth of to Airmen and their families. One-on-one consultations are available on information such as financial management, transition assistance, spouse employment, readiness, deployment, family life and relocation assistance.

Marine Corps Community Services (MCCS)
Headquarters and Service Battalion, Henderson Hall
1550 Southgate Rd.
Building 29, Room 305 Arlington, VA 22214-5103
Phone: 703-614-7171
The Personal and Family Readiness Division (MR) provides a number of Marine Corps personnel service programs, such as Casualty Assistance, DEERS Dependency Determination, Voting Assistance, Postal Services, and Personal Claims.

Commander, Navy Installations Command
Fleet and Family Support Programs
716 Sicard St., SE, Suite 1000
Washington Navy Yard, DC 20374-5140
The Fleet and Family Support Program delivered by Commander, Navy Installations Command, provides support, references, information and a wide range of assistance for members of the Navy and their families to meet the unique challenges of the military lifestyle. Up-to-date news, messages, links and resources are provided, including assistance with relocation, employment, career and benefits, healthy lifestyles, casualties, domestic violence, and retirement.

U.S. Army
Family and Morale, Welfare and Recreation Command
Directorate, Army Community Service
4700 King St., NW
Alexandria, VA 22302
The Army provides comprehensive information on the support available to personnel and families, including resources to strengthen home and family life, Army basic training, lifelong learning, finances, employment, relevant news, along with links to other resources

U.S. Coast Guard
Office of Worklife
2100 Second St., SW, Stop 7013
Washington, DC 20593-7001
Phone: 202-267-6160
The U.S. Coast Guard can provide key resources, including core publications, career information and related news, as well as comprehensive background about its mission, community services, history, photos and reports.

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Useful Websites

Military OneSource is a comprehensive resource for military members and their families relating to nearly every aspect of personal and professional life, with topics that range from health and wellness, finances, family matters and resiliency.  The website includes blogs, discussion boards, podcasts and live chat. You may also call them at 1-800-342-9647.

National Resource Directory provides wounded, ill and injured service members, veterans, their families and those who support them with a web-based yellow book. It provides information on, and access to, the full range of medical and non-medical services and resources needed to achieve their personal and professional goals across the transitions from recovery to rehabilitation to community reintegration. The National Resource Directory is an online partnership of the Departments of Defense, Labor and Veterans Affairs and provides links to the services and resources of federal, state and local governmental agencies; veterans' service, non-profit, community based and philanthropic organizations; professional associations and academic institutions.

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Additional Consumer Resources for Military Personnel

Be sure to take advantage of resources designed for military personnel and their families. Check with family readiness centers on your installation to get access to financial help.

The Consumer Financial Protection Bureau’s Office of Servicemember Affairs offers resources to plan your financial future and prevent being victim of fraud.

The Better Business Bureau also offers consumer education and advocacy to service members through their Military Line®.

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Predatory Lending Restrictions

As of October 1, 2007, the Talent Nelson amendment to the John Warner National Defense Authorization Act allows the Department of Defense to regulate the terms of payday loans, vehicle title loans and tax refund loans to active duty service members and their dependents. These three products have high interest rates, coupled with short payback terms.

The rule for service members and their dependents limits the annual percentage rate on these loans to 36%. All fees and charges should be included in the calculation of the rate. The rule also prohibits contracts requiring the use of a check or access to a bank account, mandatory arbitration, and unreasonable legal notice. Any credit agreement subject to the regulation that fails to comply with this regulation is void and cannot be enforced. The rule further provides that a creditor or assignee that knowingly violates the regulation shall be subject to certain criminal penalties.

The Department of Defense strongly encourages service members and their families to choose alternatives which are designed to help resolve financial crises, rebuild credit ratings and establish savings for emergencies. Payday loans, vehicle title loans and tax refund loans can propel an already over extended borrower into a deeper spiral of debt.

