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Hr Block 1040nr

Filing Taxes When UnemployedTurbotax Free State Efile Coupon2012 Income Tax FormsEz Tax ReturnIrs Gov 2010 Tax FormsFree 1040 EzFiling 1040nr OnlineDo Active Military Pay TaxesAmended Tax FormAmendment1040 XTurbo Tax 1040ezFree State Tax ProgramTaxact 1040xFree State File1040nr Software FreeTax Forms For 2011 Tax YearIrs Efile Form 4868How To File My 2012 Taxes1040ez Form 2013 PdfHr Block Taxes OnlineHand R Block Free FileH & R Block Taxes For FreeTaxes 2012How Do I File 2010 Taxes2011 Tax Forms 1040 Ez2013 Tax Forms 1040ezWww Irs Gov Form 1040x InstructionsFile 2012 Taxes NowAmended 2011 Tax ReturnHelp With 1040x First TimeIncome Taxes FreeTax For MilitaryHow Do I File My 2010 Taxes For FreeHow To File A Amended Tax Return For 2011Turbo TaxAmending Federal Tax ReturnFiling A 1040xIrsfreefileTax Return Forms

Hr Block 1040nr

Hr block 1040nr Index A Additional Medicare Tax, Reminders, Additional Medicare Tax withholding. Hr block 1040nr Adjustments, Reporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Agricultural labor, Deposits. Hr block 1040nr Aliens, nonresidents, Deposits. Hr block 1040nr Assistance (see Tax help) C Calendar, Calendar Comments on publication, Comments and suggestions. Hr block 1040nr Common-law employee, Employee status under common law. Hr block 1040nr Corrected wage and tax statement, Correcting Forms W-2AS, W-2CM, W-2GU, W-2VI, and Form W-3SS. Hr block 1040nr Crew leaders, Farm Crew Leaders Current period adjustments, Current Period Adjustments D Deposit How to deposit, How To Deposit Penalties, Deposit Penalties Period, Deposit Period Requirements, 8. Hr block 1040nr Depositing Taxes Rules $100,000 next-day deposit, $100,000 Next-Day Deposit Rule Accuracy of deposits, Accuracy of Deposits Rule Schedules Monthly, Monthly Deposit Schedule Semiweekly, Semiweekly Deposit Schedule When to deposit, When To Deposit E Electronic deposits, Electronic deposit requirement. Hr block 1040nr Electronic filing and payment, Reminders Employee, 2. Hr block 1040nr Who Are Employees? Employer identification number (EIN), 1. Hr block 1040nr Employer Identification Number (EIN) F Family employees, Deposits. Hr block 1040nr Farm crew leaders, Farm Crew Leaders Farmworkers, 6. Hr block 1040nr Social Security and Medicare Taxes for Farmworkers, Employers of farmworkers. Hr block 1040nr Federal employees, Deposits. Hr block 1040nr Fishing, Deposits. Hr block 1040nr Form, Calendar, Lookback period for employers of nonfarm workers. Hr block 1040nr 4070, 5. Hr block 1040nr Tips 4070A, 5. Hr block 1040nr Tips 8274, Deposits. Hr block 1040nr 940, Calendar 941-SS, Calendar, Current Period Adjustments 941-X, Adjustments to lookback period taxes. Hr block 1040nr 943, Calendar 943-X, Adjustments to lookback period taxes. Hr block 1040nr 944-X, Adjustments to lookback period taxes. Hr block 1040nr Schedule H (Form 1040), Household employers reporting social security and Medicare taxes. Hr block 1040nr SS-4, 1. Hr block 1040nr Employer Identification Number (EIN) SS-5, Reminders, Employee's social security card. Hr block 1040nr SS-8, IRS help. Hr block 1040nr W-2c, Employee's social security card. Hr block 1040nr , Correcting Forms W-2AS, W-2CM, W-2GU, W-2VI, and Form W-3SS. Hr block 1040nr Fringe benefits, Fringe Benefits, Deposits. Hr block 1040nr FUTA tax, 11. Hr block 1040nr Federal Unemployment (FUTA) Tax—U. Hr block 1040nr S. Hr block 1040nr Virgin Islands Employers Only G Government employees, nonfederal, Deposits. Hr block 1040nr Group-term life insurance, Deposits. Hr block 1040nr H Help (see Tax help) Hiring new employees, Reminders Homeworkers, Deposits. Hr block 1040nr Hospital interns, Deposits. Hr block 1040nr Household employers, Household employers reporting social security and Medicare taxes. Hr block 1040nr Household workers, Household employers reporting social security and Medicare taxes. Hr block 1040nr , Deposits. Hr block 1040nr How to deposit, How To Deposit I Insurance agents, Deposits. Hr block 1040nr IRS help (employee v. Hr block 1040nr subcontractor), IRS help. Hr block 1040nr L Lookback period Farmworkers, Lookback period for employers of farmworkers. Hr block 1040nr Nonfarm workers, Lookback period for employers of nonfarm workers. Hr block 1040nr M Meals and lodging, Deposits. Hr block 1040nr Ministers, Deposits. Hr block 1040nr Monthly deposit schedule, Monthly Deposit Schedule Moving expenses, Deposits. Hr block 1040nr N Newspaper delivery, Deposits. Hr block 1040nr Noncash payments, Deposits. Hr block 1040nr Nonprofit organizations, Deposits. Hr block 1040nr P Partners, Deposits. Hr block 1040nr Penalties, Deposit Penalties Pension plans, Deposits. Hr block 1040nr Prior period adjustments, Prior Period Adjustments Private delivery services, Reminders Publications (see Tax help) R Recordkeeping, Reminders Religious orders, Deposits. Hr block 1040nr Retirement and pension plans, Deposits. Hr block 1040nr S Salespersons, Deposits. Hr block 1040nr Scholarships and fellowships, Deposits. Hr block 1040nr Semiweekly deposit schedule, Semiweekly Deposit Schedule Severance pay, Deposits. Hr block 1040nr Sick pay, Sick pay. Hr block 1040nr , Sick pay payments. Hr block 1040nr , Deposits. Hr block 1040nr Social security number (SSN), 3. Hr block 1040nr Employee's Social Security Number (SSN) Statutory employee, Statutory employees. Hr block 1040nr Statutory nonemployee, Statutory nonemployees. Hr block 1040nr Students, Deposits. Hr block 1040nr Suggestions for publication, Comments and suggestions. Hr block 1040nr Supplemental unemployment compensation benefits, Deposits. Hr block 1040nr T Tax help, How To Get Tax Help Tax Help, Tax help. Hr block 1040nr Taxes paid by employer, Employee's portion of taxes paid by employer. Hr block 1040nr Tips, 5. Hr block 1040nr Tips, Deposits. Hr block 1040nr Travel and business expenses, Travel and business expenses. Hr block 1040nr Trust fund recovery penalty, Trust fund recovery penalty. Hr block 1040nr W Wage and Tax Statement, 10. Hr block 1040nr Wage and Tax Statements Prev  Up     Home   More Online Publications
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The Hr Block 1040nr

