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Tax Topic Index

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Rev. date: 12/08/2014

Interest Received

Tax Topic 403
Most interest that you either receive or is credited to your account and that you can withdraw without penalty is taxable income in the year it becomes available to you. In addition, some interest you receive may be tax-exempt. You should receive Copy B of Form 1099-INT or Form 1099-OID with respect to payments of interest of $10 or more, showing the taxable or reportable tax-exempt interest. You must include in income on your federal income tax return all interest received that is taxable, even if you do not receive Copy B of Form 1099-INT or 1099-OID. You must give the payer of your interest income your correct taxpayer identification number. If you do not, you may be subject to a penalty and backup withholding. Refer to Tax Topic 307 for information on backup withholding.
Examples of taxable interest include:
However, some interest is nontaxable or may be excluded from income. For example:

Original Issue Discount Instruments

If a bond, note or other debt instrument was originally issued at a discount, part of the original issue discount may have to be included in income each year as interest. Refer to Publication 550 or Publication 1212, Guide to Original Issue Discount (OID) Instruments for more information on original issue discount. You should receive a Form 1099-OID, Original Issue Discount, or a similar statement from each payer of taxable original issue discount of $10 or more, showing the amount you should report.

Nominee Recipient

There are times when you may receive a Form 1099 for interest in your name that actually belongs to someone else. In this case, the IRS considers you a nominee recipient and it may be necessary for you to file with the IRS and furnish to the other owners a Form 1099-INT. If you are a nominee recipient for the actual owner, see the instructions on Schedule B of Form 1040 or Form 1040A for how to report the interest on your income tax return. You must then prepare a Form 1099-INT, Interest Income, for the interest that is not yours and give Copy B to the actual owner. You must also file a copy of the 1099-INT and a completed Form 1096, Annual Summary and Transmittal of U.S. Information Returns, with the Internal Revenue Service. For more information on these requirements, refer to the Instructions i1099int.pdf (PDF).

Further Information

If you receive taxable interest, you may have to pay estimated tax. For more information on interest income, refer to Publication 550.