Free Taxes For Students
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Free taxes for students Publication 1212  Introductory Material Table of Contents Future Developments Photographs of Missing Children IntroductionOrdering forms and publications. Free taxes for students Tax questions. Free taxes for students Useful Items  You may want to see: Future Developments For the latest information about developments related to Pub. Free taxes for students 1212, such as legislation enacted after it was published, go to www. Free taxes for students irs. Free taxes for students gov/pub1212. Free taxes for students Photographs of Missing Children The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free taxes for students Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free taxes for students You can help bring these children home by looking at the photographs and calling 1800THELOST (18008435678) if you recognize a child. Free taxes for students Introduction This publication has two purposes. Free taxes for students Its primary purpose is to help brokers and other middlemen identify publicly offered original issue discount (OID) debt instruments they may hold as nominees for the true owners, so they can file Forms 1099OID or Forms 1099INT as required. Free taxes for students The other purpose of the publication is to help owners of publicly offered OID debt instruments determine how much OID to report on their income tax returns. Free taxes for students The list of publicly offered OID debt instruments (OID list) is on the IRS website. Free taxes for students The original issue discount tables, Sections IA through IIIF, are only available on the IRS website at www. Free taxes for students irs. Free taxes for students gov/pub1212 by clicking the link under Recent Developments. Free taxes for students The tables are posted to the website in late November or early December of each year. Free taxes for students The information on these lists come from the issuers of the debt instruments and from financial publications and is updated annually. Free taxes for students (However, see Debt Instruments Not on the OID List, later. Free taxes for students ) Brokers and other middlemen can rely on this list to determine, for information reporting purposes, whether a debt instrument was issued at a discount and the OID to be reported on information returns. Free taxes for students However, because the information in the list has generally not been verified by the IRS as correct, the following tax matters are subject to change upon examination by the IRS. Free taxes for students The OID reported by owners of a debt instrument on their income tax returns. Free taxes for students The issuer's classification of an instrument as debt for federal income tax purposes. Free taxes for students Instructions for issuers of OID debt instruments. Free taxes for students In general, issuers of publicly offered OID debt instruments must, within 30 days after the issue date, report information about the instruments to the IRS on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments. Free taxes for students See the form instructions for more information. Free taxes for students Issuers should report errors in and omissions from the list in writing at the following address: IRS OID Publication Project SE:W:CAR:MP:T 1111 Constitution Ave. Free taxes for students NW, IR6526 Washington, D. Free taxes for students C. Free taxes for students 20224 REMIC and CDO information reporting requirements. Free taxes for students Brokers and other middlemen must follow special information reporting requirements for real estate mortgage investment conduits (REMIC) regular, and collateralized debt obligations (CDO) interests. Free taxes for students The rules are explained in Publication 938, Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Free taxes for students Holders of interests in REMICs and CDOs should see chapter 1 of Publication 550 for information on REMICs and CDOs. Free taxes for students Comments and suggestions. Free taxes for students We welcome your comments about this publication and your suggestions for future editions. Free taxes for students You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free taxes for students NW, IR6526 Washington, DC 20224 We respond to many letters by telephone. Free taxes for students Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free taxes for students You can send your comments from www. Free taxes for students irs. Free taxes for students gov/formspubs/. Free taxes for students Click on “More Information” and then on “Comment on Tax Forms and Publications. Free taxes for students ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free taxes for students Ordering forms and publications. Free taxes for students Visit www. Free taxes for students irs. Free taxes for students gov/formspubs/ to download forms and publications, call 1800TAXFORM (18008293676), or write to the address below and receive a response within 10 days after your request is received. Free taxes for students Internal Revenue Service 1201 N. Free taxes for students Mitsubishi Motorway Bloomington, IL 617056613 Tax questions. Free taxes for students If you have a tax question, check the information available on IRS. Free taxes for students gov or call 18008291040. Free taxes for students We cannot answer tax questions sent to any of the preceding addresses. Free taxes for students Useful Items  You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 550 Investment Income and Expenses 938 Real Estate Mortgage Investment Conduits (REMICs) Reporting Information (And Other Collateralized Debt Obligations (CDOs)). Free taxes for students Form (and Instructions) 1096 Annual Summary and Transmittal of U. Free taxes for students S. Free taxes for students Information Returns 1099B Proceeds From Broker and Barter Exchange Transactions 1099INT Interest Income 1099OID Original Issue Discount 8949 Sales and Other Dispositions of Capital Assets Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses W8 Instructions for the Requester of Forms W8BEN, W8ECI, W8EXP, and W8IMY See How To Get Tax Help near the end of this publication for information about getting publications and forms. Free taxes for students Prev Up Next Home More Online Publications
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The Free Taxes For Students
Free taxes for students 7. Free taxes for students Interest Income Table of Contents Reminder Introduction Useful Items  You may want to see: General InformationSSN for joint account. Free taxes for students Custodian account for your child. Free taxes for students Penalty for failure to supply SSN. Free taxes for students Reporting backup withholding. Free taxes for students Savings account with parent as trustee. Free taxes for students Interest not reported on Form 1099INT. Free taxes for students Nominees. Free taxes for students Incorrect amount. Free taxes for students Information reporting requirement. Free taxes for students Taxable InterestInterest subject to penalty for early withdrawal. Free taxes for students Money borrowed to invest in certificate of deposit. Free taxes for students U. Free taxes for students S. Free taxes for students Savings Bonds Education Savings Bond Program U. Free taxes for students S. Free taxes for students 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. Free taxes for students How To Report Interest IncomeSchedule B (Form 1040A or 1040). Free taxes for students Reporting taxexempt interest. Free taxes for students U. Free taxes for students S. Free taxes for students savings bond interest previously reported. Free taxes for students Reminder Foreignsource income. Free taxes for students If you are a U. Free taxes for students S. Free taxes for students 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. Free taxes for students S. Free taxes for students law. Free taxes for students 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. Free taxes for students Introduction This chapter discusses the following