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H&r Block Free Tax Preperation

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H&r Block Free Tax Preperation

H&r block free tax preperation 7. H&r block free tax preperation   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. H&r block free tax preperation Custodian account for your child. H&r block free tax preperation Penalty for failure to supply SSN. H&r block free tax preperation Reporting backup withholding. H&r block free tax preperation Savings account with parent as trustee. H&r block free tax preperation Interest not reported on Form 1099-INT. H&r block free tax preperation Nominees. H&r block free tax preperation Incorrect amount. H&r block free tax preperation Information reporting requirement. H&r block free tax preperation Taxable InterestInterest subject to penalty for early withdrawal. H&r block free tax preperation Money borrowed to invest in certificate of deposit. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds Education Savings Bond Program U. H&r block free tax preperation S. H&r block free tax preperation Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. H&r block free tax preperation How To Report Interest IncomeSchedule B (Form 1040A or 1040). H&r block free tax preperation Reporting tax-exempt interest. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest previously reported. H&r block free tax preperation Reminder Foreign-source income. H&r block free tax preperation  If you are a U. H&r block free tax preperation S. H&r block free tax preperation citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. H&r block free tax preperation S. H&r block free tax preperation law. H&r block free tax preperation This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. H&r block free tax preperation Introduction This chapter discusses the following topics. H&r block free tax preperation Different types of interest income. H&r block free tax preperation What interest is taxable and what interest is nontaxable. H&r block free tax preperation When to report interest income. H&r block free tax preperation How to report interest income on your tax return. H&r block free tax preperation In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. H&r block free tax preperation Exceptions to this rule are discussed later in this chapter. H&r block free tax preperation You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. H&r block free tax preperation See Money borrowed to invest in certificate of deposit , later, and chapter 28. H&r block free tax preperation Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. H&r block free tax preperation Recordkeeping. H&r block free tax preperation You should keep a list showing sources and interest amounts received during the year. H&r block free tax preperation Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. H&r block free tax preperation Tax on unearned income of certain children. H&r block free tax preperation    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. H&r block free tax preperation If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. H&r block free tax preperation If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. H&r block free tax preperation   Some parents can choose to include the child's interest and dividends on the parent's return. H&r block free tax preperation If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. H&r block free tax preperation   For more information about the tax on unearned income of children and the parents' election, see chapter 31. H&r block free tax preperation Beneficiary of an estate or trust. H&r block free tax preperation   Interest you receive as a beneficiary of an estate or trust is generally taxable income. H&r block free tax preperation You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. H&r block free tax preperation , from the fiduciary. H&r block free tax preperation Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. H&r block free tax preperation Social security number (SSN). H&r block free tax preperation   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. H&r block free tax preperation This includes payers of interest. H&r block free tax preperation If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. H&r block free tax preperation SSN for joint account. H&r block free tax preperation   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. H&r block free tax preperation (For information on who owns the funds in a joint account, see Joint accounts , later. H&r block free tax preperation ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. H&r block free tax preperation This is because only one name and SSN can be shown on Form 1099. H&r block free tax preperation   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. H&r block free tax preperation 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. H&r block free tax preperation Custodian account for your child. H&r block free tax preperation   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. H&r block free tax preperation For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. H&r block free tax preperation Penalty for failure to supply SSN. H&r block free tax preperation   If you do not give your SSN to the payer of interest, you may have to pay a penalty. H&r block free tax preperation See Failure to supply SSN under Penalties in chapter 1. H&r block free tax preperation Backup withholding also may apply. H&r block free tax preperation Backup withholding. H&r block free tax preperation   Your interest income is generally not subject to regular withholding. H&r block free tax preperation However, it may be subject to backup withholding to ensure that income tax is collected on the income. H&r block free tax preperation Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. H&r block free tax preperation   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. H&r block free tax preperation For more information, see Backup Withholding in chapter 4. H&r block free tax preperation Reporting backup withholding. H&r block free tax preperation   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. H&r block free tax preperation The Form 1099-INT will show any backup withholding as “Federal income tax withheld. H&r block free tax preperation ” Joint accounts. H&r block free tax preperation   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. H&r block free tax preperation Income from property given to a child. H&r block free tax preperation   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. H&r block free tax preperation   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. H&r block free tax preperation Savings account with parent as trustee. H&r block free tax preperation   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. H&r block free tax preperation The savings account legally belongs to the child. H&r block free tax preperation The parents are not legally permitted to use any of the funds to support the child. H&r block free tax preperation Form 1099-INT. H&r block free tax preperation   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. H&r block free tax preperation This form shows you the interest you received during the year. H&r block free tax preperation Keep this form for your records. H&r block free tax preperation You do not have to attach it to your tax return. H&r block free tax preperation   Report on your tax return the total interest income you receive for the tax year. H&r block free tax preperation Interest not reported on Form 1099-INT. H&r block free tax preperation   Even if you do not receive Form 1099-INT, you must still report all of your interest income. H&r block free tax preperation For