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Earned Income Tax Credit

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Earned Income Tax Credit

Earned income tax credit 3. Earned income tax credit   Unrelated Trade or Business Table of Contents Selling of products of exempt functions. Earned income tax credit Dual use of assets or facilities. Earned income tax credit Exploitation of exempt functions. Earned income tax credit ExamplesExceptions. Earned income tax credit Excluded Trade or Business ActivitiesQualified sponsorship payment. Earned income tax credit Advertising. Earned income tax credit Exception for contingent payments. Earned income tax credit Exception for periodicals. Earned income tax credit Exception for conventions and trade shows. Earned income tax credit Legal definition. Earned income tax credit Legal where played. Earned income tax credit No for-profit games where played. Earned income tax credit Unrelated business income. Earned income tax credit   Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. Earned income tax credit   Certain trade or business activities are not treated as an unrelated trade or business. Earned income tax credit See Excluded Trade or Business Activities, later. Earned income tax credit Trade or business. Earned income tax credit   The term “trade or business” generally includes any activity conducted for the production of income from selling goods or performing services. Earned income tax credit An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purposes of the organization. Earned income tax credit   For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. Earned income tax credit Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose. Earned income tax credit Regularly conducted. Earned income tax credit   Business activities of an exempt organization ordinarily are considered regularly conducted if they show a frequency and continuity, and are pursued in a manner similar to comparable commercial activities of nonexempt organizations. Earned income tax credit   For example, a hospital auxiliary's operation of a sandwich stand for 2 weeks at a state fair would not be the regular conduct of a trade or business. Earned income tax credit The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. Earned income tax credit However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business. Earned income tax credit Not substantially related. Earned income tax credit    A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose (other than through the production of funds). Earned income tax credit Whether an activity contributes importantly depends in each case on the facts involved. Earned income tax credit   In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they intend to serve. Earned income tax credit For example, to the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. Earned income tax credit The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. Earned income tax credit   Also in determining whether activities contribute importantly to the accomplishment of an exempt purpose, the following principles apply. Earned income tax credit Selling of products of exempt functions. Earned income tax credit   Ordinarily, selling products that result from the performance of exempt functions is not an unrelated trade or business if the product is sold in substantially the same state it is in when the exempt functions are completed. Earned income tax credit Thus, for an exempt organization engaged in rehabilitating handicapped persons (its exempt function), selling articles made by these persons as part of their rehabilitation training is not an unrelated trade or business. Earned income tax credit   However, if a completed product resulting from an exempt function is used or exploited in further business activity beyond what is reasonably appropriate or necessary to dispose of it as is, the activity is an unrelated trade or business. Earned income tax credit For example, if an exempt organization maintains an experimental dairy herd for scientific purposes, the sale of milk and cream produced in the ordinary course of operation of the project is not an unrelated trade or business. Earned income tax credit But if the organization uses the milk and cream in the further manufacture of food items such as ice cream, pastries, etc. Earned income tax credit , the sale of these products is an unrelated trade or business unless the manufacturing activities themselves contribute importantly to the accomplishment of an exempt purpose of the organization. Earned income tax credit Dual use of assets or facilities. Earned income tax credit   If an asset or facility necessary to the conduct of exempt functions is also used in commercial activities, its use for exempt functions does not, by itself, make the commercial activities a related trade or business. Earned income tax credit The test, as discussed earlier, is whether the activities contribute importantly to the accomplishment of exempt purposes. Earned income tax credit   For example, a museum has a theater auditorium designed for showing educational films in connection with its program of public education in the arts and sciences. Earned income tax credit The theater is a principal feature of the museum and operates continuously while the museum is open to the public. Earned income tax credit If the organization also operates the theater as a motion picture theater for the public when the museum is closed, the activity is an unrelated trade or business. Earned income tax credit   For information on allocating expenses for the dual use of assets or facilities, see Deductions in chapter 4. Earned income tax credit Exploitation of exempt functions. Earned income tax credit   Exempt activities sometimes create goodwill or other intangibles that can be exploited in a commercial way. Earned income tax credit When an organization exploits such an intangible in commercial activities, the fact that the income depends in part upon an exempt function of the organization does not make the commercial activities a related trade or business. Earned income tax credit Unless the commercial exploitation contributes importantly to the accomplishment of the exempt purpose, the commercial activities are an unrelated trade or business. Earned income tax credit   For the treatment of expenses attributable to the exploitation of exempt activities, see Deductions in chapter 4. Earned income tax credit Examples The following are examples of activities that were determined to be (or not to be) unrelated trades or businesses using the definitions and principles just discussed. Earned income tax credit Sales commissions. Earned income tax credit   An agricultural organization, whose exempt purposes are to promote better conditions for cattle breeders and to improve the breed generally, engages in an unrelated trade or business when it regularly sells cattle for its members on a commission basis. Earned income tax credit Artists' facilities. Earned income tax credit   An organization whose exempt