topics. Free taxes for students Different types of interest income. Free taxes for students What interest is taxable and what interest is nontaxable. Free taxes for students When to report interest income. Free taxes for students How to report interest income on your tax return. Free taxes for students In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Free taxes for students Exceptions to this rule are discussed later in this chapter. Free taxes for students You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Free taxes for students See Money borrowed to invest in certificate of deposit , later, and chapter 28. Free taxes for students 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. Free taxes for students S. Free taxes for students Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Free taxes for students S. Free taxes for students Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Free taxes for students Recordkeeping. Free taxes for students You should keep a list showing sources and interest amounts received during the year. Free taxes for students Also, keep the forms you receive showing your interest income (Forms 1099INT, for example) as an important part of your records. Free taxes for students Tax on unearned income of certain children. Free taxes for students Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free taxes for students If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Free taxes for students If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free taxes for students Some parents can choose to include the child's interest and dividends on the parent's return. Free taxes for students If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Free taxes for students For more information about the tax on unearned income of children and the parents' election, see chapter 31. Free taxes for students Beneficiary of an estate or trust. Free taxes for students Interest you receive as a beneficiary of an estate or trust is generally taxable income. Free taxes for students You should receive a Schedule K1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free taxes for students , from the fiduciary. Free taxes for students Your copy of Schedule K1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Free taxes for students Social security number (SSN). Free taxes for students 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. Free taxes for students This includes payers of interest. Free taxes for students If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Free taxes for students SSN for joint account. Free taxes for students 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. Free taxes for students (For information on who owns the funds in a joint account, see Joint accounts , later. Free taxes for students ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Free taxes for students This is because only one name and SSN can be shown on Form 1099. Free taxes for students These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Free taxes for students 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. Free taxes for students Custodian account for your child. Free taxes for students 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. Free taxes for students 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. Free taxes for students Penalty for failure to supply SSN. Free taxes for students If you do not give your SSN to the payer of interest, you may have to pay a penalty. Free taxes for students See Failure to supply SSN under Penalties in chapter 1. Free taxes for students Backup withholding also may apply. Free taxes for students Backup withholding. Free taxes for students Your interest income is generally not subject to regular withholding. Free taxes for students However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free taxes for students Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Free taxes for students Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Free taxes for students For more information, see Backup Withholding in chapter 4. Free taxes for students Reporting backup withholding. Free taxes for students If backup withholding is deducted from your interest income, the payer must give you a Form 1099INT for the year indicating the amount withheld. Free taxes for students The Form 1099INT will show any backup withholding as “Federal income tax withheld. Free taxes for students ” Joint accounts. Free taxes for students 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. Free taxes for students Income from property given to a child. Free taxes for students 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. Free taxes for students 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. Free taxes for students Savings account with parent as trustee. Free taxes for students 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. Free taxes for students The savings account legally belongs to the child. Free taxes for students The parents are not legally permitted to use any of the funds to support the child. Free taxes for students Form 1099INT. Free taxes for students Interest income is generally reported to you on Form 1099INT, or a similar statement, by banks, savings and loans, and other payers of interest. Free taxes for students This form shows you the interest you received during the year. Free taxes for students Keep this form for your records. Free taxes for students You do not have to attach it to your tax return. Free taxes for students Report on your tax return the total interest income you receive for the tax year. Free taxes for students Interest not reported on Form 1099INT. Free taxes for students Even if you do not receive Form 1099INT, you must still report all of your interest income. Free taxes for students For example, you may receive distributive shares of interest from partnerships or S corporations. Free taxes for students This interest is reported to you on Schedule K1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Free taxes for students , or Schedule K1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free taxes for students Nominees. Free taxes for students Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099INT showing the interest received on your behalf. Free taxes for students If you receive a Form 1099INT 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. Free taxes for students Incorrect amount. Free taxes for students If you receive a Form 1099INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Free taxes for students The new Form 1099INT you receive will be marked “Corrected. Free taxes for students ” Form 1099OID. Free taxes for students Reportable interest income also may be shown on Form 1099OID, Original Issue Discount. Free taxes for students For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Free taxes for students Exemptinterest dividends. Free taxes for students Exemptinterest 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. Free taxes for students (However, see Information reporting requirement , next. Free taxes for students ) Exemptinterest dividends should be shown in box 10 of Form 1099DIV. Free taxes for students You do not reduce your basis for distributions that are exemptinterest dividends. Free taxes for students Information reporting requirement. Free taxes for students Although exemptinterest dividends are not taxable, you must show them on your tax return if you have to file. Free taxes for students This is an information reporting requirement and does not change the exemptinterest dividends into taxable income. Free taxes for students Note. Free taxes for students Exemptinterest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free taxes for students See Alternative Minimum Tax (AMT) in chapter 30 for more information. Free taxes for students Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Free taxes for students Interest on VA dividends. Free taxes for students Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Free taxes for students This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Free