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Taxcut Com

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Taxcut com 11. Taxcut com   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. Taxcut com Generally, references to taxes on Form 720 include this fee. Taxcut com Specified health insurance policies. Taxcut com   For issuers of specified health insurance policies, the fee for a policy year ending before October 1, 2013, is $1. Taxcut com 00, multiplied by the average number of lives covered under the policy for that policy year. Taxcut com 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. Taxcut com The actual count method. Taxcut com 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. Taxcut com The snapshot method. Taxcut com 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. Taxcut com The member months method. Taxcut com And, 4. Taxcut com The state form method. Taxcut com The member months data and the data reported on state forms are based on the calendar year. Taxcut com 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. Taxcut com 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. Taxcut com Applicable self-insured health plans. Taxcut com   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. Taxcut com 00, multiplied by the average number of lives covered under the plan for that plan year. Taxcut com 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. Taxcut com Actual count method. Taxcut com Snapshot method. Taxcut com Form 5500 method. Taxcut com 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. Taxcut com Reporting and paying the fee. Taxcut com   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. Taxcut com 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. Taxcut com 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. Taxcut com 30)), do not make an entry on the line for IRS No. Taxcut com 133 on those filings. Taxcut com   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). Taxcut com   However, if the fee is paid using EFTPS, the payment should be applied to the second quarter. Taxcut com See Electronic deposit requirement under How To Make Deposits in chapter 13, later. Taxcut com More information. Taxcut com   For more information, including methods for calculating the average number of lives covered, see sections 4375, 4376, and 4377; also see T. Taxcut com D. Taxcut com 9602, which is on page 746 of I. Taxcut com R. Taxcut com B. Taxcut com 2012-52 at www. Taxcut com irs. Taxcut com gov/pub/irs-irbs/irb12-52. Taxcut com pdf. Taxcut com Prev  Up  Next   Home   More Online Publications
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Taxcut com 7. Taxcut com   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Taxcut com Custodian account for your child. Taxcut com Penalty for failure to supply SSN. Taxcut com Reporting backup withholding. Taxcut com Savings account with parent as trustee. Taxcut com Interest not reported on Form 1099-INT. Taxcut com Nominees. Taxcut com Incorrect amount. Taxcut com Information reporting requirement. Taxcut com Taxable InterestInterest subject to penalty for early withdrawal. Taxcut com Money borrowed to invest in certificate of deposit. Taxcut com U. Taxcut com S. Taxcut com Savings Bonds Education Savings Bond Program U. Taxcut com S. Taxcut com 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. Taxcut com How To Report Interest IncomeSchedule B (Form 1040A or 1040). Taxcut com Reporting tax-exempt interest. Taxcut com U. Taxcut com S. Taxcut com savings bond interest previously reported. Taxcut com Reminder Foreign-source income. Taxcut com  If you are a U. Taxcut com S. Taxcut com 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. Taxcut com S. Taxcut com law. Taxcut com 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. Taxcut com Introduction This chapter discusses the following topics. Taxcut com Different types of interest income. Taxcut com What interest is taxable and what interest is nontaxable. Taxcut com When to report interest income. Taxcut com How to report interest income on your tax return. Taxcut com In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Taxcut com Exceptions to this rule are discussed later in this chapter. Taxcut com You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Taxcut com See Money borrowed to invest in certificate of deposit , later, and chapter 28. Taxcut com 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. Taxcut com S. Taxcut com Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Taxcut com S. Taxcut com Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Taxcut com Recordkeeping. Taxcut com You should keep a list showing sources and interest amounts received during the year. Taxcut com Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Taxcut com Tax on unearned income of certain children. Taxcut com    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Taxcut com If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Taxcut com If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Taxcut com   Some parents can choose to include the child's interest and dividends on the parent's return. Taxcut com If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Taxcut com   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Taxcut com Beneficiary of an estate or trust. Taxcut com   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Taxcut com You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Taxcut com , from the fiduciary. Taxcut com Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Taxcut com Social security number (SSN). Taxcut com   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. Taxcut com This includes payers of interest. Taxcut com If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Taxcut com SSN for joint account. Taxcut com   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. Taxcut com (For information on who owns the funds in a joint account, see Joint accounts , later. Taxcut com ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Taxcut com This is because only one name and SSN can be shown on Form 1099. Taxcut com   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Taxcut com 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. Taxcut com Custodian account for your child. Taxcut com   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. Taxcut com 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. Taxcut com Penalty for failure to supply SSN. Taxcut com   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Taxcut com See Failure to supply SSN under Penalties in