purpose is to stimulate and foster public interest in the fine arts by promoting art exhibits, sponsoring cultural events, and furnishing information about fine arts leases studio apartments to artist tenants and operates a dining hall primarily for these tenants. Earned income tax credit These two activities do not contribute importantly to accomplishing the organization's exempt purpose. Earned income tax credit Therefore, they are unrelated trades or businesses. Earned income tax credit Membership list sales. Earned income tax credit   An exempt educational organization regularly sells membership mailing lists to business firms. Earned income tax credit This activity does not contribute importantly to the accomplishment of the organization's exempt purpose and therefore is an unrelated trade or business. Earned income tax credit Also see Exchange or rental of member lists under Excluded Trade or Business Activities, later. Earned income tax credit Hospital facilities. Earned income tax credit   An exempt hospital leases its adjacent office building and furnishes certain office services to a hospital-based medical group for a fee. Earned income tax credit The group provides all diagnostic and therapeutic procedures to the hospital's patients and operates the hospital's emergency room on a 24-hour basis. Earned income tax credit The leasing activity is substantially related to the hospital's exempt purpose and is not an unrelated trade or business. Earned income tax credit   The hospital also operates a gift shop patronized by patients, visitors making purchases for patients, and employees; a cafeteria and coffee shop primarily for employees and medical staff; and a parking lot for patients and visitors only. Earned income tax credit These activities are also substantially related to the hospital's exempt purpose and do not constitute unrelated trades or businesses. Earned income tax credit Book publishing. Earned income tax credit   An exempt organization engages primarily in activities that further its exempt purposes. Earned income tax credit It also owns the publication rights to a book that does not relate to any of its exempt purposes. Earned income tax credit The organization exploits the book in a commercial manner by arranging for printing, distribution, publicity, and advertising in connection with the sale of the book. Earned income tax credit These activities constitute a trade or business regularly conducted. Earned income tax credit Because exploiting the book is unrelated to the organization's exempt purposes (except for the use of the book's profits), the income is unrelated business income. Earned income tax credit   However, if the organization transfers publication rights to a commercial publisher in return for royalties, the royalty income received will not be unrelated business income. Earned income tax credit See Royalties under Exclusions in chapter 4. Earned income tax credit School handicraft shop. Earned income tax credit   An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. Earned income tax credit The students are paid a percentage of the sales price. Earned income tax credit In addition, the shop sells products made by local residents who make articles at home according to the shop's specifications. Earned income tax credit The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. Earned income tax credit Although many local participants are former students of the school, any qualified person may participate in the program. Earned income tax credit The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax. Earned income tax credit School facilities. Earned income tax credit   An exempt school has tennis courts and dressing rooms that it uses during the regular school year in its educational program. Earned income tax credit During the summer, the school operates a tennis club open to the general public. Earned income tax credit Employees of the school run the club, including collecting membership fees and scheduling court time. Earned income tax credit   Another exempt school leases the same type of facilities to an unrelated individual who runs a tennis club for the summer. Earned income tax credit The lease is for a fixed fee that does not depend on the income or profits derived from the leased property. Earned income tax credit   In both situations, the exempt purpose is the advancement of education. Earned income tax credit Furnishing tennis facilities in the manner described does not further that exempt purpose. Earned income tax credit These activities are unrelated trades or businesses. Earned income tax credit However, in the second situation the income derived from the leasing of the property is excluded from unrelated business taxable income as rent from real property. Earned income tax credit See Rents under Exclusions in chapter 4. Earned income tax credit Services provided with lease. Earned income tax credit   An exempt university leases its football stadium during several months of the year to a professional football team for a fixed fee. Earned income tax credit Under the lease agreement, the university furnishes heat, light, and water and is responsible for all ground maintenance. Earned income tax credit It also provides dressing room, linen, and stadium security services for the professional team. Earned income tax credit   Leasing of the stadium is an unrelated trade or business. Earned income tax credit In addition, the substantial services furnished for the convenience of the lessee go beyond those usually provided with the rental of space for occupancy only. Earned income tax credit Therefore, the income from this lease is rent from real property and unrelated business taxable income. Earned income tax credit Broadcasting rights. Earned income tax credit   An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. Earned income tax credit Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. Earned income tax credit An athletic program is considered an integral part of the educational process of a university. Earned income tax credit   The educational purposes served by intercollegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. Earned income tax credit Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. Earned income tax credit Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization's exempt purpose and is not an unrelated trade or business. Earned income tax credit   In a similar situation, an exempt organization was created as a national governing body for amateur athletes to foster interest in amateur sports and to encourage widespread public participation. Earned income tax credit The organization receives income each year from the sale of exclusive broadcasting rights to an independent producer, who contracts with a commercial network to broadcast many of the athletic events sponsored, supervised, and regulated by the organization. Earned income tax credit   The broadcasting of these events promotes the various amateur sports, fosters widespread public interest in the benefits of the organization's