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Eztaxform

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Eztaxform

Eztaxform 1. Eztaxform   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. Eztaxform Custodian account for your child. Eztaxform Penalty for failure to supply SSN. Eztaxform Certification. Eztaxform Underreported interest and dividends. Eztaxform How to stop backup withholding due to underreporting. Eztaxform How to stop backup withholding due to an incorrect identification number. Eztaxform Reporting backup withholding. Eztaxform Nonresident aliens. Eztaxform Penalties. Eztaxform Savings account with parent as trustee. Eztaxform Interest IncomeInterest not reported on Form 1099-INT. Eztaxform Nominees. Eztaxform Incorrect amount. Eztaxform Information reporting requirement. Eztaxform Taxable Interest — General Below-Market Loans U. Eztaxform S. Eztaxform Savings Bonds U. Eztaxform S. Eztaxform Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. Eztaxform How To Report Interest IncomeSchedule B (Form 1040A or 1040). Eztaxform Worksheet for savings bonds distributed from a retirement or profit-sharing plan. Eztaxform File Form 1099-INT with the IRS. Eztaxform Dividends and Other DistributionsDividends not reported on Form 1099-DIV. Eztaxform Nominees. Eztaxform Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. Eztaxform Independent contractor. Eztaxform Investment interest deducted. Eztaxform Exception 1. Eztaxform Exception 2. Eztaxform Undistributed capital gains. Eztaxform File Form 1099-DIV with the IRS. Eztaxform Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. Eztaxform Passive activity losses. Eztaxform Form 8582. Eztaxform Investment ClubsInvestments in name of member. Eztaxform Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . Eztaxform Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. Eztaxform S. Eztaxform Individual Income Tax Return 1040A U. Eztaxform S. Eztaxform Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. Eztaxform S. Eztaxform Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Eztaxform S. Eztaxform Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Eztaxform General Information A few items of general interest are covered here. Eztaxform Recordkeeping. Eztaxform You should keep a list showing sources and investment income amounts you receive during the year. Eztaxform Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. Eztaxform Net investment income tax (NIIT). Eztaxform   Beginning in 2013, you may be subject to the NIIT. Eztaxform The NIIT is a 3. Eztaxform 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Eztaxform    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. Eztaxform Tax on unearned income of certain children. Eztaxform   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Eztaxform This may happen if all of the following are true. Eztaxform The child had more than $2,000 of unearned income. Eztaxform The child is required to file a tax return. Eztaxform The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. Eztaxform At least one of the child's parents was alive at the end of 2013. Eztaxform The child does not file a joint return for 2013. Eztaxform A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. Eztaxform   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. Eztaxform If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Eztaxform    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Eztaxform Use Form 8814 for this purpose. Eztaxform   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. Eztaxform Beneficiary of an estate or trust. Eztaxform   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. Eztaxform You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Eztaxform , from the fiduciary. Eztaxform Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Eztaxform Social security number (SSN). Eztaxform   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. Eztaxform This includes payers of interest and dividends. Eztaxform If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Eztaxform SSN for joint account. Eztaxform   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. Eztaxform (For information on who owns the funds in a joint account, see Joint accounts , later. Eztaxform ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Eztaxform This is because only one name and SSN can be shown on Form 1099. Eztaxform   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Eztaxform 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. Eztaxform Custodian account for your child. Eztaxform   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. Eztaxform For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. Eztaxform Penalty for failure to supply SSN. Eztaxform   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. Eztaxform The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. Eztaxform   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. Eztaxform   If you fail to supply an SSN, you may also be subject to backup withholding. Eztaxform Backup withholding. Eztaxform   Your investment income is generally not subject to regular withholding. Eztaxform However, it may be subject to backup withholding to ensure that income tax is collected on the income. Eztaxform Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Eztaxform   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). Eztaxform Certification. Eztaxform   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. Eztaxform Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. Eztaxform If you fail to make this certification, backup withholding may begin immediately on your new account or investment. Eztaxform Underreported interest and dividends. Eztaxform   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. Eztaxform How to stop backup withholding due to underreporting. Eztaxform   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Eztaxform You must show that at least one of the following situations applies. Eztaxform No underreporting occurred. Eztaxform You have a bona fide dispute with the IRS about whether underreporting occurred. Eztaxform Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. Eztaxform You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. Eztaxform   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. Eztaxform How to stop backup withholding due to