If you received interest more than $10, you would get a Form 1099-INT. A 1099-INT tax form is a record that a person or entity paid you interest during the tax year. You may not have to pay income tax on all the interest it reports, but you still need to report this information on the return.
The Internal Revenue Service requires most payments of interest income to be reported on tax form 1099-INT by the person or entity that makes the payments. This is most commonly a bank, other financial institution, or government agency.
The form 1099-INT will include your Social Security Number or Taxpayer Identification Number and the amount you received. When you file your tax return, you don’t need to attach the copies of the form 1099-INT you receive, but you need to report the information from the forms on your tax return. That is because each bank, financial institution or other entities that pay you at least $10 of interest during the year must prepare a form 1099-INT and send it to IRS. IRS uses the form 1099-INT to ensure you report the correct amount of interest income on your tax return.
The following boxes you should understand in the form 1099-INT your received, so that you can report the interest on the appropriate lines of your tax return:
Box 1 of the form 1099-INT reports all taxable interest you receive, such as your earnings from a savings bank account. All amounts reported in box 1 must be reported on the “taxable interest” line of your tax return and are taxed in the same way as the other income you report on the return.
Box 2 reports interest penalties you are charged for withdrawing money from an account before the maturity date. For the penalty amounts reported in box 2, you may be able to take a deduction in the “adjusted gross income” section of your return.
Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills, or bonds. Please note that some of this kind of interest may be tax-exempt.
Box 4 reports any federal tax withheld on your interest income by the payer. You need to appropriately report the withheld tax in the “payment section” of your tax return.
Box 8 relates to interest-bearing investments you hold with state and local governments, such as municipal bonds. You need to report this tax-exempt interest on the “tax-exempt interest” line of your own tax return.
Please remember you should also prepare a Schedule B with the name of each payer and the amount of interest received when the combined total of taxable interest reported on all 1099-INTs exceeds $1,500.
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