chapter 1. Taxcut com Backup withholding also may apply. Taxcut com Backup withholding. Taxcut com   Your interest income is generally not subject to regular withholding. Taxcut com However, it may be subject to backup withholding to ensure that income tax is collected on the income. Taxcut com Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Taxcut com   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Taxcut com For more information, see Backup Withholding in chapter 4. Taxcut com Reporting backup withholding. Taxcut com   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. Taxcut com The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Taxcut com ” Joint accounts. Taxcut com   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. Taxcut com Income from property given to a child. Taxcut com   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. Taxcut com   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. Taxcut com Savings account with parent as trustee. Taxcut com   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. Taxcut com The savings account legally belongs to the child. Taxcut com The parents are not legally permitted to use any of the funds to support the child. Taxcut com Form 1099-INT. Taxcut com   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. Taxcut com This form shows you the interest you received during the year. Taxcut com Keep this form for your records. Taxcut com You do not have to attach it to your tax return. Taxcut com   Report on your tax return the total interest income you receive for the tax year. Taxcut com Interest not reported on Form 1099-INT. Taxcut com   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Taxcut com For example, you may receive distributive shares of interest from partnerships or S corporations. Taxcut com This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Taxcut com , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Taxcut com Nominees. Taxcut com   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. Taxcut com   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. Taxcut com Incorrect amount. Taxcut com   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. Taxcut com The new Form 1099-INT you receive will be marked “Corrected. Taxcut com ” Form 1099-OID. Taxcut com   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Taxcut com For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Taxcut com Exempt-interest dividends. Taxcut com   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. Taxcut com (However, see Information reporting requirement , next. Taxcut com ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Taxcut com You do not reduce your basis for distributions that are exempt-interest dividends. Taxcut com Information reporting requirement. Taxcut com   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Taxcut com This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Taxcut com Note. Taxcut com Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Taxcut com See Alternative Minimum Tax (AMT) in chapter 30 for more information. Taxcut com Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Taxcut com Interest on VA dividends. Taxcut com   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Taxcut com This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Taxcut com Individual retirement arrangements (IRAs). Taxcut com   Interest on a Roth IRA generally is not taxable. Taxcut com Interest on a traditional IRA is tax deferred. Taxcut com You generally do not include it in your income until you make withdrawals from the IRA. Taxcut com See chapter 17. Taxcut com Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Taxcut com The following are some sources of taxable interest. Taxcut com Dividends that are actually interest. Taxcut com   Certain distributions commonly called dividends are actually interest. Taxcut com 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. Taxcut com  The “dividends” will be shown as interest income on Form 1099-INT. Taxcut com Money market funds. Taxcut com   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Taxcut com Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Taxcut com Certificates of deposit and other deferred interest accounts. Taxcut com   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. Taxcut com 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. Taxcut com The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Taxcut com If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Taxcut com Interest subject to penalty for early withdrawal. Taxcut com   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Taxcut com You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Taxcut com 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. Taxcut com Money borrowed to invest in certificate of deposit. Taxcut com   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. Taxcut com You must report the total interest you earn on the certificate in your income. Taxcut com If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Taxcut com See Interest Expenses in chapter 3 of Publication 550. Taxcut com Example. Taxcut com 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. Taxcut com 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. Taxcut com The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Taxcut com The bank also gives you a statement showing that you paid $310 interest for 2013. Taxcut com You must include the $575 in your income. Taxcut com If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Taxcut com Gift for opening account. Taxcut com   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. Taxcut com   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Taxcut com For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Taxcut com The value is determined by the cost to the financial institution. Taxcut com Example. Taxcut com You open a savings account at your local bank and deposit $800. Taxcut com The account earns $20 interest. Taxcut com You also receive a $15 calculator. Taxcut com 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. Taxcut com You must report $35 interest income on your tax return. Taxcut com Interest on insurance dividends. Taxcut com   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. Taxcut com 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. Taxcut com Prepaid insurance premiums. Taxcut com   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. Taxcut com U. Taxcut com S. Taxcut com obligations. Taxcut com   Interest on U. Taxcut com S. Taxcut com obligations, such as U. Taxcut