taxes for students Individual retirement arrangements (IRAs). Free taxes for students Interest on a Roth IRA generally is not taxable. Free taxes for students Interest on a traditional IRA is tax deferred. Free taxes for students You generally do not include it in your income until you make withdrawals from the IRA. Free taxes for students See chapter 17. Free taxes for students Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Free taxes for students The following are some sources of taxable interest. Free taxes for students Dividends that are actually interest. Free taxes for students Certain distributions commonly called dividends are actually interest. Free taxes for students You must report as interest socalled “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. Free taxes for students The “dividends” will be shown as interest income on Form 1099INT. Free taxes for students Money market funds. Free taxes for students Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Free taxes for students Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Free taxes for students Certificates of deposit and other deferred interest accounts. Free taxes for students 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. Free taxes for students 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. Free taxes for students The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Free taxes for students If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Free taxes for students Interest subject to penalty for early withdrawal. Free taxes for students If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Free taxes for students You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Free taxes for students 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. Free taxes for students Money borrowed to invest in certificate of deposit. Free taxes for students 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. Free taxes for students You must report the total interest you earn on the certificate in your income. Free taxes for students If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Free taxes for students See Interest Expenses in chapter 3 of Publication 550. Free taxes for students Example. Free taxes for students 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 6month certificate of deposit. Free taxes for students 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. Free taxes for students The bank gives you a Form 1099INT for 2013 showing the $575 interest you earned. Free taxes for students The bank also gives you a statement showing that you paid $310 interest for 2013. Free taxes for students You must include the $575 in your income. Free taxes for students If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Free taxes for students Gift for opening account. Free taxes for students 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. Free taxes for students For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Free taxes for students For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Free taxes for students The value is determined by the cost to the financial institution. Free taxes for students Example. Free taxes for students You open a savings account at your local bank and deposit $800. Free taxes for students The account earns $20 interest. Free taxes for students You also receive a $15 calculator. Free taxes for students If no other interest is credited to your account during the year, the Form 1099INT you receive will show $35 interest for the year. Free taxes for students You must report $35 interest income on your tax return. Free taxes for students Interest on insurance dividends. Free taxes for students 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. Free taxes for students 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. Free taxes for students Prepaid insurance premiums. Free taxes for students 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. Free taxes for students U. Free taxes for students S. Free taxes for students obligations. Free taxes for students Interest on U. Free taxes for students S. Free taxes for students obligations, such as U. Free taxes for students S. Free taxes for students Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Free taxes for students Interest on tax refunds. Free taxes for students Interest you receive on tax refunds is taxable income. Free taxes for students Interest on condemnation award. Free taxes for students If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Free taxes for students Installment sale payments. Free taxes for students 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. Free taxes for students That interest is taxable when you receive it. Free taxes for students If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Free taxes for students See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Free taxes for students Interest on annuity contract. Free taxes for students Accumulated interest on an annuity contract you sell before its maturity date is taxable. Free taxes for students Usurious interest. Free taxes for students Usurious interest is interest charged at an illegal rate. Free taxes for students This is taxable as interest unless state law automatically changes it to a payment on the principal. Free taxes for students Interest income on frozen deposits. Free taxes for students Exclude from your gross income interest on frozen deposits. Free taxes for students 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. Free taxes for students 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). Free taxes for students If you receive a Form 1099INT 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. Free taxes for students The interest you exclude is treated as credited to your account in the following year. Free taxes for students You must include it in income in the year you can withdraw it. Free taxes for students Example. Free taxes for students $100 of interest was credited on your frozen deposit during the year. Free taxes for students You withdrew $80 but could not withdraw any more as of the end of the year. Free taxes for students You must include $80 in your income and exclude $20 from your income for the year. Free taxes for students You must include the $20 in your income for the year you can withdraw it. Free taxes for students Bonds traded flat. Free taxes for students 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. Free taxes for students The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Free taxes for students When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Free taxes for students Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Free taxes for students See Bonds Sold Between Interest Dates , later, for more information. Free taxes for students Belowmarket loans. Free taxes for students In general, a belowmarket loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Free taxes for students See BelowMarket Loans in chapter 1 of Publication 550 for more information. Free taxes for students U. Free taxes for students S. Free taxes for students Savings Bonds This section provides tax information on U. Free taxes for students S. Free taxes for students savings bonds. Free taxes for students It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Free taxes for students For other information on U. Free taxes for students S. Free taxes for students savings bonds, write to: For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Free taxes for students O. Free taxes for students Box 7012 Parkersburg, WV 261067012 For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Free taxes for students O. Free taxes for students Box 7015 Parkersburg, WV 26106–7015 For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Free taxes for students O. Free taxes for students Box 2186 Parkersburg, WV 261062186 Or, on the Internet, visit: www. Free taxes for students treasurydirect. Free taxes for students gov/indiv/indiv. Free taxes for students htm. Free taxes for students Accrual method taxpayers. Free taxes for