example, you may receive distributive shares of interest from partnerships or S corporations. H&r block free tax preperation This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. H&r block free tax preperation , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. H&r block free tax preperation Nominees. H&r block free tax preperation   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. H&r block free tax preperation   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. H&r block free tax preperation Incorrect amount. H&r block free tax preperation   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. H&r block free tax preperation The new Form 1099-INT you receive will be marked “Corrected. H&r block free tax preperation ” Form 1099-OID. H&r block free tax preperation   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. H&r block free tax preperation For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. H&r block free tax preperation Exempt-interest dividends. H&r block free tax preperation   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. H&r block free tax preperation (However, see Information reporting requirement , next. H&r block free tax preperation ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. H&r block free tax preperation You do not reduce your basis for distributions that are exempt-interest dividends. H&r block free tax preperation Information reporting requirement. H&r block free tax preperation   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. H&r block free tax preperation This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. H&r block free tax preperation Note. H&r block free tax preperation Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. H&r block free tax preperation See Alternative Minimum Tax (AMT) in chapter 30 for more information. H&r block free tax preperation Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. H&r block free tax preperation Interest on VA dividends. H&r block free tax preperation   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. H&r block free tax preperation This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. H&r block free tax preperation Individual retirement arrangements (IRAs). H&r block free tax preperation   Interest on a Roth IRA generally is not taxable. H&r block free tax preperation Interest on a traditional IRA is tax deferred. H&r block free tax preperation You generally do not include it in your income until you make withdrawals from the IRA. H&r block free tax preperation See chapter 17. H&r block free tax preperation Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. H&r block free tax preperation The following are some sources of taxable interest. H&r block free tax preperation Dividends that are actually interest. H&r block free tax preperation   Certain distributions commonly called dividends are actually interest. H&r block free tax preperation 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. H&r block free tax preperation  The “dividends” will be shown as interest income on Form 1099-INT. H&r block free tax preperation Money market funds. H&r block free tax preperation   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. H&r block free tax preperation Generally, amounts you receive from money market funds should be reported as dividends, not as interest. H&r block free tax preperation Certificates of deposit and other deferred interest accounts. H&r block free tax preperation   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. H&r block free tax preperation 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. H&r block free tax preperation The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. H&r block free tax preperation If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. H&r block free tax preperation Interest subject to penalty for early withdrawal. H&r block free tax preperation   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. H&r block free tax preperation You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. H&r block free tax preperation See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. H&r block free tax preperation Money borrowed to invest in certificate of deposit. H&r block free tax preperation   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. H&r block free tax preperation You must report the total interest you earn on the certificate in your income. H&r block free tax preperation If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. H&r block free tax preperation See Interest Expenses in chapter 3 of Publication 550. H&r block free tax preperation Example. H&r block free tax preperation 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. H&r block free tax preperation 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. H&r block free tax preperation The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. H&r block free tax preperation The bank also gives you a statement showing that you paid $310 interest for 2013. H&r block free tax preperation You must include the $575 in your income. H&r block free tax preperation If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. H&r block free tax preperation Gift for opening account. H&r block free tax preperation   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. H&r block free tax preperation   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. H&r block free tax preperation For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. H&r block free tax preperation The value is determined by the cost to the financial institution. H&r block free tax preperation Example. H&r block free tax preperation You open a savings account at your local bank and deposit $800. H&r block free tax preperation The account earns $20 interest. H&r block free tax preperation You also receive a $15 calculator. H&r block free tax preperation 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. H&r block free tax preperation You must report $35 interest income on your tax return. H&r block free tax preperation Interest on insurance dividends. H&r block free tax preperation   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. H&r block free tax preperation 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. H&r block free tax preperation Prepaid insurance premiums. H&r block free tax preperation   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. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation obligations. H&r block free tax preperation   Interest on U. H&r block free tax preperation S. H&r block free tax preperation obligations, such as U. H&r block free tax preperation S. H&r block free tax preperation Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. H&r block free tax preperation Interest on tax refunds. H&r block free tax preperation   Interest you receive on tax refunds is taxable income. H&r block free tax preperation Interest on condemnation award. H&r block free tax preperation   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. H&r block free tax preperation Installment sale payments. H&r block free tax preperation   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. H&r block free tax preperation That interest is taxable when you receive it. H&r block free tax preperation If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. H&r block free tax preperation See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. H&r block free tax preperation Interest on annuity contract. H&r block free tax preperation   Accumulated interest on an annuity contract you sell before its maturity date is taxable. H&r block free tax preperation Usurious interest. H&r block free tax preperation   Usurious interest is interest charged at an illegal rate. H&r