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The E-file State Tax Only

E-file state tax only 1. E-file state tax only   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. E-file state tax only Custodian account for your child. E-file state tax only Penalty for failure to supply SSN. E-file state tax only Certification. E-file state tax only Underreported interest and dividends. E-file state tax only How to stop backup withholding due to underreporting. E-file state tax only How to stop backup withholding due to an incorrect identification number. E-file state tax only Reporting backup withholding. E-file state tax only Nonresident aliens. E-file state tax only Penalties. E-file state tax only Savings account with parent as trustee. E-file state tax only Interest IncomeInterest not reported on Form 1099-INT. E-file state tax only Nominees. E-file state tax only Incorrect amount. E-file state tax only Information reporting requirement. E-file state tax only Taxable Interest — General Below-Market Loans U. E-file state tax only S. E-file state tax only Savings Bonds U. E-file state tax only S. E-file state tax only Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. E-file state tax only How To Report Interest IncomeSchedule B (Form 1040A or 1040). E-file state tax only Worksheet for savings bonds distributed from a retirement or profit-sharing plan. E-file state tax only File Form 1099-INT with the IRS. E-file state tax only Dividends and Other DistributionsDividends not reported on Form 1099-DIV. E-file state tax only Nominees. E-file state tax only Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. E-file state tax only Independent contractor. E-file state tax only Investment interest deducted. E-file state tax only Exception 1. E-file state tax only Exception 2. E-file state tax only Undistributed capital gains. E-file state tax only File Form 1099-DIV with the IRS. E-file state tax only Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. E-file state tax only Passive activity losses. E-file state tax only Form 8582. E-file state tax only Investment ClubsInvestments in name of member. E-file state tax only Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . E-file state tax only Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. E-file state tax only S. E-file state tax only Individual Income Tax Return 1040A U. E-file state tax only S. E-file state tax only Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. E-file state tax only S. E-file state tax only Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. E-file state tax only S. E-file state tax only Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. E-file state tax only General Information A few items of general interest are covered here. E-file state tax only Recordkeeping. E-file state tax only You should keep a list showing sources and investment income amounts you receive during the year. E-file state tax only Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. E-file state tax only Net investment income tax (NIIT). E-file state tax only   Beginning in 2013, you may be subject to the NIIT. E-file state tax only The NIIT is a 3. E-file state tax only 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. E-file state tax only    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. E-file state tax only Tax on unearned income of certain children. E-file state tax only   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. E-file state tax only This may happen if all of the following are true. E-file state tax only The child had more than $2,000 of unearned income. E-file state tax only The child is required to file a tax return. E-file state tax only The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. E-file state tax only At least one of the child's parents was alive at the end of 2013. E-file state tax only The child does not file a joint return for 2013. E-file state tax only A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. E-file state tax only   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. E-file state tax only If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. E-file state tax only    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. E-file state tax only Use Form 8814 for this purpose. E-file state tax only   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. E-file state tax only Beneficiary of an estate or trust. E-file state tax only   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. E-file state tax only You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. E-file state tax only , from the fiduciary. E-file state tax only Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. E-file state tax only Social security number (SSN). E-file state tax only   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. E-file state tax only This includes payers of interest and dividends. E-file state tax only If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. E-file state tax only SSN for joint account. E-file state tax only   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. E-file state tax only (For information on who owns the funds in a joint account, see Joint accounts , later. E-file state tax only ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. E-file state tax only This is because only one name and SSN can be shown on Form 1099. E-file state tax only   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. E-file state tax only For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. E-file state tax only Custodian account for your child. E-file state tax only   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. E-file state tax only For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. E-file state tax only Penalty for failure to supply SSN. E-file state tax only   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. E-file state tax only The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. E-file state tax only   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. E-file state tax only   If you fail to supply an SSN, you may also be subject to backup withholding. E-file state tax only Backup withholding. E-file state tax only   Your investment income is generally not subject to regular withholding. E-file state tax only However, it may be subject to backup withholding to ensure that income tax is collected on the income. E-file state tax only Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. E-file state tax only   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). E-file state tax only Certification. E-file state tax only   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. E-file state tax only Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. E-file state tax only If you fail to make this certification, backup withholding may begin immediately on your new account or investment. E-file state tax only Underreported interest and dividends. E-file state