Hr block 1040nr Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. Hr block 1040nr Adjustment for premium. Hr block 1040nr Adjustment for acquisition premium. Hr block 1040nr Adjustment for market discount. Hr block 1040nr Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. Hr block 1040nr “Original issue discount” is defined first. Hr block 1040nr The other terms are listed alphabetically. Hr block 1040nr Original issue discount (OID). Hr block 1040nr   OID is a form of interest. Hr block 1040nr It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Hr block 1040nr Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. Hr block 1040nr Accrual period. Hr block 1040nr   An accrual period is an interval of time used to measure OID. Hr block 1040nr The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. Hr block 1040nr Acquisition premium. Hr block 1040nr   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. Hr block 1040nr A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. Hr block 1040nr See Premium, later. Hr block 1040nr Adjusted issue price. Hr block 1040nr   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. Hr block 1040nr In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. Hr block 1040nr The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. Hr block 1040nr Debt instrument. Hr block 1040nr   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). Hr block 1040nr It generally does not include an annuity contract. Hr block 1040nr Issue price. Hr block 1040nr   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. Hr block 1040nr Market discount. Hr block 1040nr   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. Hr block 1040nr An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. Hr block 1040nr The market discount is the difference between the issue price plus accrued OID and your adjusted basis. Hr block 1040nr Premium. Hr block 1040nr   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. Hr block 1040nr The premium is the excess of the adjusted basis over the payable amounts. Hr block 1040nr See Publication 550 for information on the tax treatment of bond premium. Hr block 1040nr Qualified stated interest. Hr block 1040nr   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. Hr block 1040nr Stated redemption price at maturity. Hr block 1040nr   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. Hr block 1040nr Yield to maturity (YTM). Hr block 1040nr   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. Hr block 1040nr The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. Hr block 1040nr If you do not have this information, consult your broker, tax advisor, or the issuer. Hr block 1040nr Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. Hr block 1040nr If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. Hr block 1040nr The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. Hr block 1040nr For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. Hr block 1040nr The following discussions explain what information is contained in each section of the list. Hr block 1040nr Section I. Hr block 1040nr   This section contains publicly offered, long-term debt instruments. Hr block 1040nr Section I-A: Corporate Debt Instruments Issued Before 1985. Hr block 1040nr Section I-B: Corporate Debt Instruments Issued After 1984. Hr block 1040nr Section I-C: Inflation-Indexed Debt Instruments. Hr block 1040nr For each publicly offered debt instrument in Section I, the list contains the following information. Hr block 1040nr The name of the issuer. Hr block 1040nr The Committee on Uniform Security Identification Procedures (CUSIP) number. Hr block 1040nr The issue date. Hr block 1040nr The maturity date. Hr block 1040nr The issue price expressed as a percent of principal or of stated redemption price at maturity. Hr block 1040nr The annual stated or coupon interest rate. Hr block 1040nr (This rate is shown as 0. Hr block 1040nr 00 if no annual interest payments are provided. Hr block 1040nr ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. Hr block 1040nr The total OID accrued up to January 1 of a calendar year. Hr block 1040nr (This information is not available for every instrument. Hr block 1040nr ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. Hr block 1040nr The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. Hr block 1040nr Section II. Hr block 1040nr   This section contains stripped coupons and principal components of U. Hr block 1040nr S. Hr block 1040nr Treasury and Government-Sponsored Enterprise debt instruments. Hr block 1040nr These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. Hr block 1040nr This section also includes debt instruments backed by U. Hr block 1040nr S. Hr block 1040nr Treasury securities that represent ownership interests in those securities. Hr block 1040nr   The obligations listed in Section II are arranged by maturity date. Hr block 1040nr The amounts listed are the total OID for a calendar year per $1,000 of redemption price. Hr block 1040nr Section III. Hr block 1040nr   This section contains short-term discount obligations. Hr block 1040nr Section III-A: Short-Term U. Hr block 1040nr S. Hr block 1040nr Treasury Bills. Hr block 1040nr Section III-B: Federal Home Loan Banks. Hr block 1040nr Section III-C: Federal National Mortgage Association. Hr block 1040nr Section III-D: Federal Farm Credit Banks. Hr block 1040nr Section III-E: Federal Home Loan Mortgage Corporation. Hr block 1040nr Section III-F: Federal Agricultural Mortgage Corporation. Hr block 1040nr    Information that supplements Section III-A is available on the Internet at http://www. Hr block 1040nr treasurydirect. Hr block 1040nr gov/tdhome. Hr block 1040nr htm. Hr block 1040nr   The short-term obligations listed in this section are arranged by maturity date. Hr block 1040nr For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. Hr block 1040nr Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. Hr block 1040nr Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. Hr block 1040nr U. Hr block 1040nr S. Hr block 1040nr savings bonds. Hr block 1040nr Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. Hr block 1040nr Obligations issued by tax-exempt organizations. Hr block 1040nr OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. Hr block 1040nr Mortgage-backed securities and mortgage participation certificates. Hr block 1040nr Long-term OID debt instruments issued before May 28, 1969. Hr block 1040nr Short-term obligations, other than the obligations listed in Section III. Hr block 1040nr Debt instruments issued at a discount by states or their political subdivisions. Hr block 1040nr REMIC regular interests and CDOs. Hr block 1040nr Commercial paper and banker's acceptances issued at a discount. Hr block 1040nr Obligations issued at a discount by individuals. Hr block 1040nr Foreign obligations not traded in the United States and obligations not issued in the United States. Hr block 1040nr Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. Hr block 1040nr In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. Hr block 1040nr You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. Hr block 1040nr See Backup Withholding, later. Hr block 1040nr If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. Hr block 1040nr File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). Hr