block free tax preperation This is taxable as interest unless state law automatically changes it to a payment on the principal. H&r block free tax preperation Interest income on frozen deposits. H&r block free tax preperation   Exclude from your gross income interest on frozen deposits. H&r block free tax preperation 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 where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. H&r block free tax preperation   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). H&r block free tax preperation 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 in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. H&r block free tax preperation   The interest you exclude is treated as credited to your account in the following year. H&r block free tax preperation You must include it in income in the year you can withdraw it. H&r block free tax preperation Example. H&r block free tax preperation $100 of interest was credited on your frozen deposit during the year. H&r block free tax preperation You withdrew $80 but could not withdraw any more as of the end of the year. H&r block free tax preperation You must include $80 in your income and exclude $20 from your income for the year. H&r block free tax preperation You must include the $20 in your income for the year you can withdraw it. H&r block free tax preperation Bonds traded flat. H&r block free tax preperation   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. H&r block free tax preperation The defaulted or unpaid interest is not income and is not taxable as interest if paid later. H&r block free tax preperation When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. H&r block free tax preperation Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. H&r block free tax preperation See Bonds Sold Between Interest Dates , later, for more information. H&r block free tax preperation Below-market loans. H&r block free tax preperation   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. H&r block free tax preperation See Below-Market Loans in chapter 1 of Publication 550 for more information. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds This section provides tax information on U. H&r block free tax preperation S. H&r block free tax preperation savings bonds. H&r block free tax preperation It explains how to report the interest income on these bonds and how to treat transfers of these bonds. H&r block free tax preperation For other information on U. H&r block free tax preperation S. H&r block free tax preperation savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. H&r block free tax preperation O. H&r block free tax preperation Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. H&r block free tax preperation O. H&r block free tax preperation Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. H&r block free tax preperation O. H&r block free tax preperation Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. H&r block free tax preperation treasurydirect. H&r block free tax preperation gov/indiv/indiv. H&r block free tax preperation htm. H&r block free tax preperation Accrual method taxpayers. H&r block free tax preperation   If you use an accrual method of accounting, you must report interest on U. H&r block free tax preperation S. H&r block free tax preperation savings bonds each year as it accrues. H&r block free tax preperation You cannot postpone reporting interest until you receive it or until the bonds mature. H&r block free tax preperation Accrual methods of accounting are explained in chapter 1 under Accounting Methods . H&r block free tax preperation Cash method taxpayers. H&r block free tax preperation   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. H&r block free tax preperation S. H&r block free tax preperation savings bonds when you receive it. H&r block free tax preperation The cash method of accounting is explained in chapter 1 under Accounting Methods. H&r block free tax preperation But see Reporting options for cash method taxpayers , later. H&r block free tax preperation Series HH bonds. H&r block free tax preperation    These bonds were issued at face value. H&r block free tax preperation Interest is paid twice a year by direct deposit to your bank account. H&r block free tax preperation If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. H&r block free tax preperation   Series HH bonds were first offered in 1980 and last offered in August 2004. H&r block free tax preperation Before 1980, series H bonds were issued. H&r block free tax preperation Series H bonds are treated the same as series HH bonds. H&r block free tax preperation If you are a cash method taxpayer, you must report the interest when you receive it. H&r block free tax preperation   Series H bonds have a maturity period of 30 years. H&r block free tax preperation Series HH bonds mature in 20 years. H&r block free tax preperation The last series H bonds matured in 2009. H&r block free tax preperation Series EE and series I bonds. H&r block free tax preperation   Interest on these bonds is payable when you redeem the bonds. H&r block free tax preperation The difference between the purchase price and the redemption value is taxable interest. H&r block free tax preperation Series EE bonds. H&r block free tax preperation   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. H&r block free tax preperation   Before July 1980, series E bonds were issued. H&r block free tax preperation 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. H&r block free tax preperation Paper series EE and series E bonds are issued at a discount. H&r block free tax preperation The face value is payable to you at maturity. H&r block free tax preperation Electronic series EE bonds are issued at their face value. H&r block free tax preperation The face value plus accrued interest is payable to you at maturity. H&r block free tax preperation As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. H&r block free tax preperation   Owners of paper series EE bonds can convert them to electronic bonds. H&r block free tax preperation These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). H&r block free tax preperation Series I bonds. H&r block free tax preperation   Series I bonds were first offered in 1998. H&r block free tax preperation These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. H&r block free tax preperation The face value plus all accrued interest is payable to you at maturity. H&r block free tax preperation Reporting options for cash method taxpayers. H&r block free tax preperation   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. H&r block free tax preperation Method 1. H&r block free tax preperation Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. H&r block free tax preperation (However, see Savings bonds traded , later. H&r block free tax preperation )  Note. H&r block free tax preperation Series EE bonds issued in 1983 matured in 2013. H&r block free tax preperation If you have used method 1, you generally must report the interest on these bonds on your 2013 return. H&r block free tax preperation The last series E bonds were issued in 1980 and matured in 2010. H&r block free tax preperation If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. H&r block free tax preperation Method 2. H&r block free tax preperation Choose to report the increase in redemption value as interest each year. H&r block free tax preperation You must use the same method for all series EE, series E, and series I bonds you own. H&r block free tax preperation If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. H&r block free tax preperation    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. H&r block free tax preperation