Form 1099-INT
Form 1099-INT (Interest Income) is an IRS information return issued by banks, brokerage firms, credit unions, and other payers to report interest income of $10 or more paid to a recipient during the tax year. Recipients report this income on Schedule B of Form 1040, and it is generally taxed as ordinary income at applicable marginal rates.
Form 1099-INT is one of a family of 1099 information returns that the IRS uses to track income payments to individuals and entities. Any financial institution or payor that pays $10 or more in interest to an individual during the tax year is required to issue a 1099-INT by January 31 of the following year. Brokerage firms often consolidate 1099-INT data into a single combined 1099 statement along with 1099-DIV (dividends) and 1099-B (proceeds from broker transactions).
Box 1 of Form 1099-INT reports taxable interest income, which includes interest from savings accounts, CDs, money market accounts, Treasury bills, and corporate bonds. Box 3 reports interest on U.S. savings bonds and Treasury obligations, which is subject to federal income tax but exempt from state and local income taxes — a distinction that must be tracked for state returns. Box 8 reports tax-exempt interest income from municipal bonds, which is not included in federal taxable income but must still be reported on Form 1040 (it can affect the taxation of Social Security benefits and the alternative minimum tax).
Box 11 reports bond premium, which arises when a bond is purchased at a price above its face value. For taxable bonds, bond premium can be amortized annually to offset interest income, reducing the taxable amount reported in Box 1. For tax-exempt bonds, premium amortization reduces the cost basis of the bond but does not create a deductible expense.
Box 4 reports federal income tax withheld, which occurs in cases of backup withholding. The IRS may require payers to withhold 24% of payments if a taxpayer has failed to provide a correct taxpayer identification number (TIN) or has underreported income in prior years.
For investors, interest income is generally taxed as ordinary income, unlike qualified dividends and long-term capital gains, which benefit from preferential rates. This distinction makes the type of income generated by a portfolio highly relevant to after-tax return calculations. High-income investors with large fixed-income portfolios should be aware that interest income is also included in the net investment income calculation for the 3.8% NIIT.
All recipients of Form 1099-INT should verify that amounts match their own records. Errors on information returns are not uncommon, particularly for accrued interest adjustments on bonds purchased between interest payment dates.