IRS Instruction 1099-INT and 1099-OID

IRS Instruction 1099-INT and 1099-OID – In the world of tax reporting, understanding IRS Forms 1099-INT and 1099-OID is essential for anyone handling interest income or original issue discount (OID). These forms ensure accurate reporting of taxable interest and OID to the IRS and recipients, helping avoid penalties and ensuring compliance. Whether you’re a financial institution, broker, or individual payer, this SEO-optimized guide breaks down the latest instructions, filing requirements, and best practices based on the most current IRS guidelines. We’ll cover everything from definitions to due dates, drawing from official sources to provide reliable information for tax year 2025 (filed in 2026).

What Is Form 1099-INT? Understanding Interest Income Reporting?

Form 1099-INT, or Interest Income, is used to report interest payments made to individuals or entities. This includes earnings from bank accounts, bonds, and other interest-bearing instruments. According to IRS instructions, you must file this form for each recipient who receives at least $10 in reportable interest, or $600 if paid in the course of a trade or business. Interest income encompasses amounts paid or credited without restrictions, such as bank deposits, corporate bonds, and even tax credit bond allowances on specific dates like March 15 or June 15.

Key elements include:

  • Taxable Interest (Box 1): Covers general interest like savings account earnings or bond interest not reported elsewhere.
  • Early Withdrawal Penalty (Box 2): Reports forfeited interest from premature withdrawals on time deposits.
  • U.S. Savings Bonds and Treasury Obligations (Box 3): Specific to government-issued interest.
  • Tax-Exempt Interest (Box 8): For state or local bonds, reported if $10 or more.
  • Specified Private Activity Bond Interest (Box 9): Interest from certain private activity bonds issued after August 7, 1986.

For covered securities, you may also need to report bond premiums (Boxes 11-13) and market discounts (Box 10) if they meet thresholds like $10 or more. Exempt recipients, such as corporations or IRAs, don’t require filing, and certain interest like portfolio interest for foreign owners is excluded.

What Is Form 1099-OID? Demystifying Original Issue Discount?

Form 1099-OID reports Original Issue Discount, which is the difference between a debt instrument’s stated redemption price at maturity and its issue price. OID is treated as interest income over the life of the obligation and must be reported if the total daily portions amount to $10 or more for the year. This form applies to instruments like bonds sold at a discount, certificates of deposit (CDs) longer than one year, and certain structured products.

Notable boxes on Form 1099-OID include:

  • OID (Box 1): Taxable OID for the ownership period, calculated under sections 1271-1275.
  • Other Periodic Interest (Box 2): Qualified stated interest, which can alternatively be reported on Form 1099-INT.
  • Market Discount (Box 5): Accrued amounts of $10 or more on covered securities.
  • Acquisition Premium (Box 6): Amortization for securities bought above the adjusted issue price.
  • Tax-Exempt OID (Box 11): For tax-exempt obligations acquired on or after January 1, 2017.

Similar to 1099-INT, exemptions apply to corporations, tax-exempt organizations, and short-term obligations (one year or less), which shift to 1099-INT reporting. For instruments like REMICs or CDOs, issuers must report OID separately.

Who Must File Forms 1099-INT and 1099-OID?

Filing is required if you’re a payer in a trade or business, including financial institutions, brokers, nominees, or trustees of widely held fixed investment trusts (WHFITs) or mortgage trusts (WHMTs). Government agencies and nonprofits also fall under this if payments are business-related.

  • Thresholds: $10 minimum for most interest/OID; no minimum if backup withholding or foreign tax was applied.
  • Special Cases: For nonresident aliens, use Form 1042-S for certain U.S. bank interest. Report as a nominee if holding for another owner.
  • Exceptions: No filing for exempt recipients like dealers, brokers, or states, or for excluded payments like individual-issued obligations or foreign-source interest paid outside the U.S.

If you’re handling multiple accounts or FATCA-related reporting, include account numbers and check the FATCA filing requirement box on the form.