com S. Taxcut com Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Taxcut com Interest on tax refunds. Taxcut com   Interest you receive on tax refunds is taxable income. Taxcut com Interest on condemnation award. Taxcut com   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Taxcut com Installment sale payments. Taxcut com   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. Taxcut com That interest is taxable when you receive it. Taxcut com If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Taxcut com See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Taxcut com Interest on annuity contract. Taxcut com   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Taxcut com Usurious interest. Taxcut com   Usurious interest is interest charged at an illegal rate. Taxcut com This is taxable as interest unless state law automatically changes it to a payment on the principal. Taxcut com Interest income on frozen deposits. Taxcut com   Exclude from your gross income interest on frozen deposits. Taxcut com 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. Taxcut com   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). Taxcut com 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. Taxcut com   The interest you exclude is treated as credited to your account in the following year. Taxcut com You must include it in income in the year you can withdraw it. Taxcut com Example. Taxcut com $100 of interest was credited on your frozen deposit during the year. Taxcut com You withdrew $80 but could not withdraw any more as of the end of the year. Taxcut com You must include $80 in your income and exclude $20 from your income for the year. Taxcut com You must include the $20 in your income for the year you can withdraw it. Taxcut com Bonds traded flat. Taxcut com   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. Taxcut com The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Taxcut com When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Taxcut com Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Taxcut com See Bonds Sold Between Interest Dates , later, for more information. Taxcut com Below-market loans. Taxcut com   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. Taxcut com See Below-Market Loans in chapter 1 of Publication 550 for more information. Taxcut com U. Taxcut com S. Taxcut com Savings Bonds This section provides tax information on U. Taxcut com S. Taxcut com savings bonds. Taxcut com It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Taxcut com For other information on U. Taxcut com S. Taxcut com savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Taxcut com O. Taxcut com Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Taxcut com O. Taxcut com Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Taxcut com O. Taxcut com Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Taxcut com treasurydirect. Taxcut com gov/indiv/indiv. Taxcut com htm. Taxcut com Accrual method taxpayers. Taxcut com   If you use an accrual method of accounting, you must report interest on U. Taxcut com S. Taxcut com savings bonds each year as it accrues. Taxcut com You cannot postpone reporting interest until you receive it or until the bonds mature. Taxcut com Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Taxcut com Cash method taxpayers. Taxcut com   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Taxcut com S. Taxcut com savings bonds when you receive it. Taxcut com The cash method of accounting is explained in chapter 1 under Accounting Methods. Taxcut com But see Reporting options for cash method taxpayers , later. Taxcut com Series HH bonds. Taxcut com    These bonds were issued at face value. Taxcut com Interest is paid twice a year by direct deposit to your bank account. Taxcut com If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Taxcut com   Series HH bonds were first offered in 1980 and last offered in August 2004. Taxcut com Before 1980, series H bonds were issued. Taxcut com Series H bonds are treated the same as series HH bonds. Taxcut com If you are a cash method taxpayer, you must report the interest when you receive it. Taxcut com   Series H bonds have a maturity period of 30 years. Taxcut com Series HH bonds mature in 20 years. Taxcut com The last series H bonds matured in 2009. Taxcut com Series EE and series I bonds. Taxcut com   Interest on these bonds is payable when you redeem the bonds. Taxcut com The difference between the purchase price and the redemption value is taxable interest. Taxcut com Series EE bonds. Taxcut com   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Taxcut com   Before July 1980, series E bonds were issued. Taxcut com 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. Taxcut com Paper series EE and series E bonds are issued at a discount. Taxcut com The face value is payable to you at maturity. Taxcut com Electronic series EE bonds are issued at their face value. Taxcut com The face value plus accrued interest is payable to you at maturity. Taxcut com As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Taxcut com   Owners of paper series EE bonds can convert them to electronic bonds. Taxcut com These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Taxcut com Series I bonds. Taxcut com   Series I bonds were first offered in 1998. Taxcut com These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Taxcut com The face value plus all accrued interest is payable to you at maturity. Taxcut com Reporting options for cash method taxpayers. Taxcut com   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. Taxcut com Method 1. Taxcut com Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Taxcut com (However, see Savings bonds traded , later. Taxcut com )  Note. Taxcut com Series EE bonds issued in 1983 matured in 2013. Taxcut com If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Taxcut com The last series E bonds were issued in 1980 and matured in 2010. Taxcut com If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Taxcut com Method 2. Taxcut com Choose to report the increase in redemption value as interest each year. Taxcut com You must use the same method for all series EE, series E, and series I bonds you own. Taxcut com If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Taxcut com    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. Taxcut com To learn how, see Education Savings Bond Program, later. Taxcut com Change from method 1. Taxcut com   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. Taxcut com In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Taxcut com   