Form 1099-INT is used to report interest and the information provided may be different for covered/non-covered transactions. For covered securities that were acquired at a discount or premium the payer must (unless certain notices were provided by the investor to the payer) either report the net interest amount or separately report the market discount and premium amortization amounts on the Form 1099-INT. For non-covered securities, the payer is not required to provide information to the taxpayer on any discount or premium and it is solely the responsibility of the taxpayer to account for those amounts on their tax return.
Box 1 contains the Interest Income and it is considered to be taxable and is reported as taxable interest on the tax return.
Box 2 contains the Early Withdrawal Penalty which represents any interest or principal forfeited when the investor/taxpayer surrendered the investment (withdrew the money) before the maturity date of the obligation. The investor/taxpayer may deduct this amount from their income as an adjustment to income on Line 30, Form 1040.
Box 3 contains the Interest Income on U.S Savings Bonds and Treasury Obligations. This amount is usually considered to be taxable and is reported as taxable interest on the tax return. This amount is typically not taxable at the state and local level and may be excluded from income on the state tax return. In addition, certain Savings Bond interest that is used for educational expenses are also excluded from being reported as taxable interest on the tax return. See: Form 8815 and its instructions.
Box 4 contains the Federal Tax Withholdings including any backup withholdings that were withheld out of the interest paid on the investment.
Box 5 contains information on the taxpayer’s share of any investment expenses. These expenses may be deducted as an itemized deduction on Schedule A (Form 1040) as a Miscellaneous Deduction – Other Expense, subject to the 2% adjusted gross income limitation.
Box 6 contains the Foreign Tax Paid out of the interest paid on the investment. This amount may be used to determine if the taxpayer can claim either a foreign tax credit on Form 1116 or an itemized deduction on Schedule A (Form 1040).
Box 7 contains the country or U.S. possession that the foreign tax reported in Box 6 was paid.
Box 8 contains the tax-exempt interest paid. This amount is entered on Line 8b, Form 1040.
Box 9 contains the Specified Private Activity Bond Interest tax-exempt interest paid. This amount is included in the Box 8 amount but will be subject to the Alternative Minimum Tax and be entered on Form 6251. See: Instructions for Form 6251.
Box 10 contains (for covered securities) the Market Discount amount that accrued on covered transaction during the year. Market discount generally occurs when a covered security is acquired at less than face value of a bond and the stated redemption price of a bond at maturity is more than the basis in the bond at the time it is acquired. This amount is to be added to the interest received and should be combined with any interest amount contained in Box 1 when reporting the taxable interest on Schedule B, Form 1040. If the security pays tax-exempt interest, this amount is to be added to the tax-exempt Interest received and should be combined with any tax-exempt Interest amount contained in Box 8.
Box 11 contains (for covered taxable securities), the Bond Premium amount for the year. Bond premium generally occurs when a covered security is acquired for an amount greater than the face value of the bond and the stated redemption price of a bond at maturity is less than the basis in the bond at the time it was acquired. This amount should be used to reduce the amount that is considered to be taxable interest (the amount in Box 1). If an amount is reported in this box, the taxpayer will make an adjustment on Form 1040 (Schedule B) to reduce the taxable interest. The amount contained in Box 11 will be entered as an “ABP Adjustment”. If no amount is entered in this Box 13, either no bond premium was incurred by the taxpayer or the payer of the debt instrument may have reported a net amount in Box 1 and no further entry for premium amortization is made.
Box 12 contains (for covered U.S Treasury securities), the Bond Premium amount for the year. This amount should be used to reduce the amount that is considered to be taxable interest (the amount in Box 3). If an amount is reported in this box, the taxpayer will make an adjustment on Form 1040 (Schedule B) to reduce the taxable interest. The amount contained in Box 12 will be entered as an “ABP Adjustment“. If no amount is entered in this Box 12, either no bond premium was incurred by the taxpayer or the payer of the debt instrument may have reported a net amount in Box 3 and no further entry for premium amortization is made.
Box 13 contains (for covered non-taxable securities), the Bond Premium amount for the year. If an amount is reported in this box, the taxpayer will reduce the non-taxable interest reported on Line 8b (Form 1040) up to the amount reported in Box 8. Any amount in Box 13 that exceeds the amount reported in Box 8 is considered an excess amount and is a non-deductible loss.
Box 14 shows a description of the debt instrument and may include information such as the identification (CUSIP) number, the interest or coupon rate, issuer and year of maturity.
Box 15 – 17 contains the State Withholding Information related to the investment. These amounts should be entered in Keystone Tax Solutions from the Main Menu of the Tax Return (Form 1040) by selecting Payments & Estimates Other Federal Withholdings (Form 1099).
How to enter in Keystone Tax Solutions ProWeb
To input these amounts in Keystone Tax Solutions ProWeb, from the Main Menu of the Tax Return (Form 1040) select:
- Federal Section
- Interest and Dividends (Form 1099-INT / 1099-DIV)
- Select BEGIN next to Interest or Dividend Income
- Select Interest Income, Form 1099-INT, (including interest income < 1,500)
- Enter the Payer’s Name
- Enter all interest listed in Box 1 of Form 1099-INT
- Enter the appropriate amounts from Boxes 2 through 13
- Enter any State Withholding
NOTE: This is a guide on entering Form 1099-INT into the Keystone Tax Solutions ProWeb program. This is not intended as tax advice.