nationwide amateur program, and encourages public participation. Earned income tax credit The sale of the rights and the broadcasting of the events contribute importantly to the organization's exempt purpose. Earned income tax credit Therefore, the sale of the exclusive broadcasting rights is not an unrelated trade or business. Earned income tax credit Yearbook advertising. Earned income tax credit   An exempt organization receives income from the sale of advertising in its annual yearbook. Earned income tax credit The organization hires an independent commercial firm, under a contract covering a full calendar year, to conduct an intensive advertising solicitation campaign in the organization's name. Earned income tax credit This firm is paid a percentage of the gross advertising receipts for selling the advertising, collecting from advertisers, and printing the yearbook. Earned income tax credit This advertising activity is an unrelated trade or business. Earned income tax credit Pet boarding and grooming services. Earned income tax credit   An exempt organization, organized and operated for the prevention of cruelty to animals, receives unrelated business income from providing pet boarding and grooming services for the general public. Earned income tax credit These activities do not contribute importantly to its purpose of preventing cruelty to animals. Earned income tax credit Museum eating facilities. Earned income tax credit   An exempt art museum operates a dining room, a cafeteria, and a snack bar for use by the museum staff, employees, and visitors. Earned income tax credit Eating facilities in the museum help to attract visitors and allow them to spend more time viewing the museum's exhibits without having to seek outside restaurants at mealtime. Earned income tax credit The eating facilities also allow the museum staff and employees to remain in the museum throughout the day. Earned income tax credit Thus, the museum's operation of the eating facilities contributes importantly to the accomplishment of its exempt purposes and is not unrelated trade or business. Earned income tax credit Halfway house workshop. Earned income tax credit   A halfway house organized to provide room, board, therapy, and counseling for persons discharged from alcoholic treatment centers also operates a furniture shop to provide full-time employment for its residents. Earned income tax credit The profits are applied to the operating costs of the halfway house. Earned income tax credit The income from this venture is not unrelated trade or business income because the furniture shop contributes importantly to the organization's purpose of aiding its residents' transition from treatment to a normal and productive life. Earned income tax credit Travel tour programs. Earned income tax credit   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose for which tax exemption was granted to the organization. Earned income tax credit Example 1. Earned income tax credit A tax-exempt university alumni association provides a travel tour program for its members and their families. Earned income tax credit The organization works with various travel agencies and schedules approximately ten tours a year to various places around the world. Earned income tax credit It mails out promotional material and accepts reservations for fees paid by the travel agencies on a per-person basis. Earned income tax credit The organization provides an employee for each tour as a tour leader. Earned income tax credit There is no formal educational program conducted with these tours, and they do not differ from regular commercially operated tours. Earned income tax credit By providing travel tours to its members, the organization is engaging in a regularly conducted trade or business. Earned income tax credit Even if the tours it offers support the university, financially and otherwise, and encourage alumni to do the same, they do not contribute importantly to the organization's exempt purpose of promoting education. Earned income tax credit Therefore, the sale of the travel tours is an unrelated trade or business. Earned income tax credit Example 2. Earned income tax credit A tax-exempt organization formed for the purpose of educating individuals about the geography and the culture of the United States provides study tours to national parks and other locations within the United States. Earned income tax credit These tours are conducted by teachers and others certified by the state board of education. Earned income tax credit The tours are primarily designed for students enrolled in degree programs at state educational institutions but are open to all who agree to participate in the required study program associated with the tour taken. Earned income tax credit A tour's study program consists of instruction on subjects related to the location being visited on the tour. Earned income tax credit Each tour group brings along a library of material related to the subjects being studied on the tour. Earned income tax credit During the tour, 5 or 6 hours per day are devoted to organized study, preparation of reports, lectures, instruction, and recitation by the students. Earned income tax credit Examinations are given at the end of each tour. Earned income tax credit The state board of education awards academic credit for tour participation. Earned income tax credit Because these tours are substantially related to the organization's exempt purpose, they are not an unrelated trade or business. Earned income tax credit Insurance programs. Earned income tax credit   An organization that acts as a group insurance policyholder for its members and collects a fee for performing administrative services is normally carrying on an unrelated trade or business. Earned income tax credit Exceptions. Earned income tax credit   Organizations whose exempt activities may include the provision of insurance benefits, such as fraternal beneficiary societies, voluntary employees beneficiary associations, and labor organizations, are generally exceptions to this rule. Earned income tax credit Magazine publishing. Earned income tax credit   An association of credit unions with tax-exempt status as a business league publishes a consumer-oriented magazine four times a year and makes it available to member credit unions for purchase. Earned income tax credit   By selling a magazine to its members as a promotional device, the organization furnishes its members with a regular commercial service they can use in their own operations. Earned income tax credit This service does not promote the improvement of business conditions of one or more lines of business, which is the exempt purpose of a business league. Earned income tax credit   Since the activity does not contribute importantly to the organization's exempt function, it is an unrelated trade or business. Earned income tax credit Directory of members. Earned income tax credit   A business league publishes an annual directory that contains a list of all its members, their addresses, and their area of expertise. Earned