students If you use an accrual method of accounting, you must report interest on U. Free taxes for students S. Free taxes for students savings bonds each year as it accrues. Free taxes for students You cannot postpone reporting interest until you receive it or until the bonds mature. Free taxes for students Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Free taxes for students Cash method taxpayers. Free taxes for students If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Free taxes for students S. Free taxes for students savings bonds when you receive it. Free taxes for students The cash method of accounting is explained in chapter 1 under Accounting Methods. Free taxes for students But see Reporting options for cash method taxpayers , later. Free taxes for students Series HH bonds. Free taxes for students These bonds were issued at face value. Free taxes for students Interest is paid twice a year by direct deposit to your bank account. Free taxes for students If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Free taxes for students Series HH bonds were first offered in 1980 and last offered in August 2004. Free taxes for students Before 1980, series H bonds were issued. Free taxes for students Series H bonds are treated the same as series HH bonds. Free taxes for students If you are a cash method taxpayer, you must report the interest when you receive it. Free taxes for students Series H bonds have a maturity period of 30 years. Free taxes for students Series HH bonds mature in 20 years. Free taxes for students The last series H bonds matured in 2009. Free taxes for students Series EE and series I bonds. Free taxes for students Interest on these bonds is payable when you redeem the bonds. Free taxes for students The difference between the purchase price and the redemption value is taxable interest. Free taxes for students Series EE bonds. Free taxes for students Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Free taxes for students Before July 1980, series E bonds were issued. Free taxes for students The original 10year 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. Free taxes for students Paper series EE and series E bonds are issued at a discount. Free taxes for students The face value is payable to you at maturity. Free taxes for students Electronic series EE bonds are issued at their face value. Free taxes for students The face value plus accrued interest is payable to you at maturity. Free taxes for students As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Free taxes for students Owners of paper series EE bonds can convert them to electronic bonds. Free taxes for students These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Free taxes for students Series I bonds. Free taxes for students Series I bonds were first offered in 1998. Free taxes for students These are inflationindexed bonds issued at their face amount with a maturity period of 30 years. Free taxes for students The face value plus all accrued interest is payable to you at maturity. Free taxes for students Reporting options for cash method taxpayers. Free taxes for students 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. Free taxes for students Method 1. Free taxes for students Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Free taxes for students (However, see Savings bonds traded , later. Free taxes for students ) Note. Free taxes for students Series EE bonds issued in 1983 matured in 2013. Free taxes for students If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Free taxes for students The last series E bonds were issued in 1980 and matured in 2010. Free taxes for students If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Free taxes for students Method 2. Free taxes for students Choose to report the increase in redemption value as interest each year. Free taxes for students You must use the same method for all series EE, series E, and series I bonds you own. Free taxes for students If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Free taxes for students 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. Free taxes for students To learn how, see Education Savings Bond Program, later. Free taxes for students Change from method 1. Free taxes for students 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. Free taxes for students In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Free taxes for students 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. Free taxes for students Change from method 2. Free taxes for students To change from method 2 to method 1, you must request permission from the IRS. Free taxes for students Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Free taxes for students You have typed or printed the following number at the top: “131. Free taxes for students ” It includes your name and social security number under “131. Free taxes for students ” It includes the year of change (both the beginning and ending dates). Free taxes for students It identifies the savings bonds for which you are requesting this change. Free taxes for students 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. Free taxes for students You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Free taxes for students 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. Free taxes for students On the statement, type or print “Filed pursuant to section 301. Free taxes for students 91002. Free taxes for students ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Free taxes for students By the date you file the original statement with your return, you must also send a signed copy to the address below. Free taxes for students Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Free taxes for students O. Free taxes for students Box 7604 Benjamin Franklin Station Washington, DC 20044 If you use a private delivery service, send the signed copy to the address below. Free taxes for students 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. Free taxes for students In that case, follow the form instructions for an automatic change. Free taxes for students No user fee is required. Free taxes for students Coowners. Free taxes for students If a U. Free taxes for students S. Free taxes for students savings bond is issued in the names of coowners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the coowner who bought the bond. Free taxes for students One coowner's funds used. Free taxes for students If you used your funds to buy the bond, you must pay the tax on the interest. Free taxes for students This is true even if you let the other coowner redeem the bond and keep all the proceeds. Free taxes for students Under these circumstances, the coowner who redeemed the bond will receive a Form 1099INT at the time of redemption and must provide you with another Form 1099INT showing the amount of interest from the bond taxable to you. Free taxes for students The coowner who redeemed the bond is a “nominee. Free taxes for students ” 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. Free taxes for students Both coowners' funds used. Free taxes for students If you and the other coowner 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. Free taxes for students Community property. Free taxes for students If you and your spouse live in a community property state and hold bonds as community property, onehalf of the interest is considered received by each of you. Free taxes for students If you file separate returns, each of you generally must report onehalf of the bond interest. Free taxes for students For more information about community property, see Publication 555. Free taxes for students Table 71. Free taxes for students These rules are also shown in Table 71. Free taxes for students Ownership transferred. Free taxes for students If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your coowner'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. Free taxes for students But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Free taxes for students This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Free taxes for