block 1040nr Electronic payee statements. Hr block 1040nr   You can issue Form 1099-OID electronically with the consent of the recipient. Hr block 1040nr More information. Hr block 1040nr   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. Hr block 1040nr Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. Hr block 1040nr To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. Hr block 1040nr If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. Hr block 1040nr Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. Hr block 1040nr If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. Hr block 1040nr A special rule is used to determine the original issue price for information reporting on U. Hr block 1040nr S. Hr block 1040nr Treasury bills (T-bills) listed in Section III-A. Hr block 1040nr Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. Hr block 1040nr This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. Hr block 1040nr A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. Hr block 1040nr Example 1. Hr block 1040nr There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. Hr block 1040nr The price actually paid by the owner cannot be established by owner or middleman records. Hr block 1040nr You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. Hr block 1040nr The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. Hr block 1040nr Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. Hr block 1040nr For this purpose, you can rely on Section I of the OID list to determine the following information. Hr block 1040nr Whether a debt instrument has OID. Hr block 1040nr The OID to be reported on the Form 1099-OID. Hr block 1040nr In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. Hr block 1040nr You also can report OID on other long-term debt instruments. Hr block 1040nr Form 1099-OID. Hr block 1040nr   On Form 1099-OID for a calendar year show the following information. Hr block 1040nr Box 1. Hr block 1040nr The OID for the actual dates the owner held the debt instruments during a calendar year. Hr block 1040nr To determine this amount, see Figuring OID, next. Hr block 1040nr Box 2. Hr block 1040nr The qualified stated interest paid or credited during the calendar year. Hr block 1040nr Interest reported here is not reported on Form 1099-INT. Hr block 1040nr The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. Hr block 1040nr Box 3. Hr block 1040nr Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. Hr block 1040nr Do not reduce the amounts in boxes 1 and 2 by the forfeiture. Hr block 1040nr Box 4. Hr block 1040nr Any backup withholding for this debt instrument. Hr block 1040nr Box 7. Hr block 1040nr The CUSIP number, if any. Hr block 1040nr If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. Hr block 1040nr 50 2006). Hr block 1040nr If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. Hr block 1040nr Box 8. Hr block 1040nr The OID on a U. Hr block 1040nr S. Hr block 1040nr Treasury obligation for the part of the year the owner held the debt instrument. Hr block 1040nr Box 9. Hr block 1040nr Investment expenses passed on to holders of a single-class REMIC. Hr block 1040nr Boxes 10-12. Hr block 1040nr Use to report any state income tax withheld for this debt instrument. Hr block 1040nr Figuring OID. Hr block 1040nr   You can determine the OID on a long-term debt instrument by using either of the following. Hr block 1040nr Section I of the OID list. Hr block 1040nr The income tax regulations. Hr block 1040nr Using Section I. Hr block 1040nr   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. Hr block 1040nr Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. Hr block 1040nr For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. Hr block 1040nr   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. Hr block 1040nr Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. Hr block 1040nr Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. Hr block 1040nr Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. Hr block 1040nr Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. Hr block 1040nr If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. Hr block 1040nr Report the result on Form 1099-OID in box 1. Hr block 1040nr Using the income tax regulations. Hr block 1040nr   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. Hr block 1040nr For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. Hr block 1040nr (If you use Section I-B, the OID is figured using 6-month accrual periods. Hr block 1040nr )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. Hr block 1040nr Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. Hr block 1040nr You must file an information return showing the reportable interest and OID, if any, on the CD. Hr block 1040nr These rules apply whether or not you sold the CD to the owner. Hr block 1040nr Report OID on a CD in the same way as OID on other debt instruments. Hr block 1040nr See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. Hr block 1040nr Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. Hr block 1040nr However, do not report the interest if either of the following apply. Hr block 1040nr You hold the bond as a nominee for the true owner. Hr block 1040nr The payee is a foreign person. Hr block 1040nr See Payments to foreign person under Backup Withholding, later. Hr block 1040nr Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. Hr block 1040nr The coupon may have been “stripped” (separated) from the bond and separately purchased. Hr block 1040nr However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. Hr block 1040nr Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. Hr block 1040nr The backup withholding is deducted at the time a cash payment is made. Hr block 1040nr See Pub. Hr block 1040nr 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. Hr block 1040nr Backup withholding generally applies in the following situations. Hr block 1040nr The payee does not give you a taxpayer identification number (TIN). Hr block 1040nr The IRS notifies you that the payee gave an incorrect TIN. Hr block 1040nr The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. Hr block 1040nr For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. Hr block 1040nr However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. Hr block 1040nr S. Hr block 1040nr savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. Hr block 1040nr Short-term obligations. Hr block 1040nr   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. Hr block 1040nr However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. Hr block 1040nr   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. Hr block 1040nr However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. Hr block 1040nr