tax only   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. E-file state tax only How to stop backup withholding due to underreporting. E-file state tax only   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. E-file state tax only You must show that at least one of the following situations applies. E-file state tax only No underreporting occurred. E-file state tax only You have a bona fide dispute with the IRS about whether underreporting occurred. E-file state tax only Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. E-file state tax only You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. E-file state tax only   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. E-file state tax only How to stop backup withholding due to an incorrect identification number. E-file state tax only   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. E-file state tax only Reporting backup withholding. E-file state tax only   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. E-file state tax only The information return will show any backup withholding as “Federal income tax withheld. E-file state tax only ” Nonresident aliens. E-file state tax only    Generally, payments made to nonresident aliens are not subject to backup withholding. E-file state tax only You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. E-file state tax only However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. E-file state tax only For information on the 30% rate, see Publication 519, U. E-file state tax only S. E-file state tax only Tax Guide for Aliens. E-file state tax only Penalties. E-file state tax only   There are civil and criminal penalties for giving false information to avoid backup withholding. E-file state tax only The civil penalty is $500. E-file state tax only The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. E-file state tax only Where to report investment income. E-file state tax only   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. E-file state tax only But see the rest of this publication for detailed information about reporting investment income. E-file state tax only Joint accounts. E-file state tax only   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. E-file state tax only Community property states. E-file state tax only   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. E-file state tax only If you file separate returns, you must each report one-half of any taxable distribution. E-file state tax only See Publication 555, Community Property, for more information on community income. E-file state tax only   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. E-file state tax only Example. E-file state tax only You and your spouse have a joint money market account. E-file state tax only Under state law, half the income from the account belongs to you, and half belongs to your spouse. E-file state tax only If you file separate returns, you each report half the income. E-file state tax only Income from property given to a child. E-file state tax only   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. E-file state tax only   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. E-file state tax only Savings account with parent as trustee. E-file state tax only   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. E-file state tax only The savings account legally belongs to the child. E-file state tax only The parents are not legally permitted to use any of the funds to support the child. E-file state tax only Table 1-1. E-file state tax only Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. E-file state tax only ) Type of Income If you file Form 1040, report on . E-file state tax only . E-file state tax only . E-file state tax only If you can file Form 1040A, report on . E-file state tax only . E-file state tax only . E-file state tax only If you can file Form 1040EZ, report on . E-file state tax only . E-file state tax only . E-file state tax only Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. E-file state tax only ) Line 8a (You may need to file Schedule B as well. E-file state tax only ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. E-file state tax only ) Line 9a (You may need to file Schedule B as well. E-file state tax only )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. E-file state tax only Use Part II if you held the shares more than 1 year. E-file state tax only Use Part I if you held your mutual fund shares 1 year or less. E-file state tax only For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. E-file state tax only Accuracy-related penalty. E-file state tax only   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. E-file state tax only For information on the penalty and any interest that applies, see Penalties in chapter 2. E-file state tax only Interest Income This section discusses the tax treatment of different types of interest income. E-file state tax only In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. E-file state tax only (It does not have to be entered in your passbook. E-file state tax only ) Exceptions to this rule are discussed later. E-file state tax only Form 1099-INT. E-file state tax only   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. E-file state tax only This form shows you the interest you received during the year. E-file state tax only Keep this form for your records. E-file state tax only You do not have to attach it to your tax return. E-file state tax only   Report on your tax return the total interest income you receive for the tax year. E-file state tax only Interest not reported on Form 1099-INT. E-file state tax only   Even if you do not receive Form 1099-INT, you must still report all of your interest income. E-file state tax only For example, you may receive distributive shares of interest from partnerships or S corporations. E-file state tax only This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. E-file state tax only , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. E-file state tax only Nominees. E-file state tax only   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. E-file state tax only   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. E-file state tax only Incorrect amount. E-file state tax only   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. E-file state tax only The new Form 1099-INT you receive will be marked “Corrected. E-file state tax only ” Form 1099-OID. E-file state tax only   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. E-file state tax only For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. E-file state tax only Exempt-interest dividends. E-file state tax only   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. E-file state tax only (However, see Information reporting requirement , next. E-file state tax only ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. E-file state tax only You do not reduce your basis for