Form 1099-INT Interest Income 2021: A Complete Guide

Form 1099-INT is an information return that reports interest income you received during the tax year. If a bank, credit union, brokerage, or other financial institution paid you $10 or more in interest during 2021, they must send you this form by January 31, 2022. The institution also files a copy with the IRS.

Think of Form 1099-INT as a receipt showing how much taxable interest you earned. This includes interest from savings accounts, checking accounts, certificates of deposit (CDs), bonds, money market accounts, and certain other investments. The IRS uses this information to verify that you're reporting all your taxable interest income on your tax return.

The form typically shows several key pieces of information: your name and taxpayer identification number (usually your Social Security Number), the payer's information, and boxes detailing different types of interest. Box 1 reports taxable interest, Box 3 shows interest on U.S. Savings Bonds and Treasury obligations, and Box 8 reports tax-exempt interest from municipal bonds. You'll need this information to complete your Form 1040 when filing your federal income tax return.

What Form 1099-INT Is For

When You'd Use Form 1099-INT (Late/Amended)

Filing Deadlines

For the 2021 tax year, institutions must send Form 1099-INT to recipients by January 31, 2022. They must file paper copies with the IRS by February 28, 2022, or March 31, 2022 if filing electronically.

Late Filing

If you're a payer who missed the deadline, you should file as soon as possible to minimize penalties. Penalties increase the longer you wait: $50 per form if filed within 30 days late (up to $571,000 annually), $110 per form if filed 31 days to August 1 ($1.7 million cap), and $280 per form after August 1 or for not filing at all ($3.4 million maximum). Small businesses face lower maximum penalties.

Extensions

You can request an automatic 30-day extension by filing Form 8809 by the original due date, either on paper or electronically through the FIRE System. Under hardship conditions, an additional 30-day extension may be available.

Amended/Corrected Returns

If you discover an error after filing—whether you're the payer or recipient—corrections are necessary. Payers must file corrected forms with the IRS and provide corrected statements to recipients. There are two error types:

Error Type 1 (incorrect amounts or codes): File one corrected return checking the "CORRECTED" box with accurate information.

Error Type 2 (wrong taxpayer identification number, name, or form type): File two returns—first, a corrected return with the "CORRECTED" box checked showing $0 amounts; second, a new "original" return with correct information.

Key Rules or Details for 2021

$10 Minimum Threshold

Financial institutions must issue Form 1099-INT only when they pay $10 or more in interest in boxes 1, 3, or 8. However, they must also issue the form if they withheld federal income tax under backup withholding rules or withheld foreign tax, regardless of the amount.

Backup Withholding

If you fail to provide your correct taxpayer identification number or the IRS notifies the payer that you underreported interest income, the payer must withhold 24% of your interest payments and report this in Box 4 of your Form 1099-INT.

Exempt Recipients

Corporations, tax-exempt organizations, individual retirement arrangements (IRAs), government agencies, and certain other entities don't receive Form 1099-INT for most interest payments—though exceptions exist for tax credit bonds.

Taxable vs. Tax-Exempt Interest

Interest in Box 1 is fully taxable on your federal return. Box 3 (U.S. Treasury obligations) is federally taxable but may be state tax-exempt. Box 8 (municipal bond interest) is federally tax-exempt but must be reported and may trigger alternative minimum tax if it includes specified private activity bond interest (Box 9).

Bond Premium

Boxes 11-13 report bond premium amortization for covered securities acquired at a premium, which may reduce your taxable interest or provide information for your records.

Early Withdrawal Penalties

Box 2 shows interest forfeited due to early CD withdrawals—this amount is deductible on your tax return even though it's included in Box 1's total.

Step-by-Step (High Level)

For Recipients (Taxpayers)

Step 1: Receive Your Forms

By early February 2022, gather all Form 1099-INT statements from every financial institution where you held interest-bearing accounts during 2021.