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. Taxcut com Change from method 2. Taxcut com   To change from method 2 to method 1, you must request permission from the IRS. Taxcut com Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Taxcut com You have typed or printed the following number at the top: “131. Taxcut com ” It includes your name and social security number under “131. Taxcut com ” It includes the year of change (both the beginning and ending dates). Taxcut com It identifies the savings bonds for which you are requesting this change. Taxcut com 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. Taxcut com   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Taxcut com   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. Taxcut com On the statement, type or print “Filed pursuant to section 301. Taxcut com 9100-2. Taxcut com ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Taxcut com    By the date you file the original statement with your return, you must also send a signed copy to the address below. Taxcut com   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Taxcut com O. Taxcut com Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Taxcut com   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. Taxcut com In that case, follow the form instructions for an automatic change. Taxcut com No user fee is required. Taxcut com Co-owners. Taxcut com   If a U. Taxcut com S. Taxcut com 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. Taxcut com One co-owner's funds used. Taxcut com    If you used your funds to buy the bond, you must pay the tax on the interest. Taxcut com This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Taxcut com 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. Taxcut com The co-owner who redeemed the bond is a “nominee. Taxcut com ” 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. Taxcut com Both co-owners' funds used. Taxcut com   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. Taxcut com Community property. Taxcut com   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. Taxcut com If you file separate returns, each of you generally must report one-half of the bond interest. Taxcut com For more information about community property, see Publication 555. Taxcut com Table 7-1. Taxcut com   These rules are also shown in Table 7-1. Taxcut com Ownership transferred. Taxcut com   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. Taxcut com But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Taxcut com   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Taxcut com Purchased jointly. Taxcut com   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. Taxcut com 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. Taxcut com This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Taxcut com   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Taxcut com But the new co-owner will report only his or her share of the interest earned after the transfer. Taxcut com   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. Taxcut com    Table 7-1. Taxcut com Who Pays the Tax on U. Taxcut com S. Taxcut com Savings Bond Interest IF . Taxcut com . Taxcut com . Taxcut com THEN the interest must be reported by . Taxcut com . Taxcut com . Taxcut com you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Taxcut com 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. Taxcut com 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. Taxcut com you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Taxcut com If you file separate returns, both you and your spouse generally report one-half of the interest. Taxcut com Example 1. Taxcut com You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Taxcut com The bond was issued to you and your spouse as co-owners. Taxcut com You both postpone reporting interest on the bond. Taxcut com You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Taxcut com At that time neither you nor your spouse has to report the interest earned to the date of reissue. Taxcut com Example 2. Taxcut com You bought a $1,000 series EE savings bond entirely with your own funds. Taxcut com The bond was issued to you and your spouse as co-owners. Taxcut com You both postpone reporting interest on the bond. Taxcut com You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Taxcut com You must report half the interest earned to the date of reissue. Taxcut com Transfer to a trust. Taxcut com   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. Taxcut com 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. Taxcut com 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. Taxcut com   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. Taxcut com See Savings bonds traded , later. Taxcut com Decedents. Taxcut com   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. Taxcut com This is explained in chapter 1 of Publication 550. Taxcut com Savings bonds traded. Taxcut com   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. Taxcut com (You cannot trade series I bonds for series HH bonds. Taxcut com After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Taxcut com ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Taxcut com 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. Taxcut com 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. Taxcut com Example. Taxcut com You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Taxcut com You reported the $223 as taxable income on your tax return. Taxcut com At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Taxcut com You hold the series HH bonds until maturity, when you receive $2,500. Taxcut com You must report $300 as interest income in the year of maturity. Taxcut com This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Taxcut com (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Taxcut com ) Choice to report interest in year of trade. Taxcut com   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. Taxcut com If you made this choice, it is treated as a change from method 1. Taxcut com See Change from method 1 under Series EE and series I bonds, earlier. Taxcut com Form 1099-INT for U. Taxcut com S. Taxcut com savings bonds interest. Taxcut com   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. Taxcut com 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. Taxcut com However, your Form 1099-INT may show more interest than you have to include on your income tax return. Taxcut com For example, this may happen if any of the following are true. Taxcut com You chose to report the increase in the redemption value of the bond