Form 1099-OID 2016 Checklist
Purpose and Filing Deadlines
Form 1099-OID reports original issue discount, qualified stated interest, market discount, acquisition premium, bond premium amortization, and early withdrawal penalties for the 2016 calendar year.
Payers must furnish Copy B to recipients by January 31, 2017, and file Copy A with the IRS by February 28, 2017, if filing on paper, or by March 31, 2017, if filing electronically.
Taxpayer Identification Requirements
You must verify the recipient's complete taxpayer identification number against IRS records before filing.
Acceptable TIN formats include Social Security Numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, or Employer Identification Numbers.
Payers may display only the last four digits on Copy B furnished to recipients under the 2016 instructions. Issuers must report the complete TIN to the IRS on all forms filed with the agency.
Calculating Original Issue Discount
You must calculate original issue discount for the 2016 calendar year using the Section 1272 constant yield method.
The calculation must allocate OID only to the recipient's actual holding period if the obligation was disposed of or acquired during the year.
Distinguishing Taxable and Treasury Obligations
OID on taxable obligations must be reported in Box 1 of Form 1099-OID.
OID on U.S. Treasury obligations must be reported separately in Box 8 because Treasury OID is exempt from state and local income tax.
You must ensure that recipients receive accurate reporting that distinguishes between these two categories. This distinction allows recipients to claim the appropriate state and local tax exemptions on their returns.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Reporting Acquisition Premium
For taxable covered securities acquired with an acquisition premium, you may choose between two reporting methods.
Under the first approach, you report net OID in Box 1 after reducing the gross OID by the acquisition premium amortization for the year.
Alternatively, you may report the gross OID amount in Box 1 and report the gross acquisition premium amortization separately in Box 6. Both methods produce the same tax result for the recipient.
Qualified Stated Interest Reporting
You must report qualified stated interest in Box 2 of Form 1099-OID.
If the obligation has both OID and qualified stated interest and is a U.S. Treasury security, you must ensure that the qualified stated interest is not duplicated between Boxes 2 and 8.
Early Withdrawal Penalties
You must enter the early withdrawal penalty amount in Box 3 for certificates of deposit, time deposits, or bonus savings plans redeemed before maturity.
The penalty represents forfeited interest or principal that the recipient paid due to early redemption, and this amount qualifies as an above-the-line deduction that reduces their adjusted gross income.
Backup Withholding Requirements
You must calculate and enter backup withholding in Box 4 if the recipient failed to provide a correct TIN or declined to certify their non-foreign status.
For 2016, the backup withholding rate is 28 percent of the reportable amount.
Form W-9 documentation must be maintained in your records to support the backup withholding determination. Recipients can claim credit for backup withholding on their income tax return.
Market Discount Accrual Method
For taxable covered securities acquired with market discount, you must report accrued market discount in Box 5 if the recipient elected under Section 1278(b) to include market discount in income currently and notified you in writing.
You must use the constant yield method described in Section 1276(b)(2) to determine market discount accruals unless the recipient notified you in writing that they did not make a Section 1276(b) election to use the constant yield method.
Brokers must use the constant yield method as the default reporting approach when the Section 1278(b) election applies. Use of the ratable method requires specific written notification from the taxpayer.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Bond Premium Amortization
Box 10 must reflect bond premium amortization for taxable covered securities, including Treasury Inflation Protected Securities.
You must report the amount of bond premium amortization allocable to interest paid during the tax year unless the recipient notified you in writing that they elected not to amortize bond premium under Section 171.
Obligation Description Requirements
You must complete Box 7 with either the CUSIP number or a complete obligation description.
If no CUSIP number exists, you must provide the stock exchange abbreviation, issuer name, coupon rate, and maturity year.
Nominee Filing Obligations
If you are the record holder but not the beneficial owner of an obligation, you must file a separate Form 1099-OID for each actual owner.
Each form must show only the amounts allocable to that specific owner based on their proportional ownership.
You must list yourself as the filer on Form 1096 when submitting nominee returns. A spouse is not required to file a nominee return to show amounts owned by the other spouse.
Form Transmittal and Reference Materials
Copy A of Form 1099-OID must be attached to Form 1096 Annual Summary and Transmittal of Certain Information Returns when filing with the IRS.
You should use the 2016 General Instructions for Certain Information Returns and the 2016 Instructions for Forms 1099-INT and 1099-OID as authoritative guidance for all reporting situations and special circumstances.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