income tax credit Each member has the same amount of space in the directory, and its format does not emphasize the relative importance or reputation of any member. Earned income tax credit The directory contains no commercial advertisement and is sold only to the organization's members. Earned income tax credit   The directory facilitates communication among the members and encourages the exchange of ideas and expertise. Earned income tax credit Because the directory lists the members in a similar noncommercial format without advertising and is not distributed to the public, its sale does not confer private commercial benefits on the members. Earned income tax credit The sale of the directory does contribute importantly to the organization's exempt purpose and is not an unrelated trade or business. Earned income tax credit This directory differs from the publication discussed next because of its noncommercial characteristics. Earned income tax credit Sales of advertising space. Earned income tax credit   A national association of law enforcement officials publishes a monthly journal that contains articles and other editorial material of professional interest to its members. Earned income tax credit The journal is distributed without charge, mainly to the organization's members. Earned income tax credit   The organization sells advertising space in the journal either for conventional advertising or to merely identify the purchaser without a commercial message. Earned income tax credit Some of the noncommercial advertising identifies the purchaser in a separate space, and some consists of listings of 60 or more purchasers per page. Earned income tax credit A business firm identified in a separate space is further identified in an Index of Advertisers. Earned income tax credit   The organization solicits advertising by personal contacts. Earned income tax credit Advertising from large firms is solicited by contacting their chief executive officer or community relations officer rather than their advertising manager. Earned income tax credit The organization also solicits advertising in form letters appealing for corporate and personal contributions. Earned income tax credit   An exempt organization's sale of advertising placed for the purchaser's commercial benefit is a commercial activity. Earned income tax credit Goodwill derived by the purchaser from being identified as a patron of the organization is usually considered a form of commercial benefit. Earned income tax credit Therefore, advertising in an exempt organization's publication is generally presumed to be placed for the purchaser's commercial benefit, even if it has no commercial message. Earned income tax credit However, this presumption is not conclusive if the purchaser's patronage would be difficult to justify commercially in view of the facts and circumstances. Earned income tax credit In that case, other factors should also be considered in determining whether a commercial benefit can be expected. Earned income tax credit Those other factors include: The normal manner in which the publication is circulated; The territorial scope of the circulation; The extent to which its readers, promoters, or the like could reasonably be expected to further, either directly or indirectly, the commercial interest of the advertisers; The eligibility of the publishing organization to receive tax-deductible contributions; and The commercial or noncommercial methods used to solicit the advertisers. Earned income tax credit   In this situation, the purchaser of a separate advertising space without a commercial message can nevertheless expect a commercial benefit from the goodwill derived from being identified in that manner as a patron of the organization. Earned income tax credit However, the purchaser of a listing cannot expect more than an inconsequential benefit. Earned income tax credit Therefore, the sale of separate spaces, but not the listings, is an unrelated trade or business. Earned income tax credit Publishing legal notices. Earned income tax credit   A bar association publishes a legal journal containing opinions of the county court, articles of professional interest to lawyers, advertisements for products and services used by the legal profession, and legal notices. Earned income tax credit The legal notices are published to satisfy state laws requiring publication of notices in connection with legal proceedings, such as the administration of estates and actions to quiet title to real property. Earned income tax credit The state designated the bar association's journal as the place to publish the required notices. Earned income tax credit   The publication of ordinary commercial advertising does not advance the exempt purposes of the association even when published in a periodical that contains material related to exempt purposes. Earned income tax credit Although the advertising is directed specifically to members of the legal profession, it is still commercial in nature and does not contribute importantly to the exempt purposes of the association. Earned income tax credit Therefore, the advertising income is unrelated trade or business income. Earned income tax credit   On the other hand, the publication of legal notices is distinguishable from ordinary commercial advertising in that its purpose is to inform the general public of significant legal events rather than to stimulate demand for the products or services of an advertiser. Earned income tax credit This promotes the common interests of the legal profession and contributes importantly to the association's exempt purposes. Earned income tax credit Therefore, the publishing of legal notices does not constitute an unrelated trade or business. Earned income tax credit Museum greeting card sales. Earned income tax credit    An art museum that exhibits modern art sells greeting cards that display printed reproductions of selected works from other art collections. Earned income tax credit Each card is imprinted with the name of the artist, the title or subject matter of the work, the date or period of its creation, if known, and the museum's name. Earned income tax credit The cards contain appropriate greetings and are personalized on request. Earned income tax credit   The organization sells the cards in the shop it operates in the museum and sells them at quantity discounts to retail stores. Earned income tax credit It also sells them by mail order through a catalog that is advertised in magazines and other publications throughout the year. Earned income tax credit As a result, a large number of cards are sold at a significant profit. Earned income tax credit   The museum is exempt as an educational organization on the basis of its ownership, maintenance, and exhibition for public viewing of works of art. Earned income tax credit The sale of greeting cards with printed reproductions of artworks contributes importantly to the achievement of the museum's exempt educational purposes by enhancing public awareness, interest, and appreciation of art. Earned income