an incorrect identification number. Eztaxform   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. Eztaxform Reporting backup withholding. Eztaxform   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. Eztaxform The information return will show any backup withholding as “Federal income tax withheld. Eztaxform ” Nonresident aliens. Eztaxform    Generally, payments made to nonresident aliens are not subject to backup withholding. Eztaxform You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. Eztaxform However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. Eztaxform For information on the 30% rate, see Publication 519, U. Eztaxform S. Eztaxform Tax Guide for Aliens. Eztaxform Penalties. Eztaxform   There are civil and criminal penalties for giving false information to avoid backup withholding. Eztaxform The civil penalty is $500. Eztaxform The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. Eztaxform Where to report investment income. Eztaxform   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. Eztaxform But see the rest of this publication for detailed information about reporting investment income. Eztaxform Joint accounts. Eztaxform   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. Eztaxform Community property states. Eztaxform   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. Eztaxform If you file separate returns, you must each report one-half of any taxable distribution. Eztaxform See Publication 555, Community Property, for more information on community income. Eztaxform   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. Eztaxform Example. Eztaxform You and your spouse have a joint money market account. Eztaxform Under state law, half the income from the account belongs to you, and half belongs to your spouse. Eztaxform If you file separate returns, you each report half the income. Eztaxform Income from property given to a child. Eztaxform   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. Eztaxform   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. Eztaxform Savings account with parent as trustee. Eztaxform   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. Eztaxform The savings account legally belongs to the child. Eztaxform The parents are not legally permitted to use any of the funds to support the child. Eztaxform Table 1-1. Eztaxform Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. Eztaxform ) Type of Income If you file Form 1040, report on . Eztaxform . Eztaxform . Eztaxform If you can file Form 1040A, report on . Eztaxform . Eztaxform . Eztaxform If you can file Form 1040EZ, report on . Eztaxform . Eztaxform . Eztaxform Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. Eztaxform ) Line 8a (You may need to file Schedule B as well. Eztaxform ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. Eztaxform ) Line 9a (You may need to file Schedule B as well. Eztaxform )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. Eztaxform Use Part II if you held the shares more than 1 year. Eztaxform Use Part I if you held your mutual fund shares 1 year or less. Eztaxform For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. Eztaxform Accuracy-related penalty. Eztaxform   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. Eztaxform For information on the penalty and any interest that applies, see Penalties in chapter 2. Eztaxform Interest Income This section discusses the tax treatment of different types of interest income. Eztaxform In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. Eztaxform (It does not have to be entered in your passbook. Eztaxform ) Exceptions to this rule are discussed later. Eztaxform Form 1099-INT. Eztaxform   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. Eztaxform This form shows you the interest you received during the year. Eztaxform Keep this form for your records. Eztaxform You do not have to attach it to your tax return. Eztaxform   Report on your tax return the total interest income you receive for the tax year. Eztaxform Interest not reported on Form 1099-INT. Eztaxform   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Eztaxform For example, you may receive distributive shares of interest from partnerships or S corporations. Eztaxform This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Eztaxform , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Eztaxform Nominees. Eztaxform   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. Eztaxform   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. Eztaxform Incorrect amount. Eztaxform   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. Eztaxform The new Form 1099-INT you receive will be marked “Corrected. Eztaxform ” Form 1099-OID. Eztaxform   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Eztaxform For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Eztaxform Exempt-interest dividends. Eztaxform   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. Eztaxform (However, see Information reporting requirement , next. Eztaxform ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Eztaxform You do not reduce your basis for distributions that are exempt-interest dividends. Eztaxform Information reporting requirement. Eztaxform   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Eztaxform This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Eztaxform See How To Report Interest Income , later. Eztaxform Note. Eztaxform Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Eztaxform The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. Eztaxform See Form 6251 and its instructions for more information about this tax. Eztaxform Private activity bonds are discussed later under State or Local Government Obligations. Eztaxform Interest on VA dividends. Eztaxform   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Eztaxform This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. Eztaxform Individual retirement arrangements (IRAs). Eztaxform   Interest on a Roth IRA generally is not taxable. Eztaxform Interest on a traditional IRA is tax deferred. Eztaxform You generally do not include it in your income until you make withdrawals from the IRA. Eztaxform See Publication 590 for more information. Eztaxform Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Eztaxform The following are some sources of taxable interest. Eztaxform Dividends that are actually