students Purchased jointly. Free taxes for students If you and a coowner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the coowner'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. Free taxes for students The former coowner 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. Free taxes for students This interest, however, as well as all interest earned after the reissue, is income to the former coowner. Free taxes for students This incomereporting rule also applies when the bonds are reissued in the name of your former coowner and a new coowner. Free taxes for students But the new coowner will report only his or her share of the interest earned after the transfer. Free taxes for students If bonds that you and a coowner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your coowner has to report at that time the interest earned before the bonds were reissued. Free taxes for students Table 71. Free taxes for students Who Pays the Tax on U. Free taxes for students S. Free taxes for students Savings Bond Interest IF . Free taxes for students . Free taxes for students . Free taxes for students THEN the interest must be reported by . Free taxes for students . Free taxes for students . Free taxes for students you buy a bond in your name and the name of another person as coowners, using only your own funds you. Free taxes for students 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. Free taxes for students you and another person buy a bond as coowners, each contributing part of the purchase price both you and the other coowner, in proportion to the amount each paid for the bond. Free taxes for students you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Free taxes for students If you file separate returns, both you and your spouse generally report onehalf of the interest. Free taxes for students Example 1. Free taxes for students You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Free taxes for students The bond was issued to you and your spouse as coowners. Free taxes for students You both postpone reporting interest on the bond. Free taxes for students You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free taxes for students At that time neither you nor your spouse has to report the interest earned to the date of reissue. Free taxes for students Example 2. Free taxes for students You bought a $1,000 series EE savings bond entirely with your own funds. Free taxes for students The bond was issued to you and your spouse as coowners. Free taxes for students You both postpone reporting interest on the bond. Free taxes for students You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free taxes for students You must report half the interest earned to the date of reissue. Free taxes for students Transfer to a trust. Free taxes for students 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. Free taxes for students 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. Free taxes for students 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. Free taxes for students 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. Free taxes for students See Savings bonds traded , later. Free taxes for students Decedents. Free taxes for students 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 incomereporting methods previously used by the decedent. Free taxes for students This is explained in chapter 1 of Publication 550. Free taxes for students Savings bonds traded. Free taxes for students 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. Free taxes for students (You cannot trade series I bonds for series HH bonds. Free taxes for students After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Free taxes for students ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Free taxes for students 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. Free taxes for students 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. Free taxes for students Example. Free taxes for students You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Free taxes for students You reported the $223 as taxable income on your tax return. Free taxes for students At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Free taxes for students You hold the series HH bonds until maturity, when you receive $2,500. Free taxes for students You must report $300 as interest income in the year of maturity. Free taxes for students This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Free taxes for students (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Free taxes for students ) Choice to report interest in year of trade. Free taxes for students 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. Free taxes for students If you made this choice, it is treated as a change from method 1. Free taxes for students See Change from method 1 under Series EE and series I bonds, earlier. Free taxes for students Form 1099INT for U. Free taxes for students S. Free taxes for students savings bonds interest. Free taxes for students When you cash a bond, the bank or other payer that redeems it must give you a Form 1099INT if the interest part of the payment you receive is $10 or more. Free taxes for students Box 3 of your Form 1099INT should show the interest as the difference between the amount you received and the amount paid for the bond. Free taxes for students However, your Form 1099INT may show more interest than you have to include on your income tax return. Free taxes for students For example, this may happen if any of the following are true. Free taxes for students You chose to report the increase in the redemption value of the bond each year. Free taxes for students The interest shown on your Form 1099INT will not be reduced by amounts previously included in income. Free taxes for students You received the bond from a decedent. Free taxes for students The interest shown on your Form 1099INT 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. Free taxes for students Ownership of the bond was transferred. Free taxes for students The interest shown on your Form 1099INT will not be reduced by interest that accrued before the transfer. Free taxes for students You were named as a coowner, and the other coowner contributed funds to buy the bond. Free taxes for students The interest shown on your Form 1099INT will not be reduced by the amount you received as nominee for the other coowner. Free taxes for students (See Coowners , earlier in this chapter, for more information about the reporting requirements. Free taxes for students ) You received the bond in a taxable distribution from a retirement or profitsharing plan. Free taxes for students The interest shown on your Form 1099INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Free taxes for students (This amount is generally shown on Form 1099R, Distributions From Pensions, Annuities, Retirement or ProfitSharing Plans, IRAs, Insurance Contracts, etc. Free taxes for students , for the year of distribution. Free taxes for students ) For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Free taxes for students Publication 550 includes examples showing how to report these amounts. Free taxes for students Interest on U. Free taxes for students S. Free taxes for students savings bonds is exempt from state and local taxes. Free taxes for students The Form 1099INT you receive will indicate the amount that is for U. Free taxes for students S. Free taxes for students savings bond interest in box 3. Free taxes for students 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. Free taxes for students S. Free taxes for students savings bonds during the year if you pay qualified higher educational expenses during the same year. Free taxes for students This exclusion is known as the Education Savings Bond Program. Free taxes for students You do not qualify for this exclusion if your filing status is married filing separately. Free taxes for students Form 8815. Free taxes for students Use Form 8815 to figure your exclusion. Free taxes for students Attach the form to your Form 1040 or Form 1040A. Free taxes for students