tax credit The cards may encourage more people to visit the museum itself to share in its educational programs. Earned income tax credit The fact that the cards are promoted and sold in a commercial manner at a profit and in competition with commercial greeting card publishers does not alter the fact that the activity is related to the museum's exempt purpose. Earned income tax credit Therefore, these sales activities are not an unrelated trade or business. Earned income tax credit Museum shop. Earned income tax credit   An art museum maintained and operated for the exhibition of American folk art operates a shop in the museum that sells: Reproductions of works in the museum's own collection and reproductions of artistic works from the collections of other art museums (prints suitable for framing, postcards, greeting cards, and slides); Metal, wood, and ceramic copies of American folk art objects from its own collection and similar copies of art objects from other collections of artworks; Instructional literature and scientific books and souvenir items concerning the history and development of art and, in particular, of American folk art; and Scientific books and souvenir items of the city in which the museum is located. Earned income tax credit   The shop also rents originals or reproductions of paintings contained in its collection. Earned income tax credit All of its reproductions are imprinted with the name of the artist, the title or subject matter of the work from which it is reproduced, and the museum's name. Earned income tax credit   Each line of merchandise must be considered separately to determine if sales are related to the exempt purpose. Earned income tax credit   The sale and rental of reproductions and copies of works from the museum's own collection and reproductions of artistic works not owned by the museum contribute importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. Earned income tax credit The same is true for the sale of literature relating to art. Earned income tax credit Therefore, these sales activities are not an unrelated trade or business. Earned income tax credit   On the other hand, the sale of scientific books and souvenir items of the city where the museum is located has no causal relationship to art or to artistic endeavor and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes. Earned income tax credit The fact that selling some of these items could, under different circumstances, be held related to the exempt educational purpose of some other exempt educational organization does not change this conclusion. Earned income tax credit Additionally, the sale of these items does not lose its identity as a trade or business merely because the museum also sells articles which do contribute importantly to the accomplishment of its exempt function. Earned income tax credit Therefore, these sales are an unrelated trade or business. Earned income tax credit Business league's parking and bus services. Earned income tax credit   A business league, whose purpose is to retain and stimulate trade in a downtown area that has inadequate parking facilities, operates a fringe parking lot and shuttle bus service. Earned income tax credit It also operates, as an insubstantial part of its activities, a park and shop plan. Earned income tax credit   The fringe parking lot and shuttle bus service operate in a manner that does not favor any individual or group of downtown merchants. Earned income tax credit The merchants cannot offer free or discount parking or bus fares to their customers. Earned income tax credit   The park and shop plan allows customers of particular merchants to park free at certain parking lots in the area. Earned income tax credit Merchants participating in this plan buy parking stamps, which they distribute to their customers to use to pay for parking. Earned income tax credit   Operating the fringe parking lot and shuttle bus service provides easy and convenient access to the downtown area and, therefore, stimulates and improves business conditions in the downtown area generally. Earned income tax credit That activity contributes importantly to the organization's accomplishing its exempt purpose and is not an unrelated trade or business. Earned income tax credit   The park and shop plan encourages customers to use a limited number of participating member merchants in order to obtain free parking. Earned income tax credit This provides a particular service to individual members of the organization and does not further its exempt purpose. Earned income tax credit Therefore, operating the park and shop plan is an unrelated trade or business. Earned income tax credit Youth residence. Earned income tax credit   An exempt organization, whose purpose is to provide for the welfare of young people, rents rooms primarily to people under age 25. Earned income tax credit The residence units are operated on, and as a part of, the premises in which the organization carries on the social, recreational, and guidance programs for which it was recognized as exempt. Earned income tax credit The facilities are under the management and supervision of trained career professionals who provide residents with personal counseling, physical education programs, and group recreational activities. Earned income tax credit The rentals are not an unrelated trade or business because renting the rooms is substantially related to the organization's exempt purpose. Earned income tax credit Health club program. Earned income tax credit   An exempt charitable organization's purpose is to provide for the welfare of young people. Earned income tax credit The organization conducts charitable activities and maintains facilities that will contribute to the physical, social, mental, and spiritual health of young people at minimum or no cost to them. Earned income tax credit Nominal annual dues are charged for membership in the organization and use of the facilities. Earned income tax credit   In addition, the organization organized a health club program that its members could join for an annual fee in addition to the annual dues. Earned income tax credit The annual fee is comparable to fees charged by similar local commercial health clubs and is sufficiently high to restrict participation in the program to a limited number of members of the community. Earned income tax credit   The health club program is in addition to the general physical fitness program of the organization. Earned income tax credit Operating this program does not contribute importantly to the organization's accomplishing its exempt purpose and, therefore, is an unrelated trade or business. Earned income tax credit Miniature golf course. Earned income tax credit   An exempt youth welfare organization operates a miniature golf course that is open to the general public. Earned income tax credit The course, which is managed by salaried employees, is substantially similar to commercial courses. Earned income tax credit The admission fees charged are comparable to fees of commercial facilities and are designed