If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. Hr block 1040nr Long-term obligations. Hr block 1040nr   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. Hr block 1040nr The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. Hr block 1040nr The amount to be withheld is limited to the cash paid. Hr block 1040nr Registered long-term obligations with cash payments. Hr block 1040nr   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. Hr block 1040nr The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. Hr block 1040nr If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. Hr block 1040nr For any payment, the required withholding is limited to the cash paid. Hr block 1040nr Payee not the original owner. Hr block 1040nr   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). Hr block 1040nr The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. Hr block 1040nr Bearer long-term obligations with cash payments. Hr block 1040nr   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. Hr block 1040nr For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. Hr block 1040nr For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. Hr block 1040nr The required withholding at maturity is limited to the cash paid. Hr block 1040nr Sales and redemptions. Hr block 1040nr   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. Hr block 1040nr Backup withholding applies in the following situations. Hr block 1040nr The payee does not give you a TIN. Hr block 1040nr The IRS notifies you that the payee gave an incorrect TIN. Hr block 1040nr For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. Hr block 1040nr Payments outside the United States to U. Hr block 1040nr S. Hr block 1040nr person. Hr block 1040nr   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. Hr block 1040nr S. Hr block 1040nr person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. Hr block 1040nr S. Hr block 1040nr trade or business. Hr block 1040nr Payments to foreign person. Hr block 1040nr   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. Hr block 1040nr U. Hr block 1040nr S. Hr block 1040nr -source amount. Hr block 1040nr   Backup withholding and information reporting are not required for payments of U. Hr block 1040nr S. Hr block 1040nr -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. Hr block 1040nr A U. Hr block 1040nr S. Hr block 1040nr resident is not a foreign person. Hr block 1040nr For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. Hr block 1040nr Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. Hr block 1040nr S. Hr block 1040nr person. Hr block 1040nr   For information about the 28% withholding tax that may apply to payments of U. Hr block 1040nr S. Hr block 1040nr -source OID or interest to foreign persons, see Publication 515. Hr block 1040nr Foreign-source amount. Hr block 1040nr   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. Hr block 1040nr However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. Hr block 1040nr More information. Hr block 1040nr   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. Hr block 1040nr 6049-5. Hr block 1040nr Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. Hr block 1040nr It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. Hr block 1040nr It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. Hr block 1040nr However, the information provided does not cover every situation. Hr block 1040nr More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. Hr block 1040nr Including OID in income. Hr block 1040nr   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. Hr block 1040nr Exceptions. Hr block 1040nr   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. Hr block 1040nr U. Hr block 1040nr S. Hr block 1040nr savings bonds. Hr block 1040nr Tax-exempt obligations. Hr block 1040nr (However, see Tax-Exempt Bonds and Coupons, later. Hr block 1040nr ) Obligations issued by individuals before March 2, 1984. Hr block 1040nr Loans of $10,000 or less between individuals who are not in the business of lending money. Hr block 1040nr (The dollar limit includes outstanding prior loans by the lender to the borrower. Hr block 1040nr ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. Hr block 1040nr   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. Hr block 1040nr Publication 550 also discusses rules for holders of REMIC interests and CDOs. Hr block 1040nr De minimis rule. Hr block 1040nr   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. Hr block 1040nr 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Hr block 1040nr Debt instruments with de minimis OID are not listed in this publication. Hr block 1040nr There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. Hr block 1040nr Also, the de minimis rules generally do not apply to tax-exempt obligations. Hr block 1040nr Example 2. Hr block 1040nr You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Hr block 1040nr One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Hr block 1040nr Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. Hr block 1040nr Example 3. Hr block 1040nr Assume the same facts as Example 2, except the debt instrument was issued at $950. Hr block 1040nr You must report part of the $50 OID each year because it is more than $25. Hr block 1040nr Choice to report all interest as OID. Hr block 1040nr   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. Hr block 1040nr See Constant yield method under Debt Instruments Issued After 1984, later, for more information. Hr block 1040nr   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. Hr block 1040nr For more information, see Regulations section 1. Hr block 1040nr 1272-3. Hr block 1040nr Purchase after date of original issue. Hr block 1040nr   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. Hr block 1040nr If so, the OID reported to you on Form 1099-OID may have to be adjusted. Hr block 1040nr For more information, see Showing an OID adjustment under How To Report OID, later. Hr block 1040nr The following rules generally do not apply to contingent payment debt instruments. Hr block 1040nr Adjustment for premium. Hr block 1040nr   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. Hr block 1040nr Your adjustment is the total OID shown on your Form 1099-OID. Hr block 1040nr Adjustment for acquisition premium. Hr block 1040nr   If your debt instrument has acquisition premium, reduce the OID you report. Hr block 1040nr Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. Hr block 1040nr Adjustment for market discount. Hr block 1040nr   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. Hr block 1040nr Your adjustment is the accrued market discount for the year. Hr block 1040nr See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. Hr block 1040nr