distributions that are exempt-interest dividends. E-file state tax only Information reporting requirement. E-file state tax only   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. E-file state tax only This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. E-file state tax only See How To Report Interest Income , later. E-file state tax only Note. E-file state tax only Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. E-file state tax only The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. E-file state tax only See Form 6251 and its instructions for more information about this tax. E-file state tax only Private activity bonds are discussed later under State or Local Government Obligations. E-file state tax only Interest on VA dividends. E-file state tax only   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. E-file state tax only This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. E-file state tax only Individual retirement arrangements (IRAs). E-file state tax only   Interest on a Roth IRA generally is not taxable. E-file state tax only Interest on a traditional IRA is tax deferred. E-file state tax only You generally do not include it in your income until you make withdrawals from the IRA. E-file state tax only See Publication 590 for more information. E-file state tax only Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. E-file state tax only The following are some sources of taxable interest. E-file state tax only Dividends that are actually interest. E-file state tax only   Certain distributions commonly called dividends are actually interest. E-file state tax only You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. E-file state tax only  The “dividends” will be shown as interest income on Form 1099-INT. E-file state tax only Money market funds. E-file state tax only   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. E-file state tax only Generally, amounts you receive from money market funds should be reported as dividends, not as interest. E-file state tax only Certificates of deposit and other deferred interest accounts. E-file state tax only   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. E-file state tax only You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. E-file state tax only The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. E-file state tax only If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. E-file state tax only Interest subject to penalty for early withdrawal. E-file state tax only   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. E-file state tax only You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. E-file state tax only See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. E-file state tax only Money borrowed to invest in certificate of deposit. E-file state tax only   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. E-file state tax only You must report the total interest you earn on the certificate in your income. E-file state tax only If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. E-file state tax only See Interest Expenses in chapter 3. E-file state tax only Example. E-file state tax only You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. E-file state tax only The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. E-file state tax only The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. E-file state tax only The bank also gives you a statement showing that you paid $310 interest for 2013. E-file state tax only You must include the $575 in your income. E-file state tax only If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. E-file state tax only Gift for opening account. E-file state tax only   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. E-file state tax only   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. E-file state tax only For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. E-file state tax only The value is determined by the cost to the financial institution. E-file state tax only Example. E-file state tax only You open a savings account at your local bank and deposit $800. E-file state tax only The account earns $20 interest. E-file state tax only You also receive a $15 calculator. E-file state tax only If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. E-file state tax only You must report $35 interest income on your tax return. E-file state tax only Interest on insurance dividends. E-file state tax only   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. E-file state tax only However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. E-file state tax only Prepaid insurance premiums. E-file state tax only   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. E-file state tax only U. E-file state tax only S. E-file state tax only obligations. E-file state tax only   Interest on U. E-file state tax only S. E-file state tax only obligations, such as U. E-file state tax only S. E-file state tax only Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. E-file state tax only Interest on tax refunds. E-file state tax only   Interest you receive on tax refunds is taxable income. E-file state tax only Interest on condemnation award. E-file state tax only   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. E-file state tax only Installment sale payments. E-file state tax only   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. E-file state tax only That interest is taxable when you receive it. E-file state tax only If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. E-file state tax only See Unstated Interest and Original Issue Discount (OID) in Publication 537. E-file state tax only Interest on annuity contract. E-file state tax only   Accumulated interest on an annuity contract you sell before its maturity date is taxable. E-file state tax only Usurious interest. E-file state tax only   Usurious interest is interest charged at an illegal rate. E-file state tax only This is taxable as interest unless state law automatically changes it to a payment on the principal. E-file state tax only Interest income on frozen deposits. E-file state tax only   Exclude from your gross income interest on frozen deposits. E-file state tax only A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. E-file state tax only   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). E-file state tax only If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. E-file state tax only   The interest you exclude is treated as credited to your account in the following year. E-file state tax only You must include it in income in the year you can withdraw it. E-file state tax only Example. E-file state tax only $100 of interest was credited on your frozen deposit during the year. E-file state tax only You withdrew $80 but could not withdraw any more as of the end of the year. E-file state tax only You must include $80 in your income and exclude $20 from your