to return a profit. Earned income tax credit   The operation of the miniature golf course in a commercial manner does not contribute importantly to the accomplishment of the organization's exempt purpose and, therefore, is an unrelated trade or business. Earned income tax credit Sales of hearing aids. Earned income tax credit   A tax-exempt hospital, whose primary activity is rehabilitation, sells hearing aids to patients. Earned income tax credit This activity is an essential part of the hospital's program to test and evaluate patients with hearing deficiencies and contributes importantly to its exempt purpose. Earned income tax credit It is not an unrelated trade or business. Earned income tax credit Nonpatient laboratory testing. Earned income tax credit   Nonpatient laboratory testing performed by a tax-exempt teaching hospital on specimens needed for the conduct of its teaching activities is not an unrelated trade or business. Earned income tax credit However, laboratory testing performed by a tax-exempt non-teaching hospital on referred specimens from private office patients of staff physicians is an unrelated trade or business if these services are otherwise available in the community. Earned income tax credit Selling endorsements. Earned income tax credit   An exempt scientific organization enjoys an excellent reputation in the field of biological research. Earned income tax credit It exploits this reputation regularly by selling endorsements of laboratory equipment to manufacturers. Earned income tax credit Endorsing laboratory equipment does not contribute importantly to the accomplishment of any purpose for which exemption is granted to the organization. Earned income tax credit Accordingly, the sale of endorsements is an unrelated trade or business. Earned income tax credit Sponsoring entertainment events. Earned income tax credit   An exempt university has a regular faculty and a regularly enrolled student body. Earned income tax credit During the school year, the university sponsors the appearance of professional theater companies and symphony orchestras that present drama and musical performances for the students and faculty members. Earned income tax credit Members of the general public also are admitted. Earned income tax credit The university advertises these performances and supervises advance ticket sales at various places, including such university facilities as the cafeteria and the university bookstore. Earned income tax credit Although the presentation of the performances makes use of an intangible generated by the university's exempt educational functions—the presence of the student body and faculty—such drama and music events contribute importantly to the overall educational and cultural functions of the university. Earned income tax credit Therefore, the activity is not an unrelated trade or business. Earned income tax credit Excluded Trade or Business Activities The following activities are specifically excluded from the definition of unrelated trade or business. Earned income tax credit Volunteer workforce. Earned income tax credit   Any trade or business in which substantially all the work is performed for the organization without compensation is not an unrelated trade or business. Earned income tax credit Example 1. Earned income tax credit A retail store operated by an exempt orphanage where unpaid volunteers perform substantially all the work in carrying on the business is not an unrelated trade or business. Earned income tax credit Example 2. Earned income tax credit A volunteer fire company conducts weekly public dances. Earned income tax credit Holding public dances and charging admission on a regular basis may, given the facts and circumstances of a particular case, be considered an unrelated trade or business. Earned income tax credit However, because the work at the dances is performed by unpaid volunteers, the activity is not an unrelated trade or business. Earned income tax credit Convenience of members. Earned income tax credit   A trade or business conducted by a 501(c)(3) organization or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees is not an unrelated trade or business. Earned income tax credit For example, a laundry operated by a college for the purpose of laundering dormitory linens and students' clothing is not an unrelated trade or business. Earned income tax credit Qualified sponsorship activities. Earned income tax credit   Soliciting and receiving qualified sponsorship payments is not an unrelated trade or business, and the payments are not subject to unrelated business income tax. Earned income tax credit Qualified sponsorship payment. Earned income tax credit   This is any payment made by a person engaged in a trade or business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. Earned income tax credit “Use or acknowledgment” does not include advertising the sponsor's products or services. Earned income tax credit The organization's activities include all its activities, whether or not related to its exempt purposes. Earned income tax credit   For example, if, in return for receiving a sponsorship payment, an organization promises to use the sponsor's name or logo in acknowledging the sponsor's support for an educational or fundraising event, the payment is a qualified sponsorship payment and is not subject to the unrelated business income tax. Earned income tax credit   Providing facilities, services, or other privileges (for example, complimentary tickets, pro-am playing spots in golf tournaments, or receptions for major donors) to a sponsor or the sponsor's designees in connection with a sponsorship payment does not affect whether the payment is a qualified sponsorship payment. Earned income tax credit Instead, providing these goods or services is treated as a separate transaction in determining whether the organization has unrelated business income from the event. Earned income tax credit Generally, if the services or facilities are not a substantial benefit or if providing them is a related business activity, the payments will not be subject to the unrelated business income tax. Earned income tax credit   Similarly, the sponsor's receipt of a license to use an intangible asset (for example, a trademark, logo, or designation) of the organization is treated as separate from the qualified sponsorship transaction in determining whether the organization has unrelated business taxable income. Earned income tax credit   If part of a payment would be a qualified sponsorship payment if paid separately, that part is treated as a separate payment. Earned income tax credit For example, if a sponsorship payment entitles the sponsor to both product advertising and the use or acknowledgment of the sponsor's name or logo by the organization, then the unrelated business income tax does not apply to the part of the payment that is more than the fair market value of the product advertising. Earned income tax credit Advertising. Earned income tax credit   A payment is not a qualified sponsorship payment if, in return, the