Tax Reporting: Original Issue Discount (OID)
Original issue discount (OID) is reported on Form 1099-OID. Although you may not have received a cash payment from the obligation during the year, if the obligation was originally issued at a discount, IBKR is required to report a portion of that OID each year it is held in your account. Refer to IRS Publication 550, Investment Income and Expenses, for information on how to report OID and Publication 1212, Guide to Original Issue Discount (OID) Instruments, to calculate the correct amount of OID to report on your tax return. Consult your tax advisor for further guidance.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax: Interest Income: Original Issue Discount
Original issue discount (OID) is a form of interest on a debt instrument such as a bond or note issued at less than its face amount. The discount is considered additional interest income. A debt instrument generally has OID when the instrument is issued for a price less than its stated redemption price at maturity. OID is the difference between the stated redemption price at maturity and the issue price, and is amortized over the life of the security, recognizing a portion of the discount annually as taxable interest.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Accrued Interest Paid
Accrued interest paid when a bond is purchased is not taxable to the buyer; instead it is taxable income to the seller. Your Form 1099-INT reports the full interest payment credited to your account. Consult your tax advisor for the proper reporting of accrued interest paid at purchase on your return.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax: Interest Income: Accrued Interest
Interest that has been earned or recognized but is not yet payable (credited) is considered accrued interest, for example, interest declared or accumulated on a bond since the last interest payment date up to but not including the settlement date (not yet paid). Accrued interest also includes interest on bonds sold between interest payment dates.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax: Interest Income: US Government Obligations
Interest from US obligations is exempt from state and local income tax.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: Interest from US Government Obligations
Interest on US obligations is reported on Form 1099-INT in the year the Treasury bill or note matures or you sell it, which may not be the year it was purchased. Refer to IRS Publication 550, Investment Income and Expenses, and consult your tax advisor for more information on reporting interest on US government obligations.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax: Interest Income: US Government Obligation Interest
Interest from US obligations such as US Treasury bills, notes and bonds issued by any agency or instrumentality of the United States is subject to federal income tax. Treasury bills generally are short-term issues with maturities not exceeding one year issued at a discount. Interest on a Treasury bill is the difference between the discounted price you originally paid and the face value you receive at maturity (or what you receive if you sell the bill before maturity). No interest payments are received during the life of the bill. Treasury notes and bonds have longer maturities and generally pay interest semi-annually. Refer to IRS Publication 550, Investment Income and Expenses, for further information.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Interest Income: Where is interest income reported?
Form 1099-INT reports interest income paid to your securities and commodities account for the year, including securities held outside the US (i.e., bonds issued by foreign entities). Interest income may be subject to backup withholding. Form 1099-INT reports any backup withholding as federal income tax withheld. Original issue discount (OID), although a form of interest, is reportable on Form 1099-OID.
Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.
Tax: Interest Income
Interest income is interest earned or paid to your account, for example from corporate bonds, municipal bonds and unit trusts, for the year.
Interest that you receive may either be taxable or non-taxable (tax-exempt) income. Taxable interest includes interest received from bank accounts and tax-exempt money market income. Taxable amounts received from money market funds are reported as dividends.
Taxable interest is also received on US Treasury obligations such as Treasury bills, Treasury notes and Treasury bonds, and certain preferred securities.
Tax-exempt interest includes exempt-interest dividends from a mutual fund or other regulated investment company (RIC) and interest on state and local government issued municipal bonds. Tax-exempt interest may be subject to the Alternative Minimum Tax (AMT).
If you have a bond, note or other debt instrument issued at a discount, part of the original issue discount (OID) may have to be included in income each year as interest as it accrues over the term of the debt instrument. Refer to IRS Publication 1212, Guide to Original Issue Discount Instruments.
For general information, refer to IRS Publication 550, Investment Income and Expenses, and consult your tax advisor for more information.
In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.
Tax Reporting: How to Contact the Internal Revenue Service (IRS)
To request federal tax forms, call 800.829.3676 (800/TAX-FORM), or you may access the IRS website. If your question concerns a US individual tax return call 800.829.1040. If you have a US business return question, call 800.829.4933.
Circular 230 Notice: These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor.