income for the year. E-file state tax only You must include the $20 in your income for the year you can withdraw it. E-file state tax only Bonds traded flat. E-file state tax only    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. E-file state tax only The defaulted or unpaid interest is not income and is not taxable as interest if paid later. E-file state tax only When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. E-file state tax only Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. E-file state tax only See Bonds Sold Between Interest Dates , later in this chapter. E-file state tax only Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. E-file state tax only The below-market loan rules and exceptions are described in this section. E-file state tax only For more information, see section 7872 of the Internal Revenue Code and its regulations. E-file state tax only If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. E-file state tax only Loans subject to the rules. E-file state tax only   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. E-file state tax only A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. E-file state tax only A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. E-file state tax only Forgone interest. E-file state tax only   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. E-file state tax only Applicable federal rate. E-file state tax only   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. E-file state tax only Some IRS offices have these bulletins available for research. E-file state tax only See chapter 5, How To Get Tax Help , for other ways to get this information. E-file state tax only Rules for below-market loans. E-file state tax only   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. E-file state tax only Gift and demand loans. E-file state tax only   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. E-file state tax only   A demand loan is a loan payable in full at any time upon demand by the lender. E-file state tax only A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. E-file state tax only   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. E-file state tax only The borrower is generally treated as transferring the additional payment back to the lender as interest. E-file state tax only The lender must report that amount as interest income. E-file state tax only   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. E-file state tax only The borrower may have to report this payment as taxable income, depending on its classification. E-file state tax only These transfers are considered to occur annually, generally on December 31. E-file state tax only Term loans. E-file state tax only   A term loan is any loan that is not a demand loan. E-file state tax only A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. E-file state tax only   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. E-file state tax only ) on the date the loan is made. E-file state tax only The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. E-file state tax only An equal amount is treated as original issue discount (OID). E-file state tax only The lender must report the annual part of the OID as interest income. E-file state tax only The borrower may be able to deduct the OID as interest expense. E-file state tax only See Original Issue Discount (OID) , later. E-file state tax only Exceptions to the below-market loan rules. E-file state tax only   Exceptions to the below-market loan rules are discussed here. E-file state tax only Exception for loans of $10,000 or less. E-file state tax only   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. E-file state tax only This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. E-file state tax only This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. E-file state tax only Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. E-file state tax only Exception for loans to continuing care facilities. E-file state tax only   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. E-file state tax only For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). E-file state tax only Exception for loans without significant tax effect. E-file state tax only   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. E-file state tax only These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. E-file state tax only S. E-file state tax only trade or business and would not be exempt from U. E-file state tax only S. E-file state tax only tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. E-file state tax only For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. E-file state tax only Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. E-file state tax only If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. E-file state tax only Limit on forgone interest for gift loans of $100,000 or less. E-file state tax only   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. E-file state tax only If the borrower's net investment income is $1,000 or less, it is treated as zero. E-file state tax only This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. E-file state tax only Effective dates. E-file state tax only    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. E-file state tax only U. E-file state tax only S. E-file state tax only Savings Bonds This section provides tax information on U. E-file state tax only S. E-file state tax only savings bonds. E-file state tax only It explains how to report the interest income on these bonds and how to treat transfers of these bonds. E-file state tax only U. E-file state tax only S. E-file state tax only savings bonds currently offered to individuals include Series EE bonds and Series I bonds. E-file state tax only For other information on U. E-file state tax only S. E-file state tax only savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. E-file state tax only O. E-file state tax only Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. E-file state tax only O. E-file state tax only Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. E-file state tax only O. E-file state tax only Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. E-file state tax only treasurydirect. E-file state tax only gov/indiv/indiv. E-file state tax only htm. E-file state tax only Accrual method taxpayers. E-file state tax only   If you use an accrual method of accounting, you must report interest on U. E-file state tax only S. E-file state tax only savings bonds each year as it accrues. E-file state tax only You cannot postpone reporting interest until you receive it or until the bonds mature. E-file state tax only Cash method taxpayers. E-file state tax only   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. E-file state tax only S. E-file state tax only savings bonds when you receive it. E-file state tax only But see Reporting options for cash method taxpayers , later. E-file