Step 2: Review for Accuracy

Verify that your name, Social Security Number, and interest amounts match your records. Check for duplicate forms or missing institutions.

Step 3: Organize by Type

Separate taxable interest (Box 1), U.S. obligations (Box 3), and tax-exempt interest (Box 8) since they're reported differently on your return.

Step 4: Report on Your Tax Return

Enter total Box 1 interest on Schedule B (if over $1,500) or directly on Form 1040, Line 2b. Report Box 3 amounts on Schedule B. Report Box 8 tax-exempt interest on Form 1040, Line 2a (even though it's not taxable).

Step 5: Deduct Penalties and Expenses

If Box 2 shows early withdrawal penalties, claim this deduction on Schedule 1. Box 5 investment expenses (REMICs only) are reported but no longer deductible under current tax law.

Step 6: Keep Records

Retain all 1099-INT forms with your tax records for at least three years, or longer if you're tracking bond premium adjustments.

For Payers (Financial Institutions)

Step 1: Identify Reportable Accounts

Determine which accounts paid $10+ in interest or had backup withholding/foreign tax withholding during 2021.

Step 2: Collect Information

Ensure you have correct taxpayer identification numbers and addresses for all recipients, or implement backup withholding for those without proper documentation.

Step 3: Prepare Forms

Complete Form 1099-INT for each recipient, ensuring accuracy in all boxes. Prepare Form 1096 (transmittal form) for paper submissions.

Step 4: Furnish to Recipients

Mail or provide Copy B to recipients by January 31, 2022. Electronic delivery requires recipient consent.

Step 5: File with IRS

Submit Copy A to the appropriate IRS processing center by February 28, 2022 (paper) or March 31, 2022 (electronic). Electronic filing is mandatory if you file 250 or more forms.

Step 6: Maintain Records

Keep copies for your records and be prepared to file corrections if errors are discovered.

Common Mistakes and How to Avoid Them

Mistake #1: Not Reporting Small Amounts – Many taxpayers mistakenly believe that interest under $10 doesn't need to be reported. While you won't receive a 1099-INT for amounts under $10, you're still legally required to report all interest income on your tax return, no matter how small.

Mistake #2: Ignoring Tax-Exempt Interest – Just because interest is tax-exempt (Box 8) doesn't mean you skip reporting it. You must still report tax-exempt interest on Line 2a of Form 1040. This information affects eligibility for certain credits and deductions and can impact alternative minimum tax calculations.

Mistake #3: Overlooking Early Withdrawal Penalties – Failing to claim the deduction for early withdrawal penalties (Box 2) means paying tax on income you didn't actually receive. Always transfer this amount to Schedule 1 as an "above-the-line" deduction.

Mistake #4: Incorrect Taxpayer Identification Numbers – This is the most common payer error and triggers backup withholding. Payers should use TIN Matching services before filing. Recipients should verify their Social Security Number on all forms.

Mistake #5: Double-Counting Joint Account Interest – When spouses file separately with joint accounts, ensure interest is properly allocated between returns. Don't report 100% on both returns. The primary account holder typically reports it unless you file nominee returns to show proper allocation.

Mistake #6: Missing Form 1096 – Paper filers who submit Form 1099-INT without the required Form 1096 transmittal will face processing delays and potential penalties. Always include Form 1096 when mailing paper returns.

Mistake #7: Filing Paper When Electronic Is Required – If you file 250 or more information returns, you must file electronically or request a waiver using Form 8508. Filing paper when electronic is mandatory incurs a $280-per-form penalty.

What Happens After You File

For Recipients

After you report your Form 1099-INT interest on your tax return, the IRS's automated systems match the amounts you reported against the information returns filed by payers. If everything matches and your return contains no red flags, your return processes normally. You'll receive your refund (if applicable) or your account will show the correct balance due.

