Form 1099-OID: Original Issue Discount 2025 – A Complete Guide

What Form 1099-OID Is For

Form 1099-OID (Original Issue Discount) is a tax form issued to report a special type of interest income that accrues when you purchase certain bonds, notes, or certificates of deposit (CDs) at a price lower than their face value. This price difference is called “original issue discount” or OID.

Think of OID as interest you earn gradually over time, even though you won't receive the money until the bond matures. For example, if you buy a zero-coupon bond for $800 that pays $1,000 at maturity in five years, that $200 difference is OID. The IRS requires you to report a portion of this discount as taxable income each year you own the instrument, even though you haven't received the cash yet.

Financial institutions, brokers, and bond issuers send Form 1099-OID to investors who earn $10 or more in OID during the calendar year. You'll receive this form if you own bonds, debentures, notes, or other debt instruments with terms longer than one year that were issued at a discount. Common examples include zero-coupon bonds, stripped bonds and coupons, certain corporate bonds, and long-term CDs issued at a discount.

The form shows the amount of OID you must report as interest income on your tax return, along with any qualified stated interest payments and early withdrawal penalties that may affect your taxable income. Source

When You’d Use Form 1099-OID (Late/Amended Filings)

For Recipients

You typically don't “use” Form 1099-OID in the sense of filing it yourself—you receive it from your broker or financial institution by January 31 (or February 15 if part of a consolidated statement) and use the information to complete your tax return. If you discover an error or omission after filing your tax return, you'll need to file an amended return using Form 1040-X.

For Issuers and Nominees

If you're a financial institution, broker, or nominee who holds OID obligations for others, you must file Form 1099-OID with the IRS by February 28 (or March 31 if filing electronically). If you miss this deadline or discover errors, you must file corrected forms as soon as possible to avoid penalties.

Late or corrected Forms 1099-OID can be submitted through the IRS Filing Information Returns Electronically (FIRE) system or by paper. Mark corrected forms appropriately in the designated checkbox. If you're an issuer who failed to file Form 8281 (Information Return for Publicly Offered Original Issue Discount Instruments) within 30 days of issuance, you should file it immediately even though it's late—the IRS uses this information to update Publication 1212, which helps brokers and investors calculate OID correctly. Source

Key Rules or Details for 2025

• Reporting Threshold: Issuers must file Form 1099-OID if the total OID includible in gross income is at least $10, or if any foreign tax was withheld, or if federal income tax was withheld under backup withholding rules (even if OID is less than $10).
• Electronic Filing Mandate: If you have 10 or more information returns to file, you may be required to e-file. The IRS strongly encourages electronic filing for efficiency and accuracy.
• Scannable Forms Required: Do not print Copy A from the IRS website and mail it—this version is not scannable and will result in penalties. Order official scannable forms from IRS.gov/EmployerForms or file electronically.
• Nominee Reporting: If you receive Form 1099-OID showing amounts belonging to another person, you're considered a nominee recipient and must complete a Form 1099-OID for each actual owner, showing their allocable amounts. However, spouses are not required to file nominee returns for each other.
• Backup Withholding: If a recipient fails to provide their taxpayer identification number (TIN) or provides an incorrect TIN, you must backup withhold on payments. For 2025, backup withholding applies to amounts in boxes 1, 2, and 8, limited to cash paid, after reducing by early withdrawal penalties in box 3.
• Covered Securities: For covered securities acquired with acquisition premium or market discount, additional reporting requirements apply in boxes 5 and 6. The regulations specify how to calculate these adjustments using the constant yield method.
• Tax-Exempt OID: Tax-exempt OID from municipal bonds and certain other obligations is reported in box 11, not box 1, though it may still have tax consequences for alternative minimum tax purposes. Source

Step-by-Step (High Level)

For Recipients (Individual Taxpayers)

Step 1: Receive Your Form 1099-OID

Receive your Form 1099-OID by January 31 (or February 15 for consolidated statements) from your broker, bank, or the bond issuer.

Step 2: Review the Information

Check that your name, address, and TIN are correct. Box 1 shows taxable OID, box 2 shows other periodic interest, box 3 shows early withdrawal penalties, and box 8 shows OID on U.S. Treasury obligations.

Step 3: Report OID on Schedule B

If you have more than $1,500 in total interest and dividends, list the payer's name and the amount from box 1 (and box 8 if applicable) on Schedule B (Form 1040), Part I. The total flows to Form 1040.

Step 4: Adjust if Necessary

If you purchased the bond at a premium or with acquisition premium, or if you bought it mid-year, you may need to recalculate your OID using Publication 1212 or consult a tax professional. Report adjustments on Schedule B.

Step 5: Deduct Early Withdrawal Penalties

If box 3 shows an early withdrawal penalty, deduct this on Schedule 1 (Form 1040), line 18.

For Issuers and Nominees

Step 1: Determine Filing Obligation

Identify all OID debt instruments you hold as nominee and determine if OID is $10 or more per recipient.

Step 2: Calculate OID Amounts

Use Publication 1212's OID tables or the income tax regulations to calculate the correct OID for each owner based on actual holding periods.

Step 3: Complete Forms 1099-OID

Fill in all required information including payer information, recipient information, TIN, account numbers, and amounts in appropriate boxes.

Step 4: Furnish Copies and File

Furnish Copy B to recipients by January 31 (or February 15 for consolidated statements).