Qualified U. Free taxes for students S. Free taxes for students savings bonds. Free taxes for students A qualified U. Free taxes for students S. Free taxes for students savings bond is a series EE bond issued after 1989 or a series I bond. Free taxes for students The bond must be issued either in your name (sole owner) or in your and your spouse's names (coowners). Free taxes for students You must be at least 24 years old before the bond's issue date. Free taxes for students 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. Free taxes for students 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. Free taxes for students Beneficiary. Free taxes for students You can designate any individual (including a child) as a beneficiary of the bond. Free taxes for students Verification by IRS. Free taxes for students If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Free taxes for students Qualified expenses. Free taxes for students 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. Free taxes for students Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Free taxes for students 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. Free taxes for students Eligible educational institutions. Free taxes for students 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. Free taxes for students S. Free taxes for students Department of Education. Free taxes for students Reduction for certain benefits. Free taxes for students You must reduce your qualified higher educational expenses by all of the following taxfree benefits. Free taxes for students Taxfree part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Free taxes for students Expenses used to figure the taxfree portion of distributions from a Coverdell ESA. Free taxes for students Expenses used to figure the taxfree portion of distributions from a qualified tuition program. Free taxes for students Any taxfree payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employerprovided educational assistance. Free taxes for students Any expense used in figuring the American Opportunity and lifetime learning credits. Free taxes for students Amount excludable. Free taxes for students If the total proceeds (interest and principal) from the qualified U. Free taxes for students S. Free taxes for students 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. Free taxes for students If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Free taxes for students To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Free taxes for students The numerator of the fraction is the qualified higher educational expenses you paid during the year. Free taxes for students The denominator of the fraction is the total proceeds you received during the year. Free taxes for students Example. Free taxes for students In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Free taxes for students S. Free taxes for students savings bond they bought in April 1997. Free taxes for students They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Free taxes for students In 2013, they paid $4,000 of their daughter's college tuition. Free taxes for students They are not claiming an education credit for that amount, and their daughter does not have any taxfree educational assistance. Free taxes for students They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Free taxes for students They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Free taxes for students Modified adjusted gross income limit. Free taxes for students 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. Free taxes for students 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. Free taxes for students 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. Free taxes for students Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Free taxes for students 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. Free taxes for students 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. Free taxes for students Recordkeeping. Free taxes for students If you claim the interest exclusion, you must keep a written record of the qualified U. Free taxes for students S. Free taxes for students savings bonds you redeem. Free taxes for students Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Free taxes for students You can use Form 8818 to record this information. Free taxes for students You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Free taxes for students U. Free taxes for students S. Free taxes for students Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Free taxes for students S. Free taxes for students Government. Free taxes for students Taxation of interest. Free taxes for students Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Free taxes for students You should receive Form 1099INT showing the interest (in box 3) paid to you for the year. Free taxes for students Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Free taxes for students Treasury bills. Free taxes for students These bills generally have a 4week, 13week, 26week, or 52week maturity period. Free taxes for students They are generally issued at a discount in the amount of $100 and multiples of $100. Free taxes for students The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Free taxes for students Generally, you report this interest income when the bill is paid at maturity. Free taxes for students 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. Free taxes for students Treasury notes and bonds. Free taxes for students Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Free taxes for students Maturity periods for Treasury bonds are longer than 10 years. Free taxes for students Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Free taxes for students Generally, you report this interest for the year paid. Free taxes for students For more information, see U. Free taxes for students S. Free taxes for students Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Free taxes for students For other information on Treasury notes or bonds, write to: Bureau of the Public Debt P. Free taxes for students O. Free taxes for students Box 7015 Parkersburg, WV 261067015 Or, on the Internet, visit: www. Free taxes for students treasurydirect. Free taxes for students gov/indiv/indiv. Free taxes for students htm. Free taxes for students For information on series EE, series I, and series HH savings bonds, see U. Free taxes for students S. Free taxes for students Savings Bonds , earlier. Free taxes for students Treasury inflationprotected securities (TIPS). Free taxes for students These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Free taxes for students For the tax treatment of these securities, see InflationIndexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Free taxes for students 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. Free taxes for students You must report that part of the sales price as interest income for the year of sale. Free taxes for students If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Free taxes for students 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. Free taxes for students See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Free taxes for students Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Free taxes for students But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Free taxes for students For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Free taxes for students Annuity. Free taxes for students 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. Free taxes for students See chapter 10 for information on pension and annuity income from nonqualified plans. Free taxes for students 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. Free taxes for students 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. Free taxes for students 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. Free taxes for students 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. Free taxes for students Information reporting requirement. Free taxes for students If you must file a tax return, you are required to show any