To learn how, see Education Savings Bond Program, later. H&r block free tax preperation Change from method 1. H&r block free tax preperation   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. H&r block free tax preperation In the year of change you must report all interest accrued to date and not previously reported for all your bonds. H&r block free tax preperation   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. H&r block free tax preperation Change from method 2. H&r block free tax preperation   To change from method 2 to method 1, you must request permission from the IRS. H&r block free tax preperation Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. H&r block free tax preperation You have typed or printed the following number at the top: “131. H&r block free tax preperation ” It includes your name and social security number under “131. H&r block free tax preperation ” It includes the year of change (both the beginning and ending dates). H&r block free tax preperation It identifies the savings bonds for which you are requesting this change. H&r block free tax preperation 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. H&r block free tax preperation   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). H&r block free tax preperation   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. H&r block free tax preperation On the statement, type or print “Filed pursuant to section 301. H&r block free tax preperation 9100-2. H&r block free tax preperation ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). H&r block free tax preperation    By the date you file the original statement with your return, you must also send a signed copy to the address below. H&r block free tax preperation   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. H&r block free tax preperation O. H&r block free tax preperation Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. H&r block free tax preperation   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, Application for Change in Accounting Method. H&r block free tax preperation In that case, follow the form instructions for an automatic change. H&r block free tax preperation No user fee is required. H&r block free tax preperation Co-owners. H&r block free tax preperation   If a U. H&r block free tax preperation S. H&r block free tax preperation 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. H&r block free tax preperation One co-owner's funds used. H&r block free tax preperation    If you used your funds to buy the bond, you must pay the tax on the interest. H&r block free tax preperation This is true even if you let the other co-owner redeem the bond and keep all the proceeds. H&r block free tax preperation 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. H&r block free tax preperation The co-owner who redeemed the bond is a “nominee. H&r block free tax preperation ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. H&r block free tax preperation Both co-owners' funds used. H&r block free tax preperation   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. H&r block free tax preperation Community property. H&r block free tax preperation   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. H&r block free tax preperation If you file separate returns, each of you generally must report one-half of the bond interest. H&r block free tax preperation For more information about community property, see Publication 555. H&r block free tax preperation Table 7-1. H&r block free tax preperation   These rules are also shown in Table 7-1. H&r block free tax preperation Ownership transferred. H&r block free tax preperation   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. H&r block free tax preperation But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. H&r block free tax preperation   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. H&r block free tax preperation Purchased jointly. H&r block free tax preperation   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. H&r block free tax preperation 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. H&r block free tax preperation This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. H&r block free tax preperation   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. H&r block free tax preperation But the new co-owner will report only his or her share of the interest earned after the transfer. H&r block free tax preperation   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. H&r block free tax preperation    Table 7-1. H&r block free tax preperation Who Pays the Tax on U. H&r block free tax preperation S. H&r block free tax preperation Savings Bond Interest IF . H&r block free tax preperation . H&r block free tax preperation . H&r block free tax preperation THEN the interest must be reported by . H&r block free tax preperation . H&r block free tax preperation . H&r block free tax preperation you buy a bond in your name and the name of another person as co-owners, using only your own funds you. H&r block free tax preperation 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. H&r block free tax preperation 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. H&r block free tax preperation you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. H&r block free tax preperation If you file separate returns, both you and your spouse generally report one-half of the interest. H&r block free tax preperation Example 1. H&r block free tax preperation You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. H&r block free tax preperation The bond was issued to you and your spouse as co-owners. H&r block free tax preperation You both postpone reporting interest on the bond. H&r block free tax preperation You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H&r block free tax preperation At that time neither you nor your spouse has to report the interest earned to the date of reissue. H&r block free tax preperation Example 2. H&r block free tax preperation You bought a $1,000 series EE savings bond entirely with your own funds. H&r block free tax preperation The bond was issued to you and your spouse as co-owners. H&r block free tax preperation You both postpone reporting interest on the bond. H&r block free tax preperation You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H&r block free tax preperation You must report half the interest earned to the date of reissue. H&r block free tax preperation Transfer to a trust. H&r block free tax preperation   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. H&r block free tax preperation 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. H&r block free tax preperation 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. H&r block free tax preperation   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. H&r block free tax preperation See Savings bonds traded , later. H&r block free tax preperation Decedents. H&r block free tax preperation   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. H&r block free tax preperation This is explained in chapter 1 of Publication 550. H&r block free tax preperation Savings bonds traded. H&r block free tax preperation   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. H&r block free tax preperation (You cannot trade series I bonds for series HH bonds. H&r block free tax preperation After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. H&r block free tax preperation ) Any cash you received is income up to the amount of the interest earned on the bonds traded. H&r block free tax preperation 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. H&r block free tax preperation 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. H&r block free tax preperation