organization advertises the sponsor's products or services. Earned income tax credit For information on the treatment of payments for advertising, see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Earned income tax credit   Advertising includes: Messages containing qualitative or comparative language, price information, or other indications of savings or value; Endorsements; and Inducements to purchase, sell, or use the products or services. Earned income tax credit   The use of promotional logos or slogans that are an established part of the sponsor's identity is not, by itself, advertising. Earned income tax credit In addition, mere distribution or display of a sponsor's product by the organization to the public at a sponsored event, whether for free or for remuneration, is considered use or acknowledgment of the product rather than advertising. Earned income tax credit Exception for contingent payments. Earned income tax credit   A payment is not a qualified sponsorship payment if its amount is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. Earned income tax credit However, the fact that a sponsorship payment is contingent upon an event actually taking place or being broadcast does not, by itself, affect whether a payment qualifies. Earned income tax credit Exception for periodicals. Earned income tax credit   A payment is not a qualified sponsorship payment if it entitles the payer to the use or acknowledgment of the business name, logo, or product lines in the organization's periodical. Earned income tax credit For this purpose, a periodical is any regularly scheduled and printed material (for example, a monthly journal) published by or on behalf of the organization. Earned income tax credit It does not include material that is related to and primarily distributed in connection with a specific event conducted by the organization (for example, a program or brochure distributed at a sponsored event). Earned income tax credit   The treatment of payments that entitle the payer to the depiction of the payer's name, logo, or products lines in an organization's periodical is determined under the rules that apply to advertising activities. Earned income tax credit See Sales of advertising space under Examples, earlier in this chapter. Earned income tax credit Also see Exploitation of Exempt Activity—Advertising Sales in chapter 4. Earned income tax credit Exception for conventions and trade shows. Earned income tax credit   A payment is not a qualified sponsorship payment if it is made in connection with any qualified convention or trade show activity. Earned income tax credit The exclusion of qualified convention or trade show activities from the definition of unrelated trade or business is explained later under Convention or trade show activity. Earned income tax credit Selling donated merchandise. Earned income tax credit   A trade or business that consists of selling merchandise, substantially all of which the organization received as gifts or contributions, is not an unrelated trade or business. Earned income tax credit For example, a thrift shop operated by a tax-exempt organization that sells donated clothes and books to the general public, with the proceeds going to the exempt organization, is not an unrelated trade or business. Earned income tax credit Employee association sales. Earned income tax credit   The sale of certain items by a local association of employees described in section 501(c)(4), organized before May 17, 1969, is not an unrelated trade or business if the items are sold for the convenience of the association's members at their usual place of employment. Earned income tax credit This exclusion applies only to the sale of work-related clothes and equipment and items normally sold through vending machines, food dispensing facilities, or by snack bars. Earned income tax credit Bingo games. Earned income tax credit   Certain bingo games are not included in the term “unrelated trade or business. Earned income tax credit ” To qualify for this exclusion, the bingo game must meet the following requirements. Earned income tax credit It meets the legal definition of bingo. Earned income tax credit It is legal where it is played. Earned income tax credit It is played in a jurisdiction where bingo games are not regularly conducted by for-profit organizations. Earned income tax credit Legal definition. Earned income tax credit   For a game to meet the legal definition of bingo, wagers must be placed, winners must be determined, and prizes or other property must be distributed in the presence of all persons placing wagers in that game. Earned income tax credit   A wagering game that does not meet the legal definition of bingo does not qualify for the exclusion, regardless of its name. Earned income tax credit For example, “instant bingo,” in which a player buys a pre-packaged bingo card with pull-tabs that the player removes to determine if he or she is a winner, does not qualify. Earned income tax credit Legal where played. Earned income tax credit   This exclusion applies only if bingo is legal under the laws of the jurisdiction where it is conducted. Earned income tax credit The fact that a jurisdiction's law that prohibits bingo is rarely enforced or is widely disregarded does not make the conduct of bingo legal for this purpose. Earned income tax credit No for-profit games where played. Earned income tax credit   This exclusion applies only if for-profit organizations cannot regularly conduct bingo games in any part of the same jurisdiction. Earned income tax credit Jurisdiction is normally the entire state; however, in certain situations, local jurisdiction will control. Earned income tax credit Example. Earned income tax credit Tax-exempt organizations X and Y are organized under the laws of state N, which has a law that permits exempt organizations to conduct bingo games. Earned income tax credit In addition, for-profit organizations are permitted to conduct bingo games in city S, a resort community located in county R. Earned income tax credit Several for-profit organizations conduct nightly games. Earned income tax credit Y conducts weekly bingo games in city S, while X conducts weekly games in county R. Earned income tax credit Since state law confines the for-profit organizations to city S, local jurisdiction controls. Earned income tax credit Y's bingo games conducted in city S are an unrelated trade or business. Earned income tax credit However, X's bingo games conducted in county R outside of city S are not an unrelated trade or business. Earned income tax credit Gambling activities other than bingo. Earned income tax credit   Any game of chance conducted by an exempt organization in North Dakota is not an unrelated trade or business if conducting the game does not violate any state or local law. Earned income tax credit Pole rentals. Earned income tax credit   The term unrelated trade or business does not include qualified pole rentals by a mutual or cooperative telephone or electric company described in section 501(c)(12). Earned income tax