Step 5: File with the IRS

File Copy A with the IRS along with Form 1096 by February 28 (March 31 if filing electronically). Use only scannable forms or file electronically. Source

Common Mistakes and How to Avoid Them

• Mistake #1: Filing Non-Scannable Forms
  Solution: Order official scannable forms from IRS.gov/EmployerForms or file electronically through the FIRE system.
• Mistake #2: Not Reporting OID You Haven't Received
  Solution: Always include amounts from boxes 1 and 8 of Form 1099-OID on your tax return, even though you won't receive the cash until maturity.
• Mistake #3: Incorrect OID Calculations for Partial-Year Holdings
  Solution: Recalculate OID using Publication 1212's daily OID tables based on your actual days held.
• Mistake #4: Ignoring Acquisition Premium or Bond Premium
  Solution: Reduce reportable OID by acquisition premium amortization; check box 6 and Publication 550.
• Mistake #5: Unnecessary Nominee Returns Between Spouses
  Solution: Spouses are exempt from nominee reporting for each other.
• Mistake #6: Missing the Electronic Filing Threshold
  Solution: If you have 10 or more Forms 1099 of any type, verify whether e-filing is required at IRS.gov/InfoReturn.
• Mistake #7: Confusing Tax-Exempt and Taxable OID
  Solution: Report tax-exempt OID (box 11) separately and check private activity bond AMT implications (box 9). Source

What Happens After You File

For Recipients

After you file your tax return with the OID amounts included as interest income, the IRS matches this against the Forms 1099-OID filed by issuers. If there's a mismatch—you didn't report OID that was reported to the IRS—you may receive a CP2000 notice proposing additional tax, penalties, and interest. Respond promptly with documentation if you believe the notice is incorrect.

The OID you report increases your tax basis in the bond, which is important when you eventually sell or redeem it. This prevents double taxation—you're taxed on the OID as it accrues each year, so you won't be taxed again on that same amount when you receive the maturity payment. Keep good records of your annual OID inclusions to calculate your adjusted basis correctly.

For Issuers and Nominees

After filing, the IRS processes your Forms 1099-OID and matches them against taxpayer returns. If you made errors, the IRS may assess penalties ranging from $60 to $330 per form (as of 2025) depending on how late the correction is made, with higher penalties for intentional disregard. Timely corrections can reduce or eliminate penalties.

You must retain copies of all Forms 1099-OID and supporting documentation for at least four years. The IRS may audit your information return filing to verify compliance with reporting requirements. Systematic errors affecting multiple recipients can result in significant penalty assessments.

If you discover errors after filing, submit corrected Forms 1099-OID immediately. Check the “CORRECTED” box and ensure all information matches the original return except for the corrected fields. Source

FAQs

Q1: Do I have to pay tax on OID even though I haven't received any money?

Yes. OID is considered “phantom income”—you must report it annually as it accrues, even though you won't receive the cash until the bond matures or you sell it. However, you're building up your tax basis in the bond, so you won't be taxed again on that same OID when you eventually receive the maturity payment.

Q2: What's the difference between Form 1099-INT and Form 1099-OID?

Form 1099-INT reports stated interest that's paid to you regularly (like coupon payments on traditional bonds). Form 1099-OID reports original issue discount—the difference between a bond's discounted purchase price and its face value at maturity. Some bonds may generate both forms, while zero-coupon bonds typically generate only Form 1099-OID.

Q3: I bought a bond mid-year. Is the OID amount on my Form 1099-OID correct?

Maybe not. Brokers often report OID for the entire calendar year without adjusting for your actual holding period. You may need to recalculate based on the number of days you actually held the bond using Publication 1212. If you bought from another investor (not at original issue), you may also need to adjust for acquisition premium or market discount.

Q4: What if I never received Form 1099-OID?

You're still required to report the OID. Contact your broker or the bond issuer to request a copy. If unavailable, calculate the OID yourself using Publication 1212's tables or consult a tax professional. Failure to report OID because you didn't receive the form is not a valid excuse with the IRS.

Q5: Are U.S. savings bonds reported on Form 1099-OID?

No. U.S. savings bonds (Series EE, Series I) are reported on Form 1099-INT when redeemed, not on Form 1099-OID, even though they're issued at a discount or accrue interest. You can choose to report the interest annually or defer it until redemption.

Q6: What is “acquisition premium” in box 6, and what do I do with it?

Acquisition premium occurs when you buy a bond above its original issue price but below its face value (between the issue price plus accrued OID and the maturity value). The amount in box 6 reduces your reportable OID—it's already netted against the box 1 amount unless you purchased the bond at a premium, in which case you may have no OID to report. See Publication 550 for details.

Q7: I'm a nominee—what are my responsibilities?

If you hold OID obligations in your name for someone else (such as in street name for a client), you must file Forms 1099-OID for the actual owners showing their allocable OID amounts. You must also file Form 1096 as the filer. This doesn't apply between spouses. Nominees must furnish copies to recipients by January 31 and file with the IRS by February 28 (March 31 if filing electronically).

For More Information

• IRS Form 1099-OID: IRS.gov/Form1099OID
• Publication 1212 (OID Tables): IRS.gov/Pub1212
• Publication 550 (Investment Income): IRS.gov/Pub550
• Instructions for Forms 1099-INT and 1099-OID: IRS.gov/instructions/i1099int

This guide is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.

‍