Example. H&r block free tax preperation You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. H&r block free tax preperation You reported the $223 as taxable income on your tax return. H&r block free tax preperation At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. H&r block free tax preperation You hold the series HH bonds until maturity, when you receive $2,500. H&r block free tax preperation You must report $300 as interest income in the year of maturity. H&r block free tax preperation This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). H&r block free tax preperation (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. H&r block free tax preperation ) Choice to report interest in year of trade. H&r block free tax preperation   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. H&r block free tax preperation If you made this choice, it is treated as a change from method 1. H&r block free tax preperation See Change from method 1 under Series EE and series I bonds, earlier. H&r block free tax preperation Form 1099-INT for U. H&r block free tax preperation S. H&r block free tax preperation savings bonds interest. H&r block free tax preperation   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. H&r block free tax preperation 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. H&r block free tax preperation However, your Form 1099-INT may show more interest than you have to include on your income tax return. H&r block free tax preperation For example, this may happen if any of the following are true. H&r block free tax preperation You chose to report the increase in the redemption value of the bond each year. H&r block free tax preperation The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. H&r block free tax preperation You received the bond from a decedent. H&r block free tax preperation 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. H&r block free tax preperation Ownership of the bond was transferred. H&r block free tax preperation The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. H&r block free tax preperation You were named as a co-owner, and the other co-owner contributed funds to buy the bond. H&r block free tax preperation The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. H&r block free tax preperation (See Co-owners , earlier in this chapter, for more information about the reporting requirements. H&r block free tax preperation ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. H&r block free tax preperation 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. H&r block free tax preperation (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H&r block free tax preperation , for the year of distribution. H&r block free tax preperation )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. H&r block free tax preperation Publication 550 includes examples showing how to report these amounts. H&r block free tax preperation    Interest on U. H&r block free tax preperation S. H&r block free tax preperation savings bonds is exempt from state and local taxes. H&r block free tax preperation The Form 1099-INT you receive will indicate the amount that is for U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest in box 3. H&r block free tax preperation 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. H&r block free tax preperation S. H&r block free tax preperation savings bonds during the year if you pay qualified higher educational expenses during the same year. H&r block free tax preperation This exclusion is known as the Education Savings Bond Program. H&r block free tax preperation You do not qualify for this exclusion if your filing status is married filing separately. H&r block free tax preperation Form 8815. H&r block free tax preperation   Use Form 8815 to figure your exclusion. H&r block free tax preperation Attach the form to your Form 1040 or Form 1040A. H&r block free tax preperation Qualified U. H&r block free tax preperation S. H&r block free tax preperation savings bonds. H&r block free tax preperation   A qualified U. H&r block free tax preperation S. H&r block free tax preperation savings bond is a series EE bond issued after 1989 or a series I bond. H&r block free tax preperation The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). H&r block free tax preperation You must be at least 24 years old before the bond's issue date. H&r block free tax preperation 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. H&r block free tax preperation    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. H&r block free tax preperation Beneficiary. H&r block free tax preperation   You can designate any individual (including a child) as a beneficiary of the bond. H&r block free tax preperation Verification by IRS. H&r block free tax preperation   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. H&r block free tax preperation Qualified expenses. H&r block free tax preperation   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. H&r block free tax preperation   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. H&r block free tax preperation   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. H&r block free tax preperation Eligible educational institutions. H&r block free tax preperation   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 U. H&r block free tax preperation S. H&r block free tax preperation Department of Education. H&r block free tax preperation Reduction for certain benefits. H&r block free tax preperation   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. H&r block free tax preperation Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). H&r block free tax preperation Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. H&r block free tax preperation Expenses used to figure the tax-free portion of distributions from a qualified tuition program. H&r block free tax preperation Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. H&r block free tax preperation Any expense used in figuring the American Opportunity and lifetime learning credits. H&r block free tax preperation Amount excludable. H&r block free tax preperation   If the total proceeds (interest and principal) from the qualified U. H&r block free tax preperation S. H&r block free tax preperation 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. H&r block free tax preperation If the proceeds are more than the expenses, you may be able to exclude only part of the interest. H&r block free tax preperation   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. H&r block free tax preperation The numerator of the fraction is the qualified higher educational expenses you paid during the year. H&r block free tax preperation The denominator of the fraction is the total proceeds you received during the year. H&r block free tax preperation Example. H&r block free tax preperation In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. H&r block free tax preperation S. H&r block free tax preperation savings bond they bought in April 1997. H&r block free tax preperation They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. H&r block free tax preperation In 2013, they paid $4,000 of their daughter's college tuition. H&r block free tax preperation They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. H&r block free tax preperation They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. H&r block free tax preperation They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. H&r block free tax preperation Modified adjusted gross income limit. H&r block free tax preperation   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. H&r block free tax preperation You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. H&r block free