interest. Eztaxform   Certain distributions commonly called dividends are actually interest. Eztaxform 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. Eztaxform  The “dividends” will be shown as interest income on Form 1099-INT. Eztaxform Money market funds. Eztaxform   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. Eztaxform Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Eztaxform Certificates of deposit and other deferred interest accounts. Eztaxform   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. Eztaxform 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. Eztaxform The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Eztaxform If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Eztaxform Interest subject to penalty for early withdrawal. Eztaxform   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Eztaxform You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Eztaxform See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. Eztaxform Money borrowed to invest in certificate of deposit. Eztaxform   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. Eztaxform You must report the total interest you earn on the certificate in your income. Eztaxform If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Eztaxform See Interest Expenses in chapter 3. Eztaxform Example. Eztaxform 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. Eztaxform 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. Eztaxform The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Eztaxform The bank also gives you a statement showing that you paid $310 interest for 2013. Eztaxform You must include the $575 in your income. Eztaxform If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. Eztaxform Gift for opening account. Eztaxform   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. Eztaxform   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Eztaxform For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Eztaxform The value is determined by the cost to the financial institution. Eztaxform Example. Eztaxform You open a savings account at your local bank and deposit $800. Eztaxform The account earns $20 interest. Eztaxform You also receive a $15 calculator. Eztaxform 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. Eztaxform You must report $35 interest income on your tax return. Eztaxform Interest on insurance dividends. Eztaxform   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. Eztaxform 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. Eztaxform Prepaid insurance premiums. Eztaxform   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. Eztaxform U. Eztaxform S. Eztaxform obligations. Eztaxform   Interest on U. Eztaxform S. Eztaxform obligations, such as U. Eztaxform S. Eztaxform Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Eztaxform Interest on tax refunds. Eztaxform   Interest you receive on tax refunds is taxable income. Eztaxform Interest on condemnation award. Eztaxform   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Eztaxform Installment sale payments. Eztaxform   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. Eztaxform That interest is taxable when you receive it. Eztaxform If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Eztaxform See Unstated Interest and Original Issue Discount (OID) in Publication 537. Eztaxform Interest on annuity contract. Eztaxform   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Eztaxform Usurious interest. Eztaxform   Usurious interest is interest charged at an illegal rate. Eztaxform This is taxable as interest unless state law automatically changes it to a payment on the principal. Eztaxform Interest income on frozen deposits. Eztaxform   Exclude from your gross income interest on frozen deposits. Eztaxform A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Eztaxform   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). Eztaxform If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. Eztaxform   The interest you exclude is treated as credited to your account in the following year. Eztaxform You must include it in income in the year you can withdraw it. Eztaxform Example. Eztaxform $100 of interest was credited on your frozen deposit during the year. Eztaxform You withdrew $80 but could not withdraw any more as of the end of the year. Eztaxform You must include $80 in your income and exclude $20 from your income for the year. Eztaxform You must include the $20 in your income for the year you can withdraw it. Eztaxform Bonds traded flat. Eztaxform    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. Eztaxform The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Eztaxform When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Eztaxform Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. Eztaxform See Bonds Sold Between Interest Dates , later in this chapter. Eztaxform Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. Eztaxform The below-market loan rules and exceptions are described in this section. Eztaxform For more information, see section 7872 of the Internal Revenue Code and its regulations. Eztaxform If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. Eztaxform Loans subject to the rules. Eztaxform   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. Eztaxform A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. Eztaxform A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. Eztaxform Forgone interest. Eztaxform   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Eztaxform Applicable federal rate. Eztaxform   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Eztaxform Some IRS offices have these bulletins available for research. Eztaxform See chapter 5, How To Get Tax Help , for other ways to get this information. Eztaxform Rules for below-market loans. Eztaxform   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. Eztaxform Gift and demand loans. Eztaxform   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. Eztaxform   A demand loan is a loan payable in full at any time upon demand by the lender. Eztaxform A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. Eztaxform   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. Eztaxform The borrower is generally treated as transferring the additional payment back to the lender as interest. Eztaxform The lender must report that amount as interest