state tax only Series HH bonds. E-file state tax only   These bonds were issued at face value. E-file state tax only Interest is paid twice a year by direct deposit to your bank account. E-file state tax only If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. E-file state tax only   Series HH bonds were first offered in 1980 and last offered in August 2004. E-file state tax only Before 1980, series H bonds were issued. E-file state tax only Series H bonds are treated the same as series HH bonds. E-file state tax only If you are a cash method taxpayer, you must report the interest when you receive it. E-file state tax only   Series H bonds have a maturity period of 30 years. E-file state tax only Series HH bonds mature in 20 years. E-file state tax only The last series H bonds matured in 2009. E-file state tax only The last series HH bonds will mature in 2024. E-file state tax only Series EE and series I bonds. E-file state tax only   Interest on these bonds is payable when you redeem the bonds. E-file state tax only The difference between the purchase price and the redemption value is taxable interest. E-file state tax only Series EE bonds. E-file state tax only   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. E-file state tax only Before July 1980, series E bonds were issued. E-file state tax only The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. E-file state tax only Paper series EE and series E bonds are issued at a discount. E-file state tax only The face value is payable to you at maturity. E-file state tax only Electronic series EE bonds are issued at their face value. E-file state tax only The face value plus accrued interest is payable to you at maturity. E-file state tax only As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. E-file state tax only    Owners of paper series EE bonds can convert them to electronic bonds. E-file state tax only These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). E-file state tax only Series I bonds. E-file state tax only   Series I bonds were first offered in 1998. E-file state tax only These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. E-file state tax only The face value plus all accrued interest is payable to you at maturity. E-file state tax only Reporting options for cash method taxpayers. E-file state tax only   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. E-file state tax only Method 1. E-file state tax only Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. E-file state tax only (However, see Savings bonds traded , later. E-file state tax only )  Note. E-file state tax only Series EE bonds issued in 1983 matured in 2013. E-file state tax only If you have used method 1, you generally must report the interest on these bonds on your 2013 return. E-file state tax only The last series E bonds were issued in 1980 and matured in 2010. E-file state tax only If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. E-file state tax only Method 2. E-file state tax only Choose to report the increase in redemption value as interest each year. E-file state tax only  You must use the same method for all series EE, series E, and series I bonds you own. E-file state tax only If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. E-file state tax only If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. E-file state tax only To learn how, see Education Savings Bond Program, later. E-file state tax only Change from method 1. E-file state tax only   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. E-file state tax only In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. E-file state tax only   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. E-file state tax only Change from method 2. E-file state tax only   To change from method 2 to method 1, you must request permission from the IRS. E-file state tax only Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. E-file state tax only You have typed or printed the following number at the top: “131. E-file state tax only ” It includes your name and social security number under “131. E-file state tax only ” It includes the year of change (both the beginning and ending dates). E-file state tax only It identifies the savings bonds for which you are requesting this change. E-file state tax only It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. E-file state tax only   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). E-file state tax only   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. E-file state tax only On the statement, type or print “Filed pursuant to section 301. E-file state tax only 9100-2. E-file state tax only ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). E-file state tax only    By the date you file the original statement with your return, you must also send a signed copy to the address below. E-file state tax only    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. E-file state tax only O. E-file state tax only Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. E-file state tax only Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. E-file state tax only In that case, follow the form instructions for an automatic change. E-file state tax only No user fee is required. E-file state tax only Co-owners. E-file state tax only   If a U. E-file state tax only S. E-file state tax only savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. E-file state tax only One co-owner's funds used. E-file state tax only   If you used your funds to buy the bond, you must pay the tax on the interest. E-file state tax only This is true even if you let the other co-owner redeem the bond and keep all the proceeds. E-file state tax only Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. E-file state tax only The co-owner who redeemed the bond is a “nominee. E-file state tax only ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. E-file state tax only Both co-owners' funds used. E-file state tax only   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. E-file state tax only Community property. E-file state tax only   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. E-file state tax only If you file separate returns, each of you generally must report one-half of the bond interest. E-file state tax only For more information about community property, see Publication 555. E-file state tax only Table 1-2. E-file state tax only   These rules are also shown in Table 1-2. E-file state tax only Child as only owner. E-file state tax only   Interest on U. E-file state tax only S. E-file state tax only savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. E-file state tax only If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. E-file state tax only Choice to report interest each year. E-file state tax only   The choice to report the accrued interest each year can be made either by your child or by you for your child. E-file state tax only