tax preperation   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. H&r block free tax preperation   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. H&r block free tax preperation If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. H&r block free tax preperation   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. H&r block free tax preperation Recordkeeping. H&r block free tax preperation If you claim the interest exclusion, you must keep a written record of the qualified U. H&r block free tax preperation S. H&r block free tax preperation savings bonds you redeem. H&r block free tax preperation Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. H&r block free tax preperation You can use Form 8818 to record this information. H&r block free tax preperation You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. H&r block free tax preperation S. H&r block free tax preperation Government. H&r block free tax preperation Taxation of interest. H&r block free tax preperation   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. H&r block free tax preperation You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. H&r block free tax preperation   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. H&r block free tax preperation Treasury bills. H&r block free tax preperation   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. H&r block free tax preperation They are generally issued at a discount in the amount of $100 and multiples of $100. H&r block free tax preperation The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. H&r block free tax preperation Generally, you report this interest income when the bill is paid at maturity. H&r block free tax preperation If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. H&r block free tax preperation Treasury notes and bonds. H&r block free tax preperation   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. H&r block free tax preperation Maturity periods for Treasury bonds are longer than 10 years. H&r block free tax preperation Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. H&r block free tax preperation Generally, you report this interest for the year paid. H&r block free tax preperation For more information, see U. H&r block free tax preperation S. H&r block free tax preperation Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. H&r block free tax preperation For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. H&r block free tax preperation O. H&r block free tax preperation Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. H&r block free tax preperation treasurydirect. H&r block free tax preperation gov/indiv/indiv. H&r block free tax preperation htm. H&r block free tax preperation For information on series EE, series I, and series HH savings bonds, see U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds , earlier. H&r block free tax preperation Treasury inflation-protected securities (TIPS). H&r block free tax preperation   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. H&r block free tax preperation For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. H&r block free tax preperation Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. H&r block free tax preperation You must report that part of the sales price as interest income for the year of sale. H&r block free tax preperation If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. H&r block free tax preperation When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. H&r block free tax preperation See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. H&r block free tax preperation Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. H&r block free tax preperation But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. H&r block free tax preperation For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. H&r block free tax preperation Annuity. H&r block free tax preperation   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. H&r block free tax preperation See chapter 10 for information on pension and annuity income from nonqualified plans. H&r block free tax preperation State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. H&r block free tax preperation Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. H&r block free tax preperation Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. H&r block free tax preperation For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. H&r block free tax preperation Information reporting requirement. H&r block free tax preperation   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. H&r block free tax preperation This is an information reporting requirement only. H&r block free tax preperation It does not change tax-exempt interest to taxable interest. H&r block free tax preperation Original Issue Discount (OID) Original issue discount (OID) is a form of interest. H&r block free tax preperation You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. H&r block free tax preperation A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. H&r block free tax preperation OID is the difference between the stated redemption price at maturity and the issue price. H&r block free tax preperation All debt instruments that pay no interest before maturity are presumed to be issued at a discount. H&r block free tax preperation Zero coupon bonds are one example of these instruments. H&r block free tax preperation The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). H&r block free tax preperation See Discount on Short-Term Obligations in chapter 1 of Publication 550. H&r block free tax preperation De minimis OID. H&r block free tax preperation   You can treat the discount as zero if it is less than one-fourth of 1% (. H&r block free tax preperation 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. H&r block free tax preperation This small discount is known as “de minimis” OID. H&r block free tax preperation Example 1. H&r block free tax preperation You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. H&r block free tax preperation One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. H&r block free tax preperation Because the $20 discount is less than $25, the OID is treated as zero. H&r block free tax preperation (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. H&r block free tax preperation ) Example 2. H&r block free tax preperation The facts are the same as in Example 1, except that the bond was issued at $950. H&r block free tax preperation The OID is $50. H&r block free tax preperation Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. H&r block free tax preperation Debt instrument bought after original issue. H&r block free tax preperation   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. H&r block free tax preperation If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. H&r block free tax preperation See Market Discount Bonds in chapter 1 of Publication 550. H&r block free tax preperation Exceptions to reporting OID. H&r block free tax preperation   The OID rules discussed in this chapter do not apply to the following debt instruments. H&r block free tax preperation Tax-exempt obligations. H&r block free tax preperation (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation savings bonds. H&r block free tax preperation Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). H&r block free tax preperation Obligations issued by an individual before March 2, 1984. H&r block free tax preperation Loans between individuals if all the following are true. H&r block free tax preperation The lender is not in the business of lending money. H&r block free tax preperation The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. H&r block free tax preperation