If you earned interest from a bank or brokerage account in 2017, then you should already have received your annual 1099-INT form. Most financial institutions are fairly quick about getting this information to you by the Jan. 31 deadline, although some brokers try to wait until they have all of the data they have to report to the IRS ready at the same time.
For most taxpayers, Form 1099-INT is easy to understand, but there's a lot of detail that can complicate things in some cases. Here, you'll find a box-by-box guide to the 1099-INT form.
Image source: IRS.
Left-side boxes: Personal information
Information about the paying entity as well as your personal information gets put on the left side of Form 1099-INT. Your account number is also included, along with check-boxes to indicate if your financial institution thinks that your account falls under the Foreign Account Tax Compliance Act requirements or if you might have provided an erroneous tax identification number in the past.
Box 1: Interest income
Box 1 indicates any taxable interest income you've received from this payer that doesn't qualify for inclusion under Box 3. That typically includes interest on bank savings accounts and CDs as well as corporate bond interest.
Box 2: Early withdrawal penalty
If you took a withdrawal from a bank CD before it matured, you typically have to pay a penalty, and any amount you paid will show up here. You're allowed to deduct early withdrawal penalties against your gross income on your tax return to reflect the fact that your financial institution kept part of the interest you had earned.
Box 3: Interest on U.S. Savings Bonds and Treasury obligations
Box 3 includes all interest from obligations of the U.S. government, including Treasuries and savings bonds. This interest is generally taxable at the federal level but qualifies for favorable tax-free treatment on state returns, so it's helpful to know how much income comes from those sources.
Box 4: Federal income tax withheld
Any federal income tax that your bank or broker withheld on your behalf will show up in Box 4. Be sure to count this amount under the payment section of your tax return to calculate your refund or amount owed correctly.
Box 5: Investment expenses
If there are deductible investment expenses that the financial institution incurred on your behalf, then they'll be listed here. Keep in mind that some expenses get directly deducted from income and therefore don't show up here. This box typically applies only for a special class of investments known as real estate mortgage investment conduits.
Boxes 6 and 7: Foreign tax paid and foreign country or U.S. possession
If the interest came from a foreign jurisdiction, then you might have had to pay tax to that country. If so, the amount of tax and the name of the country will be in these boxes. You'll need the information in this box to claim the foreign tax credit correctly.
Boxes 8 and 9: Tax-exempt and specified private activity bond interest
Box 8 includes all interest from tax-exempt issuers including states, municipalities, and U.S. possessions. Certain municipal bonds that have a specified private activity are taxable for alternative minimum tax purposes, and interest from those obligations appears in Box 9 as well as being included in the Box 8 total.
Box 10: Market discount
For certain bonds that you bought for less than face value, you're required to include a portion of the discount each year as taxable interest. This amount appears in Box 10.
Boxes 11 through 13: Bond premium
If you paid more than face value for a bond, then you're typically allowed to amortize a portion of the premium you paid each year and take it against income. This amount is listed in Box 11 for corporate bonds, while Box 12 includes such amounts for Treasuries and Box 13 has tax-exempt bond premium amounts.
Box 14: Tax-exempt and tax credit bond CUSIP number
Box 14 will have the identifying number if the interest listed on 1099-INT is for a single bond. If there are multiple bonds from the same payer, then you can expect to see the word Various here.
Boxes 15 through 17: State tax information
You'll find state tax information in Boxes 15 through 17, including any state tax withheld. Some interest gets taxed differently for state purposes, so be aware of that when completing a state income tax return.
Staying out of trouble
Form 1099-INT gives you the same information that goes to the IRS, so it's important to be consistent in reporting your interest income. Otherwise, it will raise red flags that could result in an audit. In most cases, it's easy to take the numbers from the 1099-INT and transfer them to the appropriate place on your tax return.