credit A qualified pole rental is the rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that the company uses in providing telephone or electric services to its members, and According to the rental, to support one or more wires (in addition to the wires described in 1 ) for use in connection with the transmission by wire of electricity or of telephone or other communications. Earned income tax credit For this purpose, the term rental includes any sale of the right to use the pole (or other structure). Earned income tax credit Distribution of low cost articles. Earned income tax credit   The term unrelated trade or business does not include activities relating to the distribution of low cost articles incidental to soliciting charitable contributions. Earned income tax credit This applies to organizations described in section 501 that are eligible to receive charitable contributions. Earned income tax credit   A distribution is considered incidental to the solicitation of a charitable contribution if: The recipient did not request the distribution, The distribution is made without the express consent of the recipient, and The article is accompanied by a request for a charitable contribution to the organization and a statement that the recipient may keep the low cost article regardless of whether a contribution is made. Earned income tax credit   An article is considered low cost if the cost of an item (or the aggregate costs if more than one item) distributed to a single recipient in a tax year is not more than $5, indexed annually for inflation. Earned income tax credit The maximum cost of a low cost article is $9. Earned income tax credit 70 for 2011. Earned income tax credit The cost of an article is the cost to the organization that distributes the item or on whose behalf it is distributed. Earned income tax credit Exchange or rental of member lists. Earned income tax credit   The exchange or rental of member or donor lists between organizations described in section 501 that are eligible to receive charitable contributions is not included in the term unrelated trade or business. Earned income tax credit Hospital services. Earned income tax credit   The providing of certain services at or below cost by an exempt hospital to other exempt hospitals that have facilities for 100 or fewer inpatients is not an unrelated trade or business. Earned income tax credit This exclusion applies only to services described in section 501(e)(1)(A). Earned income tax credit Public entertainment activity. Earned income tax credit   An unrelated trade or business does not include a qualified public entertainment activity. Earned income tax credit A public entertainment activity is one traditionally conducted at a fair or exposition promoting agriculture and education, including any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment. Earned income tax credit   A qualified public entertainment activity is one conducted by a qualifying organization: In conjunction with an international, national, state, regional, or local fair or exposition; In accordance with state law that permits the activity to be operated or conducted solely by such an organization or by an agency, instrumentality, or political subdivision of the state; or In accordance with state law that permits an organization to be granted a license to conduct an activity for not more than 20 days on paying the state a lower percentage of the revenue from the activity than the state charges nonqualifying organizations that hold similar activities. Earned income tax credit   For these purposes, a qualifying organization is an organization described in section 501(c)(3), 501(c)(4), or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial exempt purposes. Earned income tax credit Its conducting qualified public entertainment activities will not affect determination of its exempt status. Earned income tax credit Convention or trade show activity. Earned income tax credit   An unrelated trade or business does not include qualified convention or trade show activities conducted at a convention, annual meeting, or trade show. Earned income tax credit   A qualified convention or trade show activity is any activity of a kind traditionally conducted by a qualifying organization in conjunction with an international, national, state, regional, or local convention, annual meeting, or show if: One of the purposes of the organization in sponsoring the activity is promoting and stimulating interest in, and demand for, the products and services of that industry or educating the persons in attendance regarding new products and services or new rules and regulations affecting the industry; and The show is designed to achieve its purpose through the character of the exhibits and the extent of the industry products that are displayed. Earned income tax credit   For these purposes, a qualifying organization is one described in section 501(c)(3), 501(c)(4), 501(c)(5), or 501(c)(6). Earned income tax credit The organization must regularly conduct, as one of its substantial exempt purposes, a qualified convention or trade show activity. Earned income tax credit   The rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified convention or trade show is not an unrelated trade or business even if the exhibitors who rent the space are permitted to sell or solicit orders. Earned income tax credit For this purpose, a supplier's exhibit is one in which the exhibitor displays goods or services that are supplied to, rather than by, members of the qualifying organization in the conduct of these members' own trades or businesses. Earned income tax credit    Certain Internet activities conducted by a trade association described in section 501(c)(6) will be considered qualified convention and trade show activity if conducted on a special supplementary section of the association's website in conjunction with a trade show conducted by the association. Earned income tax credit The trade show itself must be a qualified convention and trade show activity. Earned income tax credit The supplementary section of the website must be ancillary to, and serve to augment and enhance, the trade show, as when it makes available the same information available at the trade show and is available only during a time period that coincides with the time period that the trade show is in operation. Earned income tax credit Conversely, Internet activities that are not conducted in conjunction with a qualified convention and trade show activity and that do not augment and enhance the trade show cannot themselves be qualified convention and trade show activity. Earned income tax credit Prev  Up  Next   Home   More Online Publications
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The Department of State advises the President and leads the nation in foreign policy issues. The State Department negotiates treaties and agreements with foreign entities, and represents the United States at the United Nations.

The Earned Income Tax Credit

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