taxexempt interest you received on your return. Free taxes for students This is an information reporting requirement only. Free taxes for students It does not change taxexempt interest to taxable interest. Free taxes for students Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Free taxes for students 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. Free taxes for students A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Free taxes for students OID is the difference between the stated redemption price at maturity and the issue price. Free taxes for students All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Free taxes for students Zero coupon bonds are one example of these instruments. Free taxes for students The OID accrual rules generally do not apply to shortterm obligations (those with a fixed maturity date of 1 year or less from date of issue). Free taxes for students See Discount on ShortTerm Obligations in chapter 1 of Publication 550. Free taxes for students De minimis OID. Free taxes for students You can treat the discount as zero if it is less than onefourth of 1% (. Free taxes for students 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Free taxes for students This small discount is known as “de minimis” OID. Free taxes for students Example 1. Free taxes for students You bought a 10year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Free taxes for students Onefourth 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. Free taxes for students Because the $20 discount is less than $25, the OID is treated as zero. Free taxes for students (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Free taxes for students ) Example 2. Free taxes for students The facts are the same as in Example 1, except that the bond was issued at $950. Free taxes for students The OID is $50. Free taxes for students 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. Free taxes for students Debt instrument bought after original issue. Free taxes for students If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Free taxes for students If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Free taxes for students See Market Discount Bonds in chapter 1 of Publication 550. Free taxes for students Exceptions to reporting OID. Free taxes for students The OID rules discussed in this chapter do not apply to the following debt instruments. Free taxes for students Taxexempt obligations. Free taxes for students (However, see Stripped taxexempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Free taxes for students U. Free taxes for students S. Free taxes for students savings bonds. Free taxes for students Shortterm debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Free taxes for students Obligations issued by an individual before March 2, 1984. Free taxes for students Loans between individuals if all the following are true. Free taxes for students The lender is not in the business of lending money. Free taxes for students The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Free taxes for students Avoiding any federal tax is not one of the principal purposes of the loan. Free taxes for students Form 1099OID. Free taxes for students The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099OID, or a similar statement, if the total OID for the calendar year is $10 or more. Free taxes for students Form 1099OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Free taxes for students It also will show, in box 2, the stated interest you must include in your income. Free taxes for students A copy of Form 1099OID will be sent to the IRS. Free taxes for students Do not file your copy with your return. Free taxes for students Keep it for your records. Free taxes for students In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099OID as interest income. Free taxes for students But see Refiguring OID shown on Form 1099OID, later in this discussion, for more information. Free taxes for students Form 1099OID not received. Free taxes for students If you had OID for the year but did not receive a Form 1099OID, you can find tables on IRS. Free taxes for students gov that list total OID on certain debt instruments and have information that will help you figure OID. Free taxes for students For the latest OID tables, go to www. Free taxes for students irs. Free taxes for students gov and enter “OID tables” in the Search box. Free taxes for students If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Free taxes for students Nominee. Free taxes for students If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099OID on your behalf, that person must give you a Form 1099OID. Free taxes for students Refiguring OID shown on Form 1099OID. Free taxes for students You must refigure the OID shown in box 1 or box 8 of Form 1099OID if either of the following apply. Free taxes for students You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Free taxes for students The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Free taxes for students For information about figuring the correct amount of OID to include in your income, see Figuring OID on LongTerm Debt Instruments in Publication 1212. Free taxes for students Refiguring periodic interest shown on Form 1099OID. Free taxes for students 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 1099OID for that instrument. Free taxes for students Certificates of deposit (CDs). Free taxes for students 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. Free taxes for students This also applies to similar deposit arrangements with banks, building and loan associations, etc. Free taxes for students , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Free taxes for students Bearer CDs. Free taxes for students CDs issued after 1982 generally must be in registered form. Free taxes for students Bearer CDs are CDs not in registered form. Free taxes for students They are not issued in the depositor's name and are transferable from one individual to another. Free taxes for students Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099INT. Free taxes for students More information. Free taxes for students See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Free taxes for students 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. Free taxes for students Cash method. Free taxes for students Most individual taxpayers use the cash method. Free taxes for students If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Free taxes for students However, there are special rules for reporting the discount on certain debt instruments. Free taxes for students See U. Free taxes for students S. Free taxes for students Savings Bonds and Original Issue Discount (OID) , earlier. Free taxes for students Example. Free taxes for students On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Free taxes for students You are not in the business of lending money. Free taxes for students The note stated that principal and interest would be due on August 31, 2013. Free taxes for students In 2013, you received $2,508. Free taxes for students 80 ($2,000 principal and $508. Free taxes for students 80 interest). Free taxes for students If you use the cash method, you must include in income on your 2013 return the $508. Free taxes for students 80 interest you received in that year. Free taxes for students Constructive receipt. Free taxes for students You constructively receive income when it is credited to your account or made available to you. Free taxes for students You do not need to have physical possession of it. Free taxes for students 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. Free taxes for students This is true even if they are not yet entered in your passbook. Free taxes for students 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. Free taxes for students Accrual method. Free taxes for students If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Free taxes for students Interest is earned over the term of the debt instrument. Free taxes for students Example. Free taxes for students