income. Eztaxform   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. Eztaxform The borrower may have to report this payment as taxable income, depending on its classification. Eztaxform These transfers are considered to occur annually, generally on December 31. Eztaxform Term loans. Eztaxform   A term loan is any loan that is not a demand loan. Eztaxform A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. Eztaxform   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. Eztaxform ) on the date the loan is made. Eztaxform The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. Eztaxform An equal amount is treated as original issue discount (OID). Eztaxform The lender must report the annual part of the OID as interest income. Eztaxform The borrower may be able to deduct the OID as interest expense. Eztaxform See Original Issue Discount (OID) , later. Eztaxform Exceptions to the below-market loan rules. Eztaxform   Exceptions to the below-market loan rules are discussed here. Eztaxform Exception for loans of $10,000 or less. Eztaxform   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. Eztaxform This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. Eztaxform This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. Eztaxform Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. Eztaxform Exception for loans to continuing care facilities. Eztaxform   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. Eztaxform For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). Eztaxform Exception for loans without significant tax effect. Eztaxform   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. Eztaxform These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. Eztaxform S. Eztaxform trade or business and would not be exempt from U. Eztaxform S. Eztaxform tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. Eztaxform For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. Eztaxform Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. Eztaxform If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. Eztaxform Limit on forgone interest for gift loans of $100,000 or less. Eztaxform   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. Eztaxform If the borrower's net investment income is $1,000 or less, it is treated as zero. Eztaxform This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. Eztaxform Effective dates. Eztaxform    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. Eztaxform U. Eztaxform S. Eztaxform Savings Bonds This section provides tax information on U. Eztaxform S. Eztaxform savings bonds. Eztaxform It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Eztaxform U. Eztaxform S. Eztaxform savings bonds currently offered to individuals include Series EE bonds and Series I bonds. Eztaxform For other information on U. Eztaxform S. Eztaxform savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. Eztaxform O. Eztaxform Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. Eztaxform O. Eztaxform Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. Eztaxform O. Eztaxform Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Eztaxform treasurydirect. Eztaxform gov/indiv/indiv. Eztaxform htm. Eztaxform Accrual method taxpayers. Eztaxform   If you use an accrual method of accounting, you must report interest on U. Eztaxform S. Eztaxform savings bonds each year as it accrues. Eztaxform You cannot postpone reporting interest until you receive it or until the bonds mature. Eztaxform Cash method taxpayers. Eztaxform   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Eztaxform S. Eztaxform savings bonds when you receive it. Eztaxform But see Reporting options for cash method taxpayers , later. Eztaxform Series HH bonds. Eztaxform   These bonds were issued at face value. Eztaxform Interest is paid twice a year by direct deposit to your bank account. Eztaxform If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Eztaxform   Series HH bonds were first offered in 1980 and last offered in August 2004. Eztaxform Before 1980, series H bonds were issued. Eztaxform Series H bonds are treated the same as series HH bonds. Eztaxform If you are a cash method taxpayer, you must report the interest when you receive it. Eztaxform   Series H bonds have a maturity period of 30 years. Eztaxform Series HH bonds mature in 20 years. Eztaxform The last series H bonds matured in 2009. Eztaxform The last series HH bonds will mature in 2024. Eztaxform Series EE and series I bonds. Eztaxform   Interest on these bonds is payable when you redeem the bonds. Eztaxform The difference between the purchase price and the redemption value is taxable interest. Eztaxform Series EE bonds. Eztaxform   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Eztaxform Before July 1980, series E bonds were issued. Eztaxform 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. Eztaxform Paper series EE and series E bonds are issued at a discount. Eztaxform The face value is payable to you at maturity. Eztaxform Electronic series EE bonds are issued at their face value. Eztaxform The face value plus accrued interest is payable to you at maturity. Eztaxform As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Eztaxform    Owners of paper series EE bonds can convert them to electronic bonds. Eztaxform These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Eztaxform Series I bonds. Eztaxform   Series I bonds were first offered in 1998. Eztaxform These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Eztaxform The face value plus all accrued interest is payable to you at maturity. Eztaxform Reporting options for cash method taxpayers. Eztaxform   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. Eztaxform Method 1. Eztaxform Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. Eztaxform (However, see Savings bonds traded , later. Eztaxform )  Note. Eztaxform Series EE bonds issued in 1983 matured in 2013. Eztaxform If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Eztaxform The last series E bonds were issued in 1980 and matured in 2010. Eztaxform If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Eztaxform Method 2. Eztaxform Choose to report the increase in redemption value as interest each year. Eztaxform  You must use the same method for all series EE, series E, and series I bonds you own. Eztaxform If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Eztaxform