If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. Hr block 1040nr The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. Hr block 1040nr For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. Hr block 1040nr 1275-7. Hr block 1040nr Sale, exchange, or redemption. Hr block 1040nr   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. Hr block 1040nr If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. Hr block 1040nr Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). Hr block 1040nr   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Hr block 1040nr Your basis, generally, is your cost increased by the OID you have included in income each year you held it. Hr block 1040nr In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Hr block 1040nr   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. Hr block 1040nr Example 4. Hr block 1040nr Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. Hr block 1040nr 00 on November 1 of Year 1. Hr block 1040nr The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. Hr block 1040nr The debt instrument provides for semiannual payments of interest at 10%. Hr block 1040nr Assume the debt instrument is a capital asset in Larry's hands. Hr block 1040nr The debt instrument has $13,765. Hr block 1040nr 00 of OID ($100,000 stated redemption price at maturity minus $86,235. Hr block 1040nr 00 issue price). Hr block 1040nr Larry sold the debt instrument for $90,000 on November 1 of Year 4. Hr block 1040nr Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. Hr block 1040nr 00 of OID in income and has increased his basis by that amount to $90,791. Hr block 1040nr 00. Hr block 1040nr Larry has realized a loss of $791. Hr block 1040nr 00. Hr block 1040nr All of Larry's loss is capital loss. Hr block 1040nr Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. Hr block 1040nr Form 1099-OID shows all OID income in box 1 except OID on a U. Hr block 1040nr S. Hr block 1040nr Treasury obligation, which is shown in box 8. Hr block 1040nr It also shows, in box 2, any qualified stated interest you must include in income. Hr block 1040nr (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. Hr block 1040nr ) A copy of Form 1099-OID will be sent to the IRS. Hr block 1040nr Do not attach your copy to your tax return. Hr block 1040nr Keep it for your records. Hr block 1040nr If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. Hr block 1040nr A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. Hr block 1040nr Form 1099-OID not received. Hr block 1040nr   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. Hr block 1040nr Refiguring OID. Hr block 1040nr   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. Hr block 1040nr You bought the debt instrument at a premium or at an acquisition premium. Hr block 1040nr The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. Hr block 1040nr S. Hr block 1040nr Treasury securities). Hr block 1040nr The debt instrument is a contingent payment or inflation-indexed debt instrument. Hr block 1040nr See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. Hr block 1040nr Refiguring interest. Hr block 1040nr   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. Hr block 1040nr Nominee. Hr block 1040nr   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. Hr block 1040nr ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. Hr block 1040nr Show the owner of the debt instrument as the “recipient” and you as the “payer. Hr block 1040nr ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. Hr block 1040nr You must also give a copy of the Form 1099-OID to the actual owner. Hr block 1040nr However, you are not required to file a nominee return to show amounts belonging to your spouse. Hr block 1040nr See the Form 1099 instructions for more information. Hr block 1040nr   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. Hr block 1040nr How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. Hr block 1040nr Form 1040 or Form 1040A required. Hr block 1040nr   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. Hr block 1040nr You received a Form 1099-OID as a nominee for the actual owner. Hr block 1040nr Your total interest and OID income for the year was more than $1,500. Hr block 1040nr Form 1040 required. Hr block 1040nr   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. Hr block 1040nr For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. Hr block 1040nr Also, you must use Form 1040 if you were charged an early withdrawal penalty. Hr block 1040nr Where to report. Hr block 1040nr   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. Hr block 1040nr Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. Hr block 1040nr Also include any other OID and interest income for which you did not receive a Form 1099. Hr block 1040nr Showing an OID adjustment. Hr block 1040nr   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. Hr block 1040nr   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. Hr block 1040nr If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. Hr block 1040nr Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Hr block 1040nr Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. Hr block 1040nr Subtract that OID from the subtotal and enter the result on line 2. Hr block 1040nr If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. Hr block 1040nr Under your last entry on line 1, subtotal all interest and OID income listed on line 1. Hr block 1040nr Below the subtotal, write “OID Adjustment” and show the additional OID. Hr block 1040nr Add that OID to the subtotal and enter the result on line 2. Hr block 1040nr Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. Hr block 1040nr It also may depend on the type of the debt instrument. Hr block 1040nr There are different rules for each of the following debt instruments. Hr block 1040nr Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. Hr block 1040nr Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. Hr block 1040nr Debt instruments issued after July 1, 1982, and before 1985. Hr block 1040nr Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). Hr block 1040nr Contingent payment debt instruments issued after August 12, 1996. Hr block 1040nr Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. Hr block 1040nr Zero coupon bonds. Hr block 1040nr   The rules for figuring OID on zero coupon bonds backed by U. Hr block 1040nr S. Hr block 1040nr Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. Hr block 1040nr Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. Hr block 1040nr The OID, which is taxed as ordinary income, generally equals the following amount. Hr block 1040nr   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. Hr block 1040nr If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. Hr block 