If there's a mismatch—you reported less interest than shown on filed Forms 1099-INT—you'll likely receive an IRS notice (CP2000) months later proposing additional tax, penalties, and interest. You'll have the opportunity to respond, agree, or dispute the discrepancy. Keep all your 1099-INT forms and records to support your position if questioned.

For Payers

After submitting Forms 1099-INT and 1096 to the IRS, your information goes into the IRS's massive database for matching against taxpayer returns. If you filed electronically, you'll receive acknowledgment of receipt. Paper filers should keep proof of mailing.

If the IRS identifies errors, missing taxpayer identification numbers, or name/TIN mismatches, you'll receive notices (CP2100 or CP2100A) typically in the fall. These notices identify problematic accounts and require you to solicit corrected information from recipients or begin backup withholding. You must respond appropriately to avoid penalties.

If you discover errors before the IRS does, file corrections immediately using the procedures outlined earlier. Voluntary corrections often result in reduced or waived penalties compared to IRS-discovered errors. The IRS may also assess information return penalties if you failed to file timely or accurately, though you can request penalty relief for reasonable cause.

FAQs

Q1: What if I receive a Form 1099-INT after filing my tax return?

If you discover you forgot to report interest income from a late-arriving 1099-INT, you should file an amended return using Form 1040-X. You have three years from the original return's due date or two years from when you paid the tax (whichever is later) to file an amended return. Don't ignore it—the IRS will eventually match records and send you a bill with interest and potential penalties.

Q2: Do I need to report interest from my IRA or 401(k)?

No. Interest earned inside retirement accounts like traditional IRAs, Roth IRAs, 401(k)s, and similar plans is tax-deferred or tax-free and shouldn't be reported annually on Form 1099-INT. You'll pay taxes on traditional IRA/401(k) distributions when you withdraw money (reported on Form 1099-R), but not on the annual interest accumulation inside the account.

Q3: What's the difference between taxable and tax-exempt interest?

Taxable interest (Box 1) is subject to federal income tax at your ordinary income tax rate and must be included in your adjusted gross income. Tax-exempt interest (Box 8) comes from municipal bonds and isn't subject to federal income tax, though it must still be reported on your return and may be taxable at the state level or subject to alternative minimum tax if it's private activity bond interest.

Q4: Can I avoid backup withholding?

Yes. Provide your correct taxpayer identification number (usually your Social Security Number) to your financial institution using Form W-9 when opening accounts. Ensure it matches IRS records exactly. If you receive a backup withholding notice, correct any TIN discrepancies immediately. Once backup withholding starts, it typically continues until you resolve the underlying issue with the IRS.

Q5: What if my Form 1099-INT shows an incorrect amount?

Contact the issuer (bank, brokerage, etc.) immediately and request a corrected Form 1099-INT. They're required to provide corrections and file them with the IRS. Keep documentation of your communications. If you can't get a correction before filing your tax return, report the correct amount on your return and attach a statement explaining the discrepancy. Maintain records proving the correct amount in case of IRS inquiry.

Q6: How does Form 1099-INT affect my state taxes?

This varies by state. Most states tax interest income, but many exempt interest on U.S. Treasury obligations (Box 3) from state income tax. Some states also exempt interest on their own municipal bonds but tax other states' municipal bonds. Check your state's tax instructions or consult a tax professional to understand how to report Form 1099-INT interest on your state return.

Q7: What happens if I never receive a Form 1099-INT but know I earned interest?

You must still report all interest income even without receiving Form 1099-INT. If you earned less than $10 from an institution, they're not required to send you one. Check your bank statements to calculate total interest earned and report it on Schedule B or directly on Form 1040. The IRS requires reporting of all income, regardless of whether you receive an information return.

Sources

All information compiled from official IRS resources, including the 2021 Instructions for Forms 1099-INT and 1099-OID, 2021 General Instructions for Certain Information Returns, IRS Form 1099-INT Information Page, and IRS Information Return Penalties.

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