each year. Taxcut com The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Taxcut com You received the bond from a decedent. Taxcut com 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. Taxcut com Ownership of the bond was transferred. Taxcut com The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Taxcut com You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Taxcut com The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Taxcut com (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Taxcut com ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Taxcut com 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. Taxcut com (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Taxcut com , for the year of distribution. Taxcut com )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Taxcut com Publication 550 includes examples showing how to report these amounts. Taxcut com    Interest on U. Taxcut com S. Taxcut com savings bonds is exempt from state and local taxes. Taxcut com The Form 1099-INT you receive will indicate the amount that is for U. Taxcut com S. Taxcut com savings bond interest in box 3. Taxcut com 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. Taxcut com S. Taxcut com savings bonds during the year if you pay qualified higher educational expenses during the same year. Taxcut com This exclusion is known as the Education Savings Bond Program. Taxcut com You do not qualify for this exclusion if your filing status is married filing separately. Taxcut com Form 8815. Taxcut com   Use Form 8815 to figure your exclusion. Taxcut com Attach the form to your Form 1040 or Form 1040A. Taxcut com Qualified U. Taxcut com S. Taxcut com savings bonds. Taxcut com   A qualified U. Taxcut com S. Taxcut com savings bond is a series EE bond issued after 1989 or a series I bond. Taxcut com The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Taxcut com You must be at least 24 years old before the bond's issue date. Taxcut com 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. Taxcut com    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. Taxcut com Beneficiary. Taxcut com   You can designate any individual (including a child) as a beneficiary of the bond. Taxcut com Verification by IRS. Taxcut com   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Taxcut com Qualified expenses. Taxcut com   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. Taxcut com   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Taxcut com   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. Taxcut com Eligible educational institutions. Taxcut com   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. Taxcut com S. Taxcut com Department of Education. Taxcut com Reduction for certain benefits. Taxcut com   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Taxcut com Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Taxcut com Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Taxcut com Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Taxcut com 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. Taxcut com Any expense used in figuring the American Opportunity and lifetime learning credits. Taxcut com Amount excludable. Taxcut com   If the total proceeds (interest and principal) from the qualified U. Taxcut com S. Taxcut com 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. Taxcut com If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Taxcut com   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Taxcut com The numerator of the fraction is the qualified higher educational expenses you paid during the year. Taxcut com The denominator of the fraction is the total proceeds you received during the year. Taxcut com Example. Taxcut com In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Taxcut com S. Taxcut com savings bond they bought in April 1997. Taxcut com They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Taxcut com In 2013, they paid $4,000 of their daughter's college tuition. Taxcut com They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Taxcut com They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Taxcut com They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Taxcut com Modified adjusted gross income limit. Taxcut com   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. Taxcut com 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. Taxcut com   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. Taxcut com   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Taxcut com 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. Taxcut com   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. Taxcut com Recordkeeping. Taxcut com If you claim the interest exclusion, you must keep a written record of the qualified U. Taxcut com S. Taxcut com savings bonds you redeem. Taxcut com Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Taxcut com You can use Form 8818 to record this information. Taxcut com You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Taxcut com U. Taxcut com S. Taxcut com Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Taxcut com S. Taxcut com Government. Taxcut com Taxation of interest. Taxcut com   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Taxcut com You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Taxcut com   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Taxcut com Treasury bills. Taxcut com   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Taxcut com They are generally issued at a discount in the amount of $100 and multiples of $100. Taxcut com The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Taxcut com Generally, you report this interest income when the bill is paid at maturity. Taxcut com 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. Taxcut com Treasury notes and bonds. Taxcut com   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Taxcut com Maturity periods for Treasury bonds are longer than 10 years. Taxcut com Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Taxcut com Generally, you report this interest for the year paid. Taxcut com For more information, see U. Taxcut com S. Taxcut com Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Taxcut com For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Taxcut com O. Taxcut com Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Taxcut com treasurydirect. Taxcut com gov/indiv/indiv. Taxcut com htm. Taxcut com For information on series EE, series I, and series HH savings bonds, see U. Taxcut com S. Taxcut com Savings Bonds , earlier. Taxcut com Treasury inflation-protected securities (TIPS). Taxcut