1040nr Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. Hr block 1040nr For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. Hr block 1040nr Your basis in the debt instrument is increased by the OID you include in income. Hr block 1040nr Form 1099-OID. Hr block 1040nr   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Hr block 1040nr However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Hr block 1040nr See Reduction for acquisition premium, later. Hr block 1040nr If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Hr block 1040nr irs. Hr block 1040nr gov/pub1212 by clicking the link under Recent Developments. Hr block 1040nr Form 1099-OID not received. Hr block 1040nr    The OID listed is for each $1,000 of redemption price. Hr block 1040nr You must adjust the listed amount if your debt instrument has a different principal amount. Hr block 1040nr For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Hr block 1040nr   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. Hr block 1040nr (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. Hr block 1040nr ) If you did not hold the debt instrument the entire year, figure your OID using the following method. Hr block 1040nr Divide the OID shown by 12. Hr block 1040nr Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. Hr block 1040nr This is the OID to include in income unless you paid an acquisition premium. Hr block 1040nr The reduction for acquisition premium is discussed next. Hr block 1040nr Reduction for acquisition premium. Hr block 1040nr   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. Hr block 1040nr Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. Hr block 1040nr This is the monthly OID. Hr block 1040nr Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. Hr block 1040nr (If the result is zero or less, stop here. Hr block 1040nr You did not pay an acquisition premium. Hr block 1040nr ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. Hr block 1040nr Subtract the amount figured in (3) from the amount figured in (1). Hr block 1040nr This is the OID to include in income for each month you hold the debt instrument during the year. Hr block 1040nr Transfers during the month. Hr block 1040nr   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. Hr block 1040nr Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. Hr block 1040nr Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. Hr block 1040nr For information about showing the correct OID on your tax return, see How To Report OID, earlier. Hr block 1040nr Form 1099-OID. Hr block 1040nr   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. Hr block 1040nr However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Hr block 1040nr See Constant yield method and the discussions on acquisition premium that follow, later. Hr block 1040nr If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. Hr block 1040nr irs. Hr block 1040nr gov/pub1212 by clicking the link under Recent Developments. Hr block 1040nr Form 1099-OID not received. Hr block 1040nr    The OID listed is for each $1,000 of redemption price. Hr block 1040nr You must adjust the listed amount if your debt instrument has a different principal amount. Hr block 1040nr For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Hr block 1040nr   If you held the debt instrument the entire year, use the OID shown in Section I-A. Hr block 1040nr (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Hr block 1040nr ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. Hr block 1040nr Method 1. Hr block 1040nr    Divide the total OID for a calendar year by 365 (366 for leap years). Hr block 1040nr Multiply the result in (1) by the number of days you held the debt instrument during that particular year. Hr block 1040nr  This computation is an approximation and may result in a slightly higher OID than Method 2. Hr block 1040nr Method 2. Hr block 1040nr    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. Hr block 1040nr (See Accrual period under Constant yield method, next. Hr block 1040nr ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Hr block 1040nr If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. Hr block 1040nr Add the results of (2) and (3). Hr block 1040nr This is the OID to include in income, unless you paid an acquisition premium. Hr block 1040nr (The reduction for acquisition premium is discussed later. Hr block 1040nr ) Constant yield method. Hr block 1040nr   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. Hr block 1040nr OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Hr block 1040nr   Figure the OID allocable to any accrual period as follows. Hr block 1040nr Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. Hr block 1040nr Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Hr block 1040nr Accrual period. Hr block 1040nr   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. Hr block 1040nr Your tax year will usually include parts of two accrual periods. Hr block 1040nr Daily OID. Hr block 1040nr   The OID for any accrual period is allocated equally to each day in the accrual period. Hr block 1040nr You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. Hr block 1040nr If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. Hr block 1040nr Figuring daily OID. Hr block 1040nr   The daily OID for the initial accrual period is figured using the following formula. Hr block 1040nr   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Hr block 1040nr Reduction for acquisition premium on debt instruments purchased before July 19, 1984. Hr block 1040nr   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Hr block 1040nr Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. Hr block 1040nr Reduction for acquisition premium on debt instruments purchased after July 18, 1984. Hr block 1040nr   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Hr block 1040nr However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. Hr block 1040nr To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. Hr block 1040nr The numerator is the acquisition premium. Hr block 1040nr The denominator is the total OID remaining for the debt instrument after your purchase date. Hr block 1040nr Section I-A is available at www. Hr block 1040nr irs. Hr block 1040nr gov/pub1212 and clicking the link under Recent Developments. Hr block 1040nr Using Section I-A to figure accumulated OID. Hr block 1040nr   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. Hr block 1040nr The amount from the “Total OID to January 1, YYYY” column for your debt instrument. Hr block 1040nr The OID from January 1 of a calendar year to the date of purchase, figured as follows. Hr block 1040nr Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. Hr block 1040nr Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. Hr