This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. E-file state tax only Either you or your child should keep a copy of this return. E-file state tax only   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. E-file state tax only S. E-file state tax only savings bond interest under this choice. E-file state tax only However, see Tax on unearned income of certain children , earlier, under General Information. E-file state tax only Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . E-file state tax only Ownership transferred. E-file state tax only   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. E-file state tax only But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. E-file state tax only   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. E-file state tax only Example. E-file state tax only You bought series EE bonds entirely with your own funds. E-file state tax only You did not choose to report the accrued interest each year. E-file state tax only Later, you transfer the bonds to your former spouse under a divorce agreement. E-file state tax only You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. E-file state tax only Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. E-file state tax only Table 1-2. E-file state tax only Who Pays the Tax on U. E-file state tax only S. E-file state tax only Savings Bond Interest IF . E-file state tax only . E-file state tax only . E-file state tax only THEN the interest must be reported by . E-file state tax only . E-file state tax only . E-file state tax only you buy a bond in your name and the name of another person as co-owners, using only your own funds you. E-file state tax only you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. E-file state tax only you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. E-file state tax only you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. E-file state tax only If you file separate returns, both you and your spouse generally report one-half of the interest. E-file state tax only Purchased jointly. E-file state tax only   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. E-file state tax only The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. E-file state tax only This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. E-file state tax only   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. E-file state tax only But the new co-owner will report only his or her share of the interest earned after the transfer. E-file state tax only   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. E-file state tax only Example 1. E-file state tax only You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. E-file state tax only The bond was issued to you and your spouse as co-owners. E-file state tax only You both postpone reporting interest on the bond. E-file state tax only You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. E-file state tax only At that time neither you nor your spouse has to report the interest earned to the date of reissue. E-file state tax only Example 2. E-file state tax only You bought a $1,000 series EE savings bond entirely with your own funds. E-file state tax only The bond was issued to you and your spouse as co-owners. E-file state tax only You both postponed reporting interest on the bond. E-file state tax only You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. E-file state tax only You must report half the interest earned to the date of reissue. E-file state tax only Transfer to a trust. E-file state tax only   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. E-file state tax only However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. E-file state tax only You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. E-file state tax only   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. E-file state tax only See Savings bonds traded , later. E-file state tax only Decedents. E-file state tax only   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. E-file state tax only Decedent who reported interest each year. E-file state tax only   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. E-file state tax only The person who acquires the bonds includes in income only interest earned after the date of death. E-file state tax only Decedent who postponed reporting interest. E-file state tax only   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. E-file state tax only The surviving spouse or personal representative (executor, administrator, etc. E-file state tax only ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. E-file state tax only The person who acquires the bonds then includes in income only interest earned after the date of death. E-file state tax only If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. E-file state tax only All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. E-file state tax only If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. E-file state tax only In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. E-file state tax only For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. E-file state tax only Example 1. E-file state tax only Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. E-file state tax only He had bought the bond for $500 and had not chosen to report the interest each year. E-file state tax only At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. E-file state tax only Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. E-file state tax only The $200 is income in respect of the decedent. E-file state tax only You are a cash method taxpayer and do not choose to report the interest each year as it is earned. E-file state tax only If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. E-file state tax only For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. E-file state tax only Example 2. E-file state tax only If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. E-file state tax only $300 is the interest earned after your uncle's death. E-file state tax only Example 3. E-file state tax only If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. E-file state tax only Example 4. E-file state tax only When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. E-file state tax only You were the beneficiary of these bonds. E-file state tax only Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. E-file state tax only Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. E-file state tax only The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. E-file state tax only You must report any interest received during the year as income on your return. E-file state tax only The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. E-file state tax only For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. E-file state tax only Savings bonds distributed from a retirement or profit-sharing plan. E-file state tax only   If you acquire a U. E-file state tax only