com   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Taxcut com For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Taxcut com 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. Taxcut com You must report that part of the sales price as interest income for the year of sale. Taxcut com If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Taxcut com 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. Taxcut com See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Taxcut com Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Taxcut com But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Taxcut com For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Taxcut com Annuity. Taxcut com   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. Taxcut com See chapter 10 for information on pension and annuity income from nonqualified plans. Taxcut com 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. Taxcut com 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. Taxcut com 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. Taxcut com 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. Taxcut com Information reporting requirement. Taxcut com   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Taxcut com This is an information reporting requirement only. Taxcut com It does not change tax-exempt interest to taxable interest. Taxcut com Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Taxcut com 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. Taxcut com A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Taxcut com OID is the difference between the stated redemption price at maturity and the issue price. Taxcut com All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Taxcut com Zero coupon bonds are one example of these instruments. Taxcut com 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). Taxcut com See Discount on Short-Term Obligations in chapter 1 of Publication 550. Taxcut com De minimis OID. Taxcut com   You can treat the discount as zero if it is less than one-fourth of 1% (. Taxcut com 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Taxcut com This small discount is known as “de minimis” OID. Taxcut com Example 1. Taxcut com You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Taxcut com 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. Taxcut com Because the $20 discount is less than $25, the OID is treated as zero. Taxcut com (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Taxcut com ) Example 2. Taxcut com The facts are the same as in Example 1, except that the bond was issued at $950. Taxcut com The OID is $50. Taxcut com 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. Taxcut com Debt instrument bought after original issue. Taxcut com   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Taxcut com If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Taxcut com See Market Discount Bonds in chapter 1 of Publication 550. Taxcut com Exceptions to reporting OID. Taxcut com   The OID rules discussed in this chapter do not apply to the following debt instruments. Taxcut com Tax-exempt obligations. Taxcut com (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Taxcut com U. Taxcut com S. Taxcut com savings bonds. Taxcut com Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Taxcut com Obligations issued by an individual before March 2, 1984. Taxcut com Loans between individuals if all the following are true. Taxcut com The lender is not in the business of lending money. Taxcut com The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Taxcut com Avoiding any federal tax is not one of the principal purposes of the loan. Taxcut com Form 1099-OID. Taxcut com   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. Taxcut com Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Taxcut com It also will show, in box 2, the stated interest you must include in your income. Taxcut com A copy of Form 1099-OID will be sent to the IRS. Taxcut com Do not file your copy with your return. Taxcut com Keep it for your records. Taxcut com   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Taxcut com But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Taxcut com Form 1099-OID not received. Taxcut com   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Taxcut com gov that list total OID on certain debt instruments and have information that will help you figure OID. Taxcut com For the latest OID tables, go to www. Taxcut com irs. Taxcut com gov and enter “OID tables” in the Search box. Taxcut com If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Taxcut com Nominee. Taxcut com   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. Taxcut com Refiguring OID shown on Form 1099-OID. Taxcut com   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Taxcut com You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Taxcut com The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Taxcut com 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. Taxcut com Refiguring periodic interest shown on Form 1099-OID. Taxcut com   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. Taxcut com Certificates of deposit (CDs). Taxcut com   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. Taxcut com   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Taxcut com , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Taxcut com Bearer CDs. Taxcut com   CDs issued after 1982 generally must be in registered form. Taxcut com Bearer CDs are CDs not in registered form. Taxcut com They are not issued in the depositor's name and are transferable from one individual to another. Taxcut com   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Taxcut com More information. Taxcut com   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Taxcut com 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. Taxcut com Cash method. Taxcut com   Most individual taxpayers use the cash method. Taxcut com If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Taxcut com However, there are special rules for reporting the discount on certain debt instruments. Taxcut com See U. Taxcut com S. Taxcut com Savings Bonds and Original Issue Discount (OID) , earlier. Taxcut com Example. Taxcut com On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Taxcut com You are not in the business of lending money. Taxcut com The note stated that principal and interest would be due on August 31, 2013. Taxcut com In 2013, you received $2,508. Taxcut com 80 ($2,000 principal and $508. Taxcut com 80 interest). Taxcut com If you use the cash method, you must include