block 1040nr Add the amounts figured in (2a) and (2b). Hr block 1040nr Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. Hr block 1040nr You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. Hr block 1040nr Your basis in the debt instrument is increased by the OID you include in income. Hr block 1040nr For information about showing the correct OID on your tax return, see How To Report OID, earlier. Hr block 1040nr Form 1099-OID. Hr block 1040nr   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. Hr block 1040nr However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. Hr block 1040nr See Constant yield method and Reduction for acquisition premium, later. Hr block 1040nr   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. Hr block 1040nr See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. Hr block 1040nr If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. Hr block 1040nr irs. Hr block 1040nr gov/pub1212 by clicking the link under Recent Developments. Hr block 1040nr Form 1099-OID not received. Hr block 1040nr   The OID listed is for each $1,000 of redemption price. Hr block 1040nr You must adjust the listed amount if your debt instrument has a different principal amount. Hr block 1040nr For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. Hr block 1040nr   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. Hr block 1040nr (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. Hr block 1040nr ) If you did not hold the debt instrument the entire year, figure your OID as follows. Hr block 1040nr Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. Hr block 1040nr (See Accrual period under Constant yield method, later. Hr block 1040nr ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. Hr block 1040nr Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. Hr block 1040nr Add the results of (2) and (3). Hr block 1040nr This is the OID to include in income for that year, unless you paid an acquisition premium. Hr block 1040nr (The reduction for acquisition premium is discussed later. Hr block 1040nr ) Tax-exempt bond. Hr block 1040nr   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. Hr block 1040nr You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. Hr block 1040nr In general, use the rules that follow to determine your OID. Hr block 1040nr Constant yield method. Hr block 1040nr   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. Hr block 1040nr (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. Hr block 1040nr ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. Hr block 1040nr   Figure the OID allocable to any accrual period as follows. Hr block 1040nr Multiply the adjusted issue price at the beginning of the accrual period by a fraction. Hr block 1040nr The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. Hr block 1040nr The yield must be stated appropriately taking into account the length of the particular accrual period. Hr block 1040nr Subtract from the result in (1) any qualified stated interest allocable to the accrual period. Hr block 1040nr Accrual period. Hr block 1040nr   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. Hr block 1040nr For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. Hr block 1040nr Any short period is included as the first accrual period. Hr block 1040nr   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. Hr block 1040nr However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. Hr block 1040nr Daily OID. Hr block 1040nr   The OID for any accrual period is allocated equally to each day in the accrual period. Hr block 1040nr Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. Hr block 1040nr Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. Hr block 1040nr If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. Hr block 1040nr Figuring daily OID. Hr block 1040nr   The daily OID for the initial accrual period is figured using the following formula. Hr block 1040nr   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. Hr block 1040nr Example 5. Hr block 1040nr On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. Hr block 1040nr 17. Hr block 1040nr According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. Hr block 1040nr The yield to maturity is 12%, compounded semiannually. Hr block 1040nr The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. Hr block 1040nr The accrual periods are the 6-month periods ending on each of these dates. Hr block 1040nr The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). Hr block 1040nr The daily OID for the first accrual period is figured as follows. Hr block 1040nr   ($86,235. Hr block 1040nr 17 x . Hr block 1040nr 12/2) – $5,000     181 days     = $174. Hr block 1040nr 11020 = $. Hr block 1040nr 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. Hr block 1040nr 17 + $174. Hr block 1040nr 11), or $86,409. Hr block 1040nr 28. Hr block 1040nr The number of days for the second accrual period (July 1 through December 31) is 184 days. Hr block 1040nr The daily OID for the second accrual period is figured as follows. Hr block 1040nr   ($86,409. Hr block 1040nr 28 x . Hr block 1040nr 12/2) – $5,000     184 days     = $184. Hr block 1040nr 55681 = $1. Hr block 1040nr 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. Hr block 1040nr 11 ($. Hr block 1040nr 95665 × 182 days) plus $184. Hr block 1040nr 56 ($1. Hr block 1040nr 00303 × 184 days), or $358. Hr block 1040nr 67. Hr block 1040nr Add the OID to the $10,000 interest you report on your income tax return for Year 1. Hr block 1040nr Example 6. Hr block 1040nr Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. Hr block 1040nr Also, the interest payment dates are October 31 and April 30 of each calendar year. Hr block 1040nr The accrual periods are the 6-month periods ending on each of these dates. Hr block 1040nr The number of days for the first accrual period (May 1 through October 31) is 184 days. Hr block 1040nr The daily OID for the first accrual period is figured as follows. Hr block 1040nr   ($86,235. Hr block 1040nr 17 x . Hr block 1040nr 12/2) – $5,000     184 days     = $174. Hr block 1040nr 11020 = $. Hr block 1040nr 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). Hr block 1040nr The daily OID for the second accrual period is figured as follows. Hr block 1040nr   ($86,409. Hr block 1040nr 28 x . Hr block 1040nr 12/2) – $5,000     181 days     = $184. Hr block 1040nr 55681 = $1. Hr block 1040nr 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. Hr block 1040nr 31 of OID in income. Hr block 1040nr This is $174. Hr block 1040nr 11 ($. Hr block 1040nr 94625 × 184 days) for the period May 1 through October 31 plus $62. Hr block 1040nr 20 ($1. Hr block 1040nr 01965 × 61 days) for the period November 1 through December 31. Hr