Avoiding any federal tax is not one of the principal purposes of the loan. H&r block free tax preperation Form 1099-OID. H&r block free tax preperation   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. H&r block free tax preperation Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. H&r block free tax preperation It also will show, in box 2, the stated interest you must include in your income. H&r block free tax preperation A copy of Form 1099-OID will be sent to the IRS. H&r block free tax preperation Do not file your copy with your return. H&r block free tax preperation Keep it for your records. H&r block free tax preperation   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. H&r block free tax preperation But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. H&r block free tax preperation Form 1099-OID not received. H&r block free tax preperation   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. H&r block free tax preperation gov that list total OID on certain debt instruments and have information that will help you figure OID. H&r block free tax preperation For the latest OID tables, go to www. H&r block free tax preperation irs. H&r block free tax preperation gov and enter “OID tables” in the Search box. H&r block free tax preperation If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. H&r block free tax preperation Nominee. H&r block free tax preperation   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. H&r block free tax preperation Refiguring OID shown on Form 1099-OID. H&r block free tax preperation   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. H&r block free tax preperation You bought the debt instrument after its original issue and paid a premium or an acquisition premium. H&r block free tax preperation The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). H&r block free tax preperation For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. H&r block free tax preperation Refiguring periodic interest shown on Form 1099-OID. H&r block free tax preperation   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. H&r block free tax preperation Certificates of deposit (CDs). H&r block free tax preperation   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. H&r block free tax preperation   This also applies to similar deposit arrangements with banks, building and loan associations, etc. H&r block free tax preperation , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. H&r block free tax preperation Bearer CDs. H&r block free tax preperation   CDs issued after 1982 generally must be in registered form. H&r block free tax preperation Bearer CDs are CDs not in registered form. H&r block free tax preperation They are not issued in the depositor's name and are transferable from one individual to another. H&r block free tax preperation   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. H&r block free tax preperation More information. H&r block free tax preperation   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. H&r block free tax preperation When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. H&r block free tax preperation Cash method. H&r block free tax preperation   Most individual taxpayers use the cash method. H&r block free tax preperation If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. H&r block free tax preperation However, there are special rules for reporting the discount on certain debt instruments. H&r block free tax preperation See U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds and Original Issue Discount (OID) , earlier. H&r block free tax preperation Example. H&r block free tax preperation On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. H&r block free tax preperation You are not in the business of lending money. H&r block free tax preperation The note stated that principal and interest would be due on August 31, 2013. H&r block free tax preperation In 2013, you received $2,508. H&r block free tax preperation 80 ($2,000 principal and $508. H&r block free tax preperation 80 interest). H&r block free tax preperation If you use the cash method, you must include in income on your 2013 return the $508. H&r block free tax preperation 80 interest you received in that year. H&r block free tax preperation Constructive receipt. H&r block free tax preperation   You constructively receive income when it is credited to your account or made available to you. H&r block free tax preperation You do not need to have physical possession of it. H&r block free tax preperation For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. H&r block free tax preperation This is true even if they are not yet entered in your passbook. H&r block free tax preperation   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. H&r block free tax preperation Accrual method. H&r block free tax preperation   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. H&r block free tax preperation Interest is earned over the term of the debt instrument. H&r block free tax preperation Example. H&r block free tax preperation If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. H&r block free tax preperation You would report the interest as follows: 2011, $80; 2012, $249. H&r block free tax preperation 60; and 2013, $179. H&r block free tax preperation 20. H&r block free tax preperation Coupon bonds. H&r block free tax preperation   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. H&r block free tax preperation It does not matter when you mail the coupon for payment. H&r block free tax preperation How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. H&r block free tax preperation You cannot use Form 1040EZ if your taxable interest income is more than $1,500. H&r block free tax preperation Instead, you must use Form 1040A or Form 1040. H&r block free tax preperation Form 1040A. H&r block free tax preperation   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. H&r block free tax preperation Your taxable interest income is more than $1,500. H&r block free tax preperation You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H&r block free tax preperation You received interest from a seller-financed mortgage, and the buyer used the property as a home. H&r block free tax preperation You received a Form 1099-INT for U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest that includes amounts you reported before 2013. H&r block free tax preperation You received, as a nominee, interest that actually belongs to someone else. H&r block free tax preperation You received a Form 1099-INT for interest on frozen deposits. H&r block free tax preperation You are reporting OID in an amount less than the amount shown on Form 1099-OID. H&r block free tax preperation You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H&r block free tax preperation You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). H&r block free tax preperation List each payer's name and the amount of interest income received from each payer on line 1. H&r block free tax preperation If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H&r block free tax preperation   You cannot use Form 1040A if you must use Form 1040, as described next. H&r block free tax preperation Form 1040. H&r block free tax preperation   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. H&r block free tax preperation Schedule B (Form 1040A or 1040). H&r block free tax preperation   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. H&r block free tax preperation Your taxable interest income is more than $1,500. H&r block free tax preperation You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H&r block free tax preperation You received interest from a seller-financed mortgage, and