If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Free taxes for students You would report the interest as follows: 2011, $80; 2012, $249. Free taxes for students 60; and 2013, $179. Free taxes for students 20. Free taxes for students Coupon bonds. Free taxes for students Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Free taxes for students It does not matter when you mail the coupon for payment. Free taxes for students 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. Free taxes for students You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Free taxes for students Instead, you must use Form 1040A or Form 1040. Free taxes for students Form 1040A. Free taxes for students You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Free taxes for students Your taxable interest income is more than $1,500. Free taxes for students You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Free taxes for students You received interest from a sellerfinanced mortgage, and the buyer used the property as a home. Free taxes for students You received a Form 1099INT for U. Free taxes for students S. Free taxes for students savings bond interest that includes amounts you reported before 2013. Free taxes for students You received, as a nominee, interest that actually belongs to someone else. Free taxes for students You received a Form 1099INT for interest on frozen deposits. Free taxes for students You are reporting OID in an amount less than the amount shown on Form 1099OID. Free taxes for students You received a Form 1099INT for interest on a bond you bought between interest payment dates. Free taxes for students 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). Free taxes for students List each payer's name and the amount of interest income received from each payer on line 1. Free taxes for students If you received a Form 1099INT or Form 1099OID from a brokerage firm, list the brokerage firm as the payer. Free taxes for students You cannot use Form 1040A if you must use Form 1040, as described next. Free taxes for students Form 1040. Free taxes for students 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 taxexempt interest from private activity bonds issued after August 7, 1986. Free taxes for students Schedule B (Form 1040A or 1040). Free taxes for students You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Free taxes for students Your taxable interest income is more than $1,500. Free taxes for students You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Free taxes for students You received interest from a sellerfinanced mortgage, and the buyer used the property as a home. Free taxes for students You received a Form 1099INT for U. Free taxes for students S. Free taxes for students savings bond interest that includes amounts you reported before 2013. Free taxes for students You received, as a nominee, interest that actually belongs to someone else. Free taxes for students You received a Form 1099INT for interest on frozen deposits. Free taxes for students You received a Form 1099INT for interest on a bond you bought between interest payment dates. Free taxes for students You are reporting OID in an amount less than the amount shown on Form 1099OID. Free taxes for students Statement (2) in the preceding list under Form 1040 is true. Free taxes for students In Part I, line 1, list each payer's name and the amount received from each. Free taxes for students If you received a Form 1099INT or Form 1099OID from a brokerage firm, list the brokerage firm as the payer. Free taxes for students Reporting taxexempt interest. Free taxes for students Total your taxexempt interest (such as interest or accrued OID on certain state and municipal bonds, including taxexempt interest on zero coupon municipal bonds) and exemptinterest dividends from a mutual fund as shown on Form 1099INT, box 8, and on Form 1099DIV, box 10. Free taxes for students Add these amounts to any other taxexempt interest you received. Free taxes for students Report the total on line 8b of Form 1040A or 1040. Free taxes for students If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Free taxes for students Do not add taxexempt interest in the total on Form 1040EZ, line 2. Free taxes for students Form 1099INT, box 9, and Form 1099DIV, box 11, show the taxexempt interest subject to the alternative minimum tax on Form 6251. Free taxes for students These amounts are already included in the amounts on Form 1099INT, box 8, and Form 1099DIV, box 10. Free taxes for students Do not add the amounts in Form 1099INT, box 9 and Form 1099DIV, box 11 to, or subtract them from, the amounts on Form 1099INT, box 8, and Form 1099DIV, box 10. Free taxes for students Do not report interest from an individual retirement account (IRA) as taxexempt interest. Free taxes for students Form 1099INT. Free taxes for students Your taxable interest income, except for interest from U. Free taxes for students S. Free taxes for students savings bonds and Treasury obligations, is shown in box 1 of Form 1099INT. Free taxes for students Add this amount to any other taxable interest income you received. Free taxes for students You must report all of your taxable interest income even if you do not receive a Form 1099INT. Free taxes for students Generally, contact your financial institution if you do not receive a Form 1099INT by February 15. Free taxes for students Your identifying number may be truncated on any paper Form 1099INT you receive. Free taxes for students If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099INT in box 2. Free taxes for students See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Free taxes for students Box 3 of Form 1099INT shows the interest income you received from U. Free taxes for students S. Free taxes for students savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Free taxes for students 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. Free taxes for students If part of the amount shown in box 3 was previously included in your interest income, see U. Free taxes for students S. Free taxes for students savings bond interest previously reported , later. Free taxes for students Box 4 of Form 1099INT will contain an amount if you were subject to backup withholding. Free taxes for students 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). Free taxes for students Box 5 of Form 1099INT shows investment expenses you may be able to deduct as an itemized deduction. Free taxes for students See chapter 28 for more information about investment expenses. Free taxes for students If there are entries in boxes 6 and 7 of Form 1099INT, you must file Form 1040. Free taxes for students 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). Free taxes for students To take the credit, you may have to file Form 1116, Foreign Tax Credit. Free taxes for students For more information, see Publication 514, Foreign Tax Credit for Individuals. Free taxes for students U. Free taxes for students S. Free taxes for students savings bond interest previously reported. Free taxes for students If you received a Form 1099INT for U. Free taxes for students S. Free taxes for students savings bond interest, the form may show interest you do not have to report. Free taxes for students See Form 1099INT for U. Free taxes for students S. Free taxes for students savings bonds interest , earlier, under U. Free taxes for students S. Free taxes for students Savings Bonds. Free taxes for students On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099INT. Free taxes for students Then follow these steps. Free taxes for students Several lines above line 2, enter a subtotal of all interest listed on line 1. Free taxes for students Below the subtotal enter “U. Free taxes for students S. Free taxes for students Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Free taxes for students Subtract these amounts from the subtotal and enter the result on line 2. Free taxes for students More information. Free taxes for students For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Free taxes for students Prev Up Next Home More Online Publications