Form 1099-OID 2017 Checklist
Purpose
Form 1099-OID reports original issue discount, qualified stated interest, and related adjustments for taxable and tax-exempt obligations held during 2017. A material 2017 regulatory shift requires payers to report certain amounts for tax-exempt covered securities acquired on or after January 1, 2017, including original issue discount and premium amortization.
Preparation Steps
Verify Covered Security Acquisition Date for Market Discount Reporting (Box 5)
Determine whether the obligation qualifies as a covered security acquired on or after January 1, 2017. For covered securities acquired on or after January 1, 2015, you must report accrued market discount on a constant yield basis unless the recipient notified you in writing under Regulation 1.6045-1(n)(5) declining the election.
For tax-exempt obligations that are covered securities acquired on or after January 1, 2017, and issued with original issue discount, report the market discount that accrued on the obligation during the year while held by the recipient. Payers may report market discount for tax-exempt obligations that are covered securities acquired before January 1, 2017, but this reporting remains optional for pre-2017 acquisitions.
Separate OID by Obligation Type: Taxable vs. U.S. Treasury (Boxes 1 and 8)
- Report original issue discount on taxable obligations in Box 1 and original issue discount on U.S. Treasury obligations separately in Box 8.
- The 2017 instructions clarify that the amount in Box 8 may be a negative number, such as when a Treasury inflation-protected security has a deflationary adjustment for the year.
Calculate Acquisition and Bond Premium Amortization for Covered Securities (Boxes 6 and 10)
For covered securities acquired with acquisition premium or bond premium, determine whether to report net original issue discount or gross amounts. You may report either a net amount that reflects the offset of original issue discount by premium amortization, or a gross amount for both the original issue discount and the premium amortization.
For noncovered securities acquired with an acquisition premium or a bond premium, you must report only the gross amount of original issue discount. Payers may report acquisition premium for tax-exempt obligations that are covered securities acquired before January 1, 2017, and issued with original issue discount, but this reporting remains optional.
Identify Tax-Exempt OID Covered Securities Acquired On or After January 1, 2017 (Box 11)
- Report tax-exempt original issue discount in Box 11 for obligations that are covered securities acquired on or after January 1, 2017.
- Payers may report the original issue discount for tax-exempt obligations that are covered securities acquired before January 1, 2017, but they face no requirement to do so.
Reconcile Boxes 2 and 8 or Boxes 2 and 11 (Qualified Stated Interest)
If Box 2 contains a value and Box 8 contains a value, the Box 2 amount represents interest on a U.S. Treasury obligation exempt from state and local tax. If Box 2 and Box 11 both contain values, the Box 2 amount represents tax-exempt interest.
- You must not double-report qualified stated interest across these boxes.
- You may report both qualified stated interest and original issue discount on Form 1099-OID rather than filing both Forms 1099-INT and 1099-OID.
Confirm Nominee Recipient Filing Procedures
- If you serve as the record holder but another person beneficially owns the obligation, file separate Forms 1099-OID for each beneficial owner showing allocable amounts.
- You must file Copy A with Form 1096 by February 28, 2018, for paper filing or April 2, 2018, for electronic filing.
Report Early Withdrawal Penalty Interest (Box 3)
- If the recipient withdrew funds before maturity, such as from a certificate of deposit, report the forfeited interest in Box 3.
- You must report this as a separate line item and not reduce the amounts in boxes 1 and 2 by the amount of the forfeiture.
Assemble and File by 2017 Year-End Deadlines
- Furnish Copy B to the recipient by January 31, 2018.
- File Copy A with Form 1096 by February 28, 2018, for paper filing or April 2, 2018, for electronic filing using Publication 1220 specifications.
The IRS processes paper forms by machine using optical character recognition equipment, so you cannot file Form 1096 or Copy A of Forms 1099-OID that you print from the IRS website. Scanner processing will reject printed copies.
2017 Year-Specific Updates
- Tax-Exempt Covered Security OID Reporting Effective January 1, 2017: Payers must now report tax-exempt original issue discount and acquisition or bond premium amortization in Boxes 11, 6, and 10 for covered securities acquired on or after January 1, 2017. An expanded reporting scope applies compared to the 2016 requirements. Optional reporting remains available for pre-2017 acquisitions, but no mandate exists for these earlier securities. A clear 2017 cutoff for mandatory expanded reporting has been established.
- Market Discount Constant Yield Basis Election Default: For covered securities acquired on or after January 1, 2015, the market discount is calculated on a constant yield basis unless the recipient notifies the payer in writing under Regulation 1.6045-1(n)(5) that no constant yield election applies. Document all such elections received during 2017.
- FATCA Chapter 4 Account Reporting Checkbox: If the FATCA filing requirement box receives a check mark, the payer reports to satisfy Chapter 4 account reporting obligations. Recipients may also have separate Form 8938 filing requirements.
- Investment Expenses of Single-Class REMICs (Box 9): For 2017, amounts in Box 9 are includible in Box 2 and may be deductible on Schedule A, subject to the 2 percent adjusted gross income limit. You must not report Box 9 amounts separately as a second amount of interest.
- State Income Tax Withholding Boxes 12–14: Report state tax withheld separately for each state using the correct state codes and identification numbers. The 2017 form clarifies that Boxes 12–14 are state-specific and you must not aggregate them across multiple states.
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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.