the buyer used the property as a home. H&r block free tax preperation You received a Form 1099-INT for U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest that includes amounts you reported before 2013. H&r block free tax preperation You received, as a nominee, interest that actually belongs to someone else. H&r block free tax preperation You received a Form 1099-INT for interest on frozen deposits. H&r block free tax preperation You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H&r block free tax preperation You are reporting OID in an amount less than the amount shown on Form 1099-OID. H&r block free tax preperation Statement (2) in the preceding list under Form 1040 is true. H&r block free tax preperation In Part I, line 1, list each payer's name and the amount received from each. H&r block free tax preperation If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H&r block free tax preperation Reporting tax-exempt interest. H&r block free tax preperation   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. H&r block free tax preperation Add these amounts to any other tax-exempt interest you received. H&r block free tax preperation Report the total on line 8b of Form 1040A or 1040. H&r block free tax preperation   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. H&r block free tax preperation Do not add tax-exempt interest in the total on Form 1040EZ, line 2. H&r block free tax preperation   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. H&r block free tax preperation These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H&r block free tax preperation Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H&r block free tax preperation    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. H&r block free tax preperation Form 1099-INT. H&r block free tax preperation   Your taxable interest income, except for interest from U. H&r block free tax preperation S. H&r block free tax preperation savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. H&r block free tax preperation Add this amount to any other taxable interest income you received. H&r block free tax preperation You must report all of your taxable interest income even if you do not receive a Form 1099-INT. H&r block free tax preperation Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. H&r block free tax preperation Your identifying number may be truncated on any paper Form 1099-INT you receive. H&r block free tax preperation   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. H&r block free tax preperation See Penalty on early withdrawal of savings in chapter 1 of Publication 550. H&r block free tax preperation   Box 3 of Form 1099-INT shows the interest income you received from U. H&r block free tax preperation S. H&r block free tax preperation savings bonds, Treasury bills, Treasury notes, and Treasury bonds. H&r block free tax preperation Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. H&r block free tax preperation If part of the amount shown in box 3 was previously included in your interest income, see U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest previously reported , later. H&r block free tax preperation   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. H&r block free tax preperation Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). H&r block free tax preperation   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. H&r block free tax preperation See chapter 28 for more information about investment expenses. H&r block free tax preperation   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. H&r block free tax preperation You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). H&r block free tax preperation To take the credit, you may have to file Form 1116, Foreign Tax Credit. H&r block free tax preperation For more information, see Publication 514, Foreign Tax Credit for Individuals. H&r block free tax preperation U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest previously reported. H&r block free tax preperation   If you received a Form 1099-INT for U. H&r block free tax preperation S. H&r block free tax preperation savings bond interest, the form may show interest you do not have to report. H&r block free tax preperation See Form 1099-INT for U. H&r block free tax preperation S. H&r block free tax preperation savings bonds interest , earlier, under U. H&r block free tax preperation S. H&r block free tax preperation Savings Bonds. H&r block free tax preperation   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. H&r block free tax preperation Then follow these steps. H&r block free tax preperation Several lines above line 2, enter a subtotal of all interest listed on line 1. H&r block free tax preperation Below the subtotal enter “U. H&r block free tax preperation S. H&r block free tax preperation Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. H&r block free tax preperation Subtract these amounts from the subtotal and enter the result on line 2. H&r block free tax preperation More information. H&r block free tax preperation   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. H&r block free tax preperation Prev  Up  Next   Home   More Online Publications
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Most tax-exempt organizations are required to file an annual return or notice with the Internal Revenue Service. (See Annual Return Filing Exceptions for a list of organizations that are not required to file.) Section 6033(j) of the Internal Revenue Code automatically revokes the exemption of any organization that fails to satisfy its filing requirement for three consecutive years. The automatic revocation of exemption is effective as of the due date of the third required annual filing or notice. Organizations on the Automatic Revocation of Exemption List (Auto-Revocation List) previously recognized as exempt under section 501(c)(3) of the Internal Revenue Code are no longer eligible to receive tax-deductible contributions under Code section 170.

Contributors and grantors can rely on the Exempt Organizations Select Check (Pub 78 data) page to determine organization deductibility and foundation status, even if the organization no longer appears in the Statistics of Income (SOI) Tax Stats - EO BMF. See Revenue Procedure 2011-33.

Publication of an organization’s name on the Auto-Revocation List serves as notice to donors and others that the organization is no longer eligible to receive tax-deductible contributions under section 170 and that donors and others may not rely on an IRS determination letter dated before the effective date of revocation or on a prior listing in either Exempt Organizations Select Check (Pub. 78 data) or the IRS Business Master File extract for purposes of claiming tax-deductible contributions. Because the list is an official IRS record of organizations that lost their exempt status for failing to file for three consecutive years, an organization whose exempt status is reinstated remains on the list. If, however, you think your organization was erroneously listed as revoked, see our frequently asked questions.

Because of system limitations, the name field may capture only the first few words of a long organizational name. For example, if the organization's full name is XXXXX YYYYY ZZZZZ University, Alumni Association Chapter 214, the name field may only display XXXXX YYYYY ZZZZZ University. You can check Exempt Organizations Select Check (Pub. 78 data) to ensure that an organization is still eligible to receive tax deductible contributions. For best search results, be sure to enter the exact legal name of the organization.
 

 


AUTOMATIC REVOCATION OF EXEMPTION LIST

 

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