If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Eztaxform To learn how, see Education Savings Bond Program, later. Eztaxform Change from method 1. Eztaxform   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. Eztaxform In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. Eztaxform   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. Eztaxform Change from method 2. Eztaxform   To change from method 2 to method 1, you must request permission from the IRS. Eztaxform Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Eztaxform You have typed or printed the following number at the top: “131. Eztaxform ” It includes your name and social security number under “131. Eztaxform ” It includes the year of change (both the beginning and ending dates). Eztaxform It identifies the savings bonds for which you are requesting this change. Eztaxform 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. Eztaxform   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Eztaxform   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. Eztaxform On the statement, type or print “Filed pursuant to section 301. Eztaxform 9100-2. Eztaxform ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Eztaxform    By the date you file the original statement with your return, you must also send a signed copy to the address below. Eztaxform    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Eztaxform O. Eztaxform Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Eztaxform 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. Eztaxform In that case, follow the form instructions for an automatic change. Eztaxform No user fee is required. Eztaxform Co-owners. Eztaxform   If a U. Eztaxform S. Eztaxform 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. Eztaxform One co-owner's funds used. Eztaxform   If you used your funds to buy the bond, you must pay the tax on the interest. Eztaxform This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Eztaxform 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. Eztaxform The co-owner who redeemed the bond is a “nominee. Eztaxform ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. Eztaxform Both co-owners' funds used. Eztaxform   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. Eztaxform Community property. Eztaxform   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. Eztaxform If you file separate returns, each of you generally must report one-half of the bond interest. Eztaxform For more information about community property, see Publication 555. Eztaxform Table 1-2. Eztaxform   These rules are also shown in Table 1-2. Eztaxform Child as only owner. Eztaxform   Interest on U. Eztaxform S. Eztaxform savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. Eztaxform If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. Eztaxform Choice to report interest each year. Eztaxform   The choice to report the accrued interest each year can be made either by your child or by you for your child. Eztaxform This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. Eztaxform Either you or your child should keep a copy of this return. Eztaxform   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. Eztaxform S. Eztaxform savings bond interest under this choice. Eztaxform However, see Tax on unearned income of certain children , earlier, under General Information. Eztaxform Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . Eztaxform Ownership transferred. Eztaxform   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. Eztaxform But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Eztaxform   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Eztaxform Example. Eztaxform You bought series EE bonds entirely with your own funds. Eztaxform You did not choose to report the accrued interest each year. Eztaxform Later, you transfer the bonds to your former spouse under a divorce agreement. Eztaxform You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. Eztaxform Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. Eztaxform Table 1-2. Eztaxform Who Pays the Tax on U. Eztaxform S. Eztaxform Savings Bond Interest IF . Eztaxform . Eztaxform . Eztaxform THEN the interest must be reported by . Eztaxform . Eztaxform . Eztaxform you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Eztaxform 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. Eztaxform 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. Eztaxform you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Eztaxform If you file separate returns, both you and your spouse generally report one-half of the interest. Eztaxform Purchased jointly. Eztaxform   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. Eztaxform 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. Eztaxform This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Eztaxform   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Eztaxform But the new co-owner will report only his or her share of the interest earned after the transfer. Eztaxform   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. Eztaxform Example 1. Eztaxform You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Eztaxform The bond was issued to you and your spouse as co-owners. Eztaxform You both postpone reporting interest on the bond. Eztaxform You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Eztaxform At that time neither you nor your spouse has to report the interest earned to the date of reissue. Eztaxform Example 2. Eztaxform You bought a $1,000 series EE savings bond entirely with your own funds. Eztaxform The bond was issued to you and your spouse as co-owners. Eztaxform You both postponed reporting interest on the bond. Eztaxform You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Eztaxform You must report half the interest earned to the date of reissue. Eztaxform Transfer to a trust. Eztaxform   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. Eztaxform 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. Eztaxform 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. Eztaxform   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. Eztaxform See Savings bonds traded , later. Eztaxform Decedents. Eztaxform   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. Eztaxform Decedent who reported interest each year. Eztaxform   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. Eztaxform