Key Changes and Updates for 2026 Filing

The IRS instructions for these forms are continuous-use, meaning they’re updated as legislation changes rather than annually. For tax year 2025 (filed in 2026), refer to the January 2024 revision, with any developments posted on IRS.gov/Form1099INT or IRS.gov/Form1099OID. Notable ongoing rules include:

  • Enhanced reporting for covered securities (acquired after specific dates) on bond premiums, acquisition premiums, and market discounts.
  • TIN truncation allowed on recipient statements for privacy.
  • Online fillable forms available for Copies B and others.
  • Integration with General Instructions for Certain Information Returns (2025), which covers electronic filing and extensions.

No major legislative changes are noted post-2024, but always check IRS.gov for real-time updates.

Step-by-Step Instructions for Filling Out Form 1099-INT

  1. Gather Information: Collect recipient details, including TIN, and calculate interest using IRS methods (e.g., constant yield for discounts).
  2. Complete Payer and Recipient Sections: Enter your info, recipient’s name/address/TIN.
  3. Fill Boxes: Input amounts as described—e.g., Box 1 for taxable interest, Box 4 for backup withholding.
  4. Handle Special Reporting: For WHFITs or REMICs, include expenses and furnish statements by March 15.
  5. State Reporting (Optional): Use Boxes 15-17 for state tax info if participating in combined federal/state filing.
  6. File Copies: Submit Copy A to IRS, provide Copy B to recipient.

Use Pub. 1212 for OID calculations on specific instruments.

Step-by-Step Instructions for Filling Out Form 1099-OID

  1. Calculate OID: Use daily portions based on ownership period; de minimis discounts (under 0.25%) are zero.
  2. Enter Details: Payer/recipient info, then boxes—e.g., Box 1 for taxable OID, Box 7 for instrument description (CUSIP).
  3. Adjust for Premiums/Discounts: Report amortizations in Boxes 5, 6, 10 for covered securities.
  4. Special Entities: For CDOs or FASITs, report as issuer; single-class REMICs add investment expenses in Box 9.
  5. Distribute Forms: File with IRS, furnish to recipients.

Combine interest and OID on one 1099-OID if applicable to avoid duplicate forms.

Due Dates and Filing Requirements for 2026

  • Recipient Statements: Furnish by January 31, 2026, for most; March 15 for WHFIT/REMIC/CDO info.
  • IRS Filing: Paper by February 28, 2026; electronic by March 31, 2026. Use Form 1096 as transmittal.
  • Electronic Filing: Required if 10+ returns; use IRIS or FIRE systems.
  • Extensions: Request via Form 8809.

Order paper forms from IRS.gov if needed, with limits on quantities.

Penalties for Non-Compliance

Failure to file, furnish statements, or report correct TINs can result in penalties ranging from $60 to $630 per form, depending on timing and intent. Backup withholding failures add separate penalties. Intentional disregard can lead to higher fines. Always verify TINs to avoid issues.

Common Mistakes to Avoid When Reporting 1099-INT and 1099-OID

  • Miscalculating OID or premiums—use IRS publications for accuracy.
  • Forgetting exemptions for corporations or foreign payments.
  • Not truncating TINs on recipient copies for security.
  • Overlooking FATCA checkboxes for international compliance.
  • Filing duplicates when combining interest and OID.

Frequently Asked Questions About IRS Forms 1099-INT and 1099-OID

What if OID is less than $10?

No filing required unless backup withholding or foreign tax applies.

Can I report OID on Form 1099-INT?

Only for short-term obligations; otherwise, use 1099-OID.

How do I handle negative OID on Treasury obligations?

Report in Box 8 of 1099-OID—it can be negative due to adjustments like deflation.

Are tax-exempt OID reports mandatory?

Required for covered securities acquired after 2016; optional before.

Where can I download the latest forms?

From IRS.gov/Form1099INT or IRS.gov/Form1099OID.

Conclusion: Stay Compliant with IRS Reporting in 2026

Mastering Forms 1099-INT and 1099-OID ensures smooth tax reporting for interest income and original issue discount. By following these instructions, you can avoid common pitfalls and meet deadlines effectively. For the most up-to-date details, always consult official IRS resources. If you’re a payer, consider consulting a tax professional for complex scenarios like REMICs or international payments.