If you receive a form 1099-INT in the mail, count yourself lucky. Sure, it's another tax document to keep track of, but it's also an accomplishment: It means you probably earned more than $10 in interest in the past year. With rates near zero, that's pretty impressive.
By law, you're required to report interest income on your taxes. But financial institutions aren't required to send you a 1099-INT unless you've earned more than $10 in interest in the past year. And even when you earn more than $10 in interest, you might just find that you'll have to log in to your account online to download your own form. Banks don't make money paying for postage, after all.
Making sense of your 1099-INT
A 1099-INT should look like the image below, with the exception that yours, unlike this example, should have some dollars and cents in the little numbered boxes on the right side.
Different types of income show up in each box.
Most people will receive a 1099-INT that has only a few boxes filled in. That's typical. It's most common to see amounts in box 1, and box 1 only. That's where the "plain-vanilla" interest is reported -- interest on a checking, savings, or brokerage account, for example.
Box 2 is also fairly common. That's where early withdrawal penalties appear. If you cashed in a certificate of deposit early, and thus forfeited interest or principal, that amount will appear here. The next few boxes are fairly self-explanatory. Interest you earn on U.S. savings bonds and Treasury securities will appear in box 3, federal income taxes that were taken out of your interest income appears in box 4, and so on.
Boxes 10-13 can be a little tricky, but they're less common to see. Bonds can be purchased at a discount or premium to their face value. Discounts can be amortized (divided into annual chunks) and count as income. Conversely, if you paid a premium for a bond (say, you paid $1,050 for a bond with a face value of $1,000), the premium can be amortized against your interest income. These amounts would show up in the appropriate box.
Some extra tips
If you happen to lose a 1099-INT, don't sweat it. The IRS isn't worried about your organizational skills; it just wants you to properly report all of your income. While most institutions should be happy to send you another copy, you can always report your interest income on your taxes without it. A December bank statement should show how much interest you earned that year, for example, providing you with sufficient information to claim the interest income as required.
Finally, if you can help it, try to keep your form 1099-INTs for at least three years. That's how long the IRS has to audit you if you make a mistake and don't claim all your income. If that happens, you'll be glad you have the paperwork easily accessible when you really need it.