The person who acquires the bonds includes in income only interest earned after the date of death. Eztaxform Decedent who postponed reporting interest. Eztaxform   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. Eztaxform The surviving spouse or personal representative (executor, administrator, etc. Eztaxform ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. Eztaxform The person who acquires the bonds then includes in income only interest earned after the date of death. Eztaxform If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. Eztaxform All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. Eztaxform If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. Eztaxform In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. Eztaxform For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. Eztaxform Example 1. Eztaxform Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. Eztaxform He had bought the bond for $500 and had not chosen to report the interest each year. Eztaxform At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. Eztaxform Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. Eztaxform The $200 is income in respect of the decedent. Eztaxform You are a cash method taxpayer and do not choose to report the interest each year as it is earned. Eztaxform If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. Eztaxform For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. Eztaxform Example 2. Eztaxform If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. Eztaxform $300 is the interest earned after your uncle's death. Eztaxform Example 3. Eztaxform If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. Eztaxform Example 4. Eztaxform When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. Eztaxform You were the beneficiary of these bonds. Eztaxform Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. Eztaxform Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. Eztaxform The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. Eztaxform You must report any interest received during the year as income on your return. Eztaxform The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. Eztaxform For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. Eztaxform Savings bonds distributed from a retirement or profit-sharing plan. Eztaxform   If you acquire a U. Eztaxform S. Eztaxform savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). Eztaxform When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. Eztaxform To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. Eztaxform Savings bonds traded. Eztaxform   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. Eztaxform (You cannot trade series I bonds for series HH bonds. Eztaxform After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Eztaxform ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Eztaxform 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. Eztaxform 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. Eztaxform Example. Eztaxform You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Eztaxform You reported the $223 as taxable income on your tax return. Eztaxform At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Eztaxform You hold the series HH bonds until maturity, when you receive $2,500. Eztaxform You must report $300 as interest income in the year of maturity. Eztaxform This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Eztaxform (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Eztaxform ) Choice to report interest in year of trade. Eztaxform   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. Eztaxform If you made this choice, it is treated as a change from method 1. Eztaxform See Change from method 1 under Series EE and series I bonds, earlier. Eztaxform Form 1099-INT for U. Eztaxform S. Eztaxform savings bond interest. Eztaxform   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. Eztaxform 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. Eztaxform However, your Form 1099-INT may show more interest than you have to include on your income tax return. Eztaxform For example, this may happen if any of the following are true. Eztaxform You chose to report the increase in the redemption value of the bond each year. Eztaxform The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Eztaxform You received the bond from a decedent. Eztaxform 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. Eztaxform Ownership of the bond was transferred. Eztaxform The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Eztaxform You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Eztaxform The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Eztaxform (See Co-owners , earlier in this section, for more information about the reporting requirements. Eztaxform ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Eztaxform 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. Eztaxform (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Eztaxform , for the year of distribution. Eztaxform )   For more information on including the correct amount of interest on your return, see U. Eztaxform S. Eztaxform savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. Eztaxform    Interest on U. Eztaxform S. Eztaxform savings bonds is exempt from state and local taxes. Eztaxform The Form 1099-INT you receive will indicate the amount that is for U. Eztaxform S. Eztaxform savings bonds interest in box 3. Eztaxform Do not include this income on your state or local income tax return. Eztaxform 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. Eztaxform S. Eztaxform savings bonds during the year if you pay qualified higher educational expenses during the same year. Eztaxform This exclusion is known as the Education Savings Bond Program. Eztaxform You do not qualify for this exclusion if your filing status is married filing separately. Eztaxform Form 8815. Eztaxform   Use Form 8815 to figure your exclusion. Eztaxform Attach the form to your Form 1040 or Form 1040A. Eztaxform Qualified U. Eztaxform S. Eztaxform savings bonds. Eztaxform   A qualified U. Eztaxform S. Eztaxform savings bond is a series EE bond issued after 1989 or a series I bond. Eztaxform The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Eztaxform You must be at least 24 years old before the bond's issue date. Eztaxform 