Key Takeaways

• If a bank, financial institution, or other entity pays you at least $10 of interest during the year, it is required to prepare a Form 1099-INT, send you a copy by January 31, and file a copy with the IRS.

• If you receive a Form 1099-INT, you’ll need to include the amount shown in Box 1 on the “taxable interest” line of your tax return.

• Report any tax-exempt interest shown in Box 8 of the 1099-INT on the “tax-exempt interest” line of your tax return.

• Including federal tax withheld shown in Box 4 of the 1099-INT on your tax return could reduce the amount of tax you’ll owe or increase your refund.

Interest income

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. If you receive a 1099-INT, you may not have to pay income tax on the interest it reports, but you may still need to report it on your return.

1099-INT filing requirements

When you file your taxes, you don’t need to attach copies of the 1099-INT forms you receive, but you do need to report the information from the forms on your tax return. That’s because each bank, financial institution or other entity that pays you at least $10 of interest during the year is required to:

• prepare a 1099-INT,
• send you a copy by January 31, and
• file a copy with the IRS.

The IRS uses the information on the 1099-INT to compare the amount on the form to what you report on your tax return.

TurboTax Tip: If you were charged interest penalties for withdrawing money from an account before the maturity date (shown in Box 2 of Form 1099-INT), you may be able to take a deduction on Schedule 1 of Form 1040 as an adjustment to income.

Taxation of interest

When you receive a 1099-INT, you’ll need to understand what each box of the form is reporting, so that you can report your interest on the appropriate lines of your tax return:

• Box 1 of the 1099-INT reports all taxable interest you receive, such as your earnings from a savings account.
• Box 2 reports interest penalties you were charged for withdrawing money from an account before the maturity date.
• Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills or bonds. Some of this may be tax-exempt.
• Box 4 reports any federal tax withheld on your interest income by the payer.
• Box 8 reports tax-exempt interest and relates to interest-bearing investments you hold with state and local governments, such as municipal bonds.