block 1040nr The OID is added to the $5,000 interest income paid on October 31 of Year 1. Hr block 1040nr Your basis in the debt instrument is increased by the OID you include in income. Hr block 1040nr On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. Hr block 1040nr 48 ($86,235. Hr block 1040nr 17 + $236. Hr block 1040nr 31). Hr block 1040nr Short first accrual period. Hr block 1040nr   You may have to make adjustments if a debt instrument has a short first accrual period. Hr block 1040nr For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. Hr block 1040nr (The remaining accrual periods begin on May 1 and November 1. Hr block 1040nr ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. Hr block 1040nr You may use any reasonable compounding method in determining OID for a short period. Hr block 1040nr Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). Hr block 1040nr Consult your tax advisor for more information about making this computation. Hr block 1040nr   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. Hr block 1040nr Reduction for acquisition premium. Hr block 1040nr   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. Hr block 1040nr To figure the daily acquisition premium, multiply the daily OID by the following fraction. Hr block 1040nr The numerator is the acquisition premium. Hr block 1040nr The denominator is the total OID remaining for the debt instrument after your purchase date. Hr block 1040nr Example 7. Hr block 1040nr Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. Hr block 1040nr The adjusted issue price on November 1 of Year 1 is $86,409. Hr block 1040nr 28 ($86,235. Hr block 1040nr 17 + $174. Hr block 1040nr 11). Hr block 1040nr In this case, you paid an acquisition premium of $590. Hr block 1040nr 72 ($87,000 − $86,409. Hr block 1040nr 28). Hr block 1040nr The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. Hr block 1040nr 1) Daily OID on date of purchase (2nd accrual period) $1. Hr block 1040nr 01965*  2)  Acquisition premium $590. Hr block 1040nr 72    3)  Total OID remaining after purchase date ($13,764. Hr block 1040nr 83 − $174. Hr block 1040nr 11) 13,590. Hr block 1040nr 72   4) Line 2 ÷ line 3 . Hr block 1040nr 04346  5)  Line 1 × line 4 . Hr block 1040nr 04432  6)  Daily OID reduced for the acquisition premium. Hr block 1040nr Line 1 − line 5 $0. Hr block 1040nr 97533  * As shown in Example 6. Hr block 1040nr The total OID to include in income for Year 1 is $59. Hr block 1040nr 50 ($. Hr block 1040nr 97533 × 61 days). Hr block 1040nr Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. Hr block 1040nr In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. Hr block 1040nr If you hold a contingent payment bond, you must report OID as it accrues each year. Hr block 1040nr Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. Hr block 1040nr To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. Hr block 1040nr Noncontingent bond method. Hr block 1040nr    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. Hr block 1040nr In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. Hr block 1040nr When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. Hr block 1040nr If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. Hr block 1040nr If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. Hr block 1040nr Form 1099-OID. Hr block 1040nr   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. Hr block 1040nr For example, the amount may not be correct if the contingent payment was different from the projected amount. Hr block 1040nr If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. Hr block 1040nr For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. Hr block 1040nr Figuring OID. Hr block 1040nr   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. Hr block 1040nr The issuer must make these available to you. Hr block 1040nr Comparable yield. Hr block 1040nr   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. Hr block 1040nr The comparable yield is determined as of the debt instrument's issue date. Hr block 1040nr Projected payment schedule. Hr block 1040nr   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. Hr block 1040nr The projected payment schedule is created by the issuer as of the debt instrument's issue date. Hr block 1040nr It is used to determine the issuer's and holder's interest accruals and adjustments. Hr block 1040nr Steps for figuring OID. Hr block 1040nr   Figure the OID on a contingent payment debt instrument in two steps. Hr block 1040nr Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. Hr block 1040nr Use the comparable yield as the yield to maturity. Hr block 1040nr In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). Hr block 1040nr Do not treat any amount payable as qualified stated interest. Hr block 1040nr Adjust the OID in (1) to account for actual contingent payments. Hr block 1040nr If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. Hr block 1040nr If the contingent payment is less than the projected fixed amount, you have a negative adjustment. Hr block 1040nr Net positive adjustment. Hr block 1040nr   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. Hr block 1040nr Treat a net positive adjustment as additional OID for the tax year. Hr block 1040nr Net negative adjustment. Hr block 1040nr   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. Hr block 1040nr Use a net negative adjustment to offset OID on the debt instrument for the tax year. Hr block 1040nr If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. Hr block 1040nr However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. Hr block 1040nr You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. Hr block 1040nr Basis adjustments. Hr block 1040nr   In general, increase your basis in a contingent payment debt instrument by the OID included in income. Hr block 1040nr Your basis, however, is not affected by any negative or positive adjustments. Hr block 1040nr Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. Hr block 1040nr Treatment of gain or loss on sale or exchange. Hr block 1040nr   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. Hr block 1040nr If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. Hr block 1040nr If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. Hr block 1040nr See Regulations section 1. Hr block 1040nr 1275-4 for exceptions to these rules. Hr block 1040nr Premium, acquisition premium, and market discount. Hr block 1040nr   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. Hr block 1040nr See Regulations section 1. Hr block 1040nr 1275-4 to determine how to account for these items. Hr block 1040nr Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. Hr block 1040nr An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d