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. Eztaxform    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. Eztaxform Beneficiary. Eztaxform   You can designate any individual (including a child) as a beneficiary of the bond. Eztaxform Verification by IRS. Eztaxform   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. Eztaxform Qualified expenses. Eztaxform   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. Eztaxform   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Eztaxform For information about these programs, see Publication 970, Tax Benefits for Education. Eztaxform   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. Eztaxform Eligible educational institutions. Eztaxform   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. Eztaxform Reduction for certain benefits. Eztaxform   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Eztaxform Tax-free part of scholarships and fellowships. Eztaxform Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Eztaxform Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Eztaxform Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Eztaxform Any expense used in figuring the American Opportunity and lifetime learning credits. Eztaxform For information about these benefits, see Publication 970. Eztaxform Amount excludable. Eztaxform   If the total proceeds (interest and principal) from the qualified U. Eztaxform S. Eztaxform 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. Eztaxform If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Eztaxform   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Eztaxform The numer
 
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Page Last Reviewed or Updated: 13-Mar-2014

The Eztaxform

Eztaxform Index A Adjusted gross income (AGI) Income limits for, Income Limits Age Age 65, Age 65. Eztaxform Mandatory retirement age, Payments that are not disability income. Eztaxform Assistance (see Tax help) C Citizenship requirement, U. Eztaxform S. Eztaxform Citizen or Resident Alien Credit figured by IRS, Credit Figured for You Credit figured for you, Credit Figured for You D Disability benefits Nontaxable by law, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Disability income, Disability income. Eztaxform Disability, permanent and total disability, Qualified Individual, Permanent and total disability. Eztaxform E Eligibility for credit, Are You Eligible for the Credit? Employer's accident or health plans or pension plans Disability income from, Disability income. Eztaxform Excess adjusted gross income, Step 3. Eztaxform Determine Excess Adjusted Gross Income F Figuring the credit yourself, Figuring the Credit Yourself Determine excess AGI, Step 3. Eztaxform Determine Excess Adjusted Gross Income Determine initial amount, Step 1. Eztaxform Determine Initial Amount Determine the credit, Step 5. Eztaxform Determine Your Credit Determine the total of steps 2 and 3, Step 4. Eztaxform Determine the Total of Steps 2 and 3 Total certain nontaxable pensions and benefits, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Foreign military service Pension, annuity, or disability benefit from, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Foreign Service Pension, annuity, or disability benefit from, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Form RRB-1099 Payments by Railroad Retirement Board, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Form SSA-1099 Social security benefit statement, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Free tax services, Free help with your tax return. Eztaxform H Head of household, Head of household. Eztaxform Help (see Tax help) I Income limits, Income Limits Initial amounts for persons under age 65, Initial amounts for persons under age 65. Eztaxform J Joint returns, Married Persons L Limit on credit, Limit on credit. Eztaxform Lump-sum payments Accrued annual leave, Payments that are not disability income. Eztaxform Death benefits paid to surviving spouse or child, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits M Mandatory retirement age, Payments that are not disability income. Eztaxform Married taxpayers, Married Persons Mentally incompetent persons Sheltered employment for, Sheltered employment. Eztaxform Missing children Photographs of, Reminders N National Oceanic and Atmospheric Administration Pension, annuity, or disability benefit from, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Nonresident aliens, Exceptions. Eztaxform Nontaxable payments, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits O Out of work, Substantial gainful activity. Eztaxform P Pension or annuity payments Nontaxable by law, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Permanent and total disability, Qualified Individual, Permanent and total disability. Eztaxform Physician certification, Permanent and total disability. Eztaxform , Physician's statement. Eztaxform Public Health Service Pension, annuity, or disability benefit from, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Publications (see Tax help) Q Qualified individual, Qualified Individual Age 65 or older, Qualified Individual Under age 65 and retired on permanent and total disability, Qualified Individual, Under Age 65 R Residence requirement, U. Eztaxform S. Eztaxform Citizen or Resident Alien S Schedule R, Credit Figured for You, Figuring the Credit Yourself, , Examples Sheltered employment, Sheltered employment. Eztaxform Social security payments, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Substantial gainful activity, Substantial gainful activity. Eztaxform T Tables and figures Figure A, Qualified individual determination, Substantial gainful activity. Eztaxform Table 1, Income limits, Substantial gainful activity. Eztaxform , Table 1. Eztaxform Income Limits Table 2, Initial amounts, Table 2. Eztaxform Initial Amounts Tax help, How To Get Tax Help TTY/TDD information, How To Get Tax Help U U. Eztaxform S. Eztaxform citizens and resident aliens, U. Eztaxform S. Eztaxform Citizen or Resident Alien V VA Form 21-0172 Certification of permanent and total disability, Veterans. Eztaxform Veterans Certification by VA of permanent and total disability, Veterans. Eztaxform Exclusion of nontaxable pension or annuity payment or disability benefits, Step 2. Eztaxform Total Certain Nontaxable Pensions and Benefits Prev  Up     Home   More Online Publications