in income on your 2013 return the $508. Taxcut com 80 interest you received in that year. Taxcut com Constructive receipt. Taxcut com   You constructively receive income when it is credited to your account or made available to you. Taxcut com You do not need to have physical possession of it. Taxcut com 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. Taxcut com This is true even if they are not yet entered in your passbook. Taxcut com   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. Taxcut com Accrual method. Taxcut com   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Taxcut com Interest is earned over the term of the debt instrument. Taxcut com Example. Taxcut com If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Taxcut com You would report the interest as follows: 2011, $80; 2012, $249. Taxcut com 60; and 2013, $179. Taxcut com 20. Taxcut com Coupon bonds. Taxcut com   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Taxcut com It does not matter when you mail the coupon for payment. Taxcut com 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. Taxcut com You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Taxcut com Instead, you must use Form 1040A or Form 1040. Taxcut com Form 1040A. Taxcut com   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Taxcut com Your taxable interest income is more than $1,500. Taxcut com You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Taxcut com You received interest from a seller-financed mortgage, and the buyer used the property as a home. Taxcut com You received a Form 1099-INT for U. Taxcut com S. Taxcut com savings bond interest that includes amounts you reported before 2013. Taxcut com You received, as a nominee, interest that actually belongs to someone else. Taxcut com You received a Form 1099-INT for interest on frozen deposits. Taxcut com You are reporting OID in an amount less than the amount shown on Form 1099-OID. Taxcut com You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Taxcut com 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). Taxcut com List each payer's name and the amount of interest income received from each payer on line 1. Taxcut com If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Taxcut com   You cannot use Form 1040A if you must use Form 1040, as described next. Taxcut com Form 1040. Taxcut com   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. Taxcut com Schedule B (Form 1040A or 1040). Taxcut com   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Taxcut com Your taxable interest income is more than $1,500. Taxcut com You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Taxcut com You received interest from a seller-financed mortgage, and the buyer used the property as a home. Taxcut com You received a Form 1099-INT for U. Taxcut com S. Taxcut com savings bond interest that includes amounts you reported before 2013. Taxcut com You received, as a nominee, interest that actually belongs to someone else. Taxcut com You received a Form 1099-INT for interest on frozen deposits. Taxcut com You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Taxcut com You are reporting OID in an amount less than the amount shown on Form 1099-OID. Taxcut com Statement (2) in the preceding list under Form 1040 is true. Taxcut com In Part I, line 1, list each payer's name and the amount received from each. Taxcut com If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Taxcut com Reporting tax-exempt interest. Taxcut com   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. Taxcut com Add these amounts to any other tax-exempt interest you received. Taxcut com Report the total on line 8b of Form 1040A or 1040. Taxcut com   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Taxcut com Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Taxcut com   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. Taxcut com These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Taxcut com 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. Taxcut com    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Taxcut com Form 1099-INT. Taxcut com   Your taxable interest income, except for interest from U. Taxcut com S. Taxcut com savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Taxcut com Add this amount to any other taxable interest income you received. Taxcut com You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Taxcut com Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Taxcut com Your identifying number may be truncated on any paper Form 1099-INT you receive. Taxcut com   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. Taxcut com See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Taxcut com   Box 3 of Form 1099-INT shows the interest income you received from U. Taxcut com S. Taxcut com savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Taxcut com 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. Taxcut com If part of the amount shown in box 3 was previously included in your interest income, see U. Taxcut com S. Taxcut com savings bond interest previously reported , later. Taxcut com   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Taxcut com 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). Taxcut com   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Taxcut com See chapter 28 for more information about investment expenses. Taxcut com   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Taxcut com 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). Taxcut com To take the credit, you may have to file Form 1116, Foreign Tax Credit. Taxcut com For more information, see Publication 514, Foreign Tax Credit for Individuals. Taxcut com U. Taxcut com S. Taxcut com savings bond interest previously reported. Taxcut com   If you received a Form 1099-INT for U. Taxcut com S. Taxcut com savings bond interest, the form may show interest you do not have to report. Taxcut com See Form 1099-INT for U. Taxcut com S. Taxcut com savings bonds interest , earlier, under U. Taxcut com S. Taxcut com Savings Bonds. Taxcut com   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Taxcut com Then follow these steps. Taxcut com Several lines above line 2, enter a subtotal of all interest listed on line 1. Taxcut com Below the subtotal enter “U. Taxcut com S. Taxcut com Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Taxcut com Subtract these amounts from the subtotal and enter the result on line 2. Taxcut com More information. Taxcut com   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Taxcut com Prev  Up  Next   Home   More Online Publications