S. E-file state tax only savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). E-file state tax only When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. E-file state tax only To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. E-file state tax only Savings bonds traded. E-file state tax only   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. E-file state tax only (You cannot trade series I bonds for series HH bonds. E-file state tax only After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. E-file state tax only ) Any cash you received is income up to the amount of the interest earned on the bonds traded. E-file state tax only When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. E-file state tax only Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. E-file state tax only Example. E-file state tax only You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. E-file state tax only You reported the $223 as taxable income on your tax return. E-file state tax only At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. E-file state tax only You hold the series HH bonds until maturity, when you receive $2,500. E-file state tax only You must report $300 as interest income in the year of maturity. E-file state tax only This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). E-file state tax only (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. E-file state tax only ) Choice to report interest in year of trade. E-file state tax only   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. E-file state tax only If you made this choice, it is treated as a change from method 1. E-file state tax only See Change from method 1 under Series EE and series I bonds, earlier. E-file state tax only Form 1099-INT for U. E-file state tax only S. E-file state tax only savings bond interest. E-file state tax only   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. E-file state tax only Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. E-file state tax only However, your Form 1099-INT may show more interest than you have to include on your income tax return. E-file state tax only For example, this may happen if any of the following are true. E-file state tax only You chose to report the increase in the redemption value of the bond each year. E-file state tax only The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. E-file state tax only You received the bond from a decedent. E-file state tax only The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. E-file state tax only Ownership of the bond was transferred. E-file state tax only The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. E-file state tax only You were named as a co-owner, and the other co-owner contributed funds to buy the bond. E-file state tax only The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. E-file state tax only (See Co-owners , earlier in this section, for more information about the reporting requirements. E-file state tax only ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. E-file state tax only The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. E-file state tax only (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. E-file state tax only , for the year of distribution. E-file state tax only )   For more information on including the correct amount of interest on your return, see U. E-file state tax only S. E-file state tax only savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. E-file state tax only    Interest on U. E-file state tax only S. E-file state tax only savings bonds is exempt from state and local taxes. E-file state tax only The Form 1099-INT you receive will indicate the amount that is for U. E-file state tax only S. E-file state tax only savings bonds interest in box 3. E-file state tax only Do not include this income on your state or local income tax return. E-file state tax only Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. E-file state tax only S. E-file state tax only savings bonds during the year if you pay qualified higher educational expenses during the same year. E-file state tax only This exclusion is known as the Education Savings Bond Program. E-file state tax only You do not qualify for this exclusion if your filing status is married filing separately. E-file state tax only Form 8815. E-file state tax only   Use Form 8815 to figure your exclusion. E-file state tax only Attach the form to your Form 1040 or Form 1040A. E-file state tax only Qualified U. E-file state tax only S. E-file state tax only savings bonds. E-file state tax only   A qualified U. E-file state tax only S. E-file state tax only savings bond is a series EE bond issued after 1989 or a series I bond. E-file state tax only The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). E-file state tax only You must be at least 24 years old before the bond's issue date. E-file state tax only For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. E-file state tax only    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. E-file state tax only Beneficiary. E-file state tax only   You can designate any individual (including a child) as a beneficiary of the bond. E-file state tax only Verification by IRS. E-file state tax only   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. E-file state tax only Qualified expenses. E-file state tax only   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. E-file state tax only   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. E-file state tax only For information about these programs, see Publication 970, Tax Benefits for Education. E-file state tax only   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. E-file state tax only Eligible educational institutions. E-file state tax only   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. E-file state tax only Reduction for certain benefits. E-file state tax only   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. E-file state tax only Tax-free part of scholarships and fellowships. E-file state tax only Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. E-file state tax only Expenses used to figure the tax-free portion of distributions from a qualified tuition program. E-file state tax only Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. E-file state tax only Any expense used in figuring the American Opportunity and lifetime learning credits. E-file state tax only For information about these benefits, see Publication 970. E-file state tax only Amount excludable. E-file state tax only   If the total proceeds (interest and principal) from the qualified U. E-file state tax only S. E-file state tax only savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. E-file state tax only If the proceeds are more than the expenses, you may be able to exclude only part of the interest. E-file state tax only   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. E-file state tax only The numer