Form 1099-INT–2023 Tax Year Checklist
Purpose
Form 1099-INT reports taxable and tax-exempt interest income paid to recipients during the 2023 calendar year. The current form revision (January 2024) clarifies the reporting of covered security premium amortization under Section 171 and the calculation of constant yield market discount for securities acquired on or after January 1, 2015, aligning with updated Treasury regulations.
Preparation Steps
Step 1: Verify Taxpayer Identification Numbers
Confirm that both the payer TIN and recipient TIN (SSN, ITIN, ATIN, or EIN) are complete and accurate before printing. Verify that the recipient TIN matches IRS records. Backup withholding rules for 2023 apply if the taxpayer's TIN is missing or incorrect, as per the current Form W-9 instructions.
Step 2: Report Taxable Interest Income in Box 1
Report all taxable interest paid during calendar year 2023 in Box 1. Include any credits from clean renewable energy bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, qualified school construction bonds, and Build America bonds received on the 2023 credit allowance dates (March 15, June 15, September 15, and December 15). These credits are treated as interest income paid to the recipient on those dates.
Step 3: Complete Box 2 for Early Withdrawal Penalties
Complete Box 2 only if the recipient forfeited interest or principal in 2023 due to early withdrawal from a time savings account. Document the forfeiture amount separately. The recipient may claim this as an above-the-line deduction on their 2023 Form 1040. Do not reduce the amount reported in Box 1 by the amount of the forfeiture.
Step 4: Report U.S. Treasury Interest in Box 3
Enter interest on U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes paid in 2023 in Box 3 only. Do not duplicate these amounts in Box 1. This interest is exempt from state and local income taxes but is subject to federal income tax. Do not include this interest in Box 1.
Step 5: Report Backup Withholding in Box 4
Report 2023 backup withholding in Box 4 if you withheld federal income tax due to a missing or incorrect TIN. The recipient must report this amount as federal income tax withheld on their 2023 Form 1040 or Form 1040-SR. Backup withholding applies to payments reported in Box 1 (which may be reduced by Box 2 amounts), Box 3, and Box 8.
Step 6: Report Premium Amortization for Covered Securities
For covered securities held by the recipient and acquired at a premium in 2023 or prior years, complete Boxes 11, 12, and/or 13 to reflect premium amortization allocable to 2023 interest payments. You are not required to report premium amortization if the recipient notified you in writing under Regulations Section 1.6045-1(n)(5) that they elect not to amortize bond premium under Section 171 for taxable securities.
Step 7: Report Market Discount for Covered Securities
For covered securities where the recipient made a Section 1278(b) election to accrue market discount into income and notified you in writing under Regulations Section 1.6045-1(n)(5), report accrued market discount in Box 10. Use a constant yield basis for securities acquired on or after January 1, 2015, unless the recipient notified you in writing that they do not want to use the constant yield method under Section 1276(b).
Step 8: Complete State Tax Information
Complete Boxes 15 through 17 for state tax information if you withheld state income tax on 2023 interest payments. Enter the abbreviated state name in Box 15, your state identification number assigned by that state in Box 16, and the amount of state tax withheld in Box 17. Furnish Copy 1 to the state tax department and Copy 2 to the recipient when required.
Step 9: File Nominee Returns When Required
If you are a nominee receiving interest belonging to another person, file a separate Form 1099-INT for each beneficial owner showing their allocable 2023 income. List yourself as the payer and the beneficial owner as the recipient. When filing paper forms, submit Copy A with Form 1096 to the IRS. Furnish Copy B to each beneficial owner by January 31, 2024.
Step 10: Apply Withholding Rules for Nonresident Aliens
For nonresident alien recipients receiving 2023 interest, determine withholding obligations under IRC Chapter 3. File Form 1042-S if applicable and reference Publication 515 for detailed guidance. U.S. bank deposit interest may be subject to different reporting requirements than other types of interest income.
Step 11: Understand Filing Method Requirements
Determine whether you must file electronically or may file on paper. For tax year 2023 returns filed in 2024, you must file electronically if you have 10 or more information returns in aggregate (across all form types). If you have fewer than 10 returns, you may file on paper using official IRS-printed forms or file electronically.
Step 12: Use Proper Forms for Filing Method
When filing electronically, transmit your data directly to the IRS without Form 1096. When filing paper returns, use only the official IRS-printed Copy A (scannable red form) for submission to the IRS. Do not print Copy A from the IRS website, as downloaded versions are not scannable, and penalties apply for submitting non-scannable forms. Attach Form 1096 as a transmittal summary when filing paper forms.
Step 13: Meet Filing Deadlines
Furnish Copy B to recipients by January 31, 2024. File with the IRS by February 28, 2024, if filing paper forms, or by March 31, 2024, if filing electronically. Request an extension using the procedures outlined in the General Instructions for Certain Information Returns if you cannot meet these deadlines.
Step 14: Furnish Required Copies to Recipients
Provide Copy B to the recipient and Copy 2 for the recipient’s state tax return filing when applicable. You may furnish statements to recipients electronically if the recipient consents under the procedures outlined in the General Instructions for Certain Information Returns. The statement must contain all information shown on the official Form 1099-INT.
Step 15: Maintain Proper Documentation
Retain Copy C or an equivalent record for your files. Keep documentation supporting the amounts reported on each Form 1099-INT, including records of premium amortization calculations, market discount accruals, and any written notifications received from recipients regarding elections under Sections 171, 1276(b), or 1278(b).
Key Updates for 2023 Tax Year
Covered Security Premium Amortization
Payers must report premium amortization on taxable covered securities and Treasury obligations in Boxes 11 and 12, respectively, and on tax-exempt covered securities in Box 13, unless the recipient notified the payer in writing under Regulations Section 1.6045-1(n)(5), declining amortization for taxable securities. This ensures that recipients can properly net premium amortization against interest income on their 2023 tax return per the Instructions for Schedule B (Form 1040). For tax-exempt covered securities, premium amortization must always be reported and reduces the recipient’s basis.
Market Discount Accrual Method
For covered securities acquired on or after January 1, 2015, the constant yield calculation is the default method for 2023 accruals unless the recipient elected otherwise in writing under Regulations Section 1.6045-1(n)(5). The non-constant yield election is no longer the default. Payers must apply the constant yield method unless the recipient specifically notifies them otherwise before the accrual period begins.
Tax Credit Bonds
Build America Bonds and other tax credit bonds continue to generate credit allowance dates in 2023 (March 15, June 15, September 15, and December 15). Credits are treated as interest income paid to the recipient on those dates and must be reported in B of the tax return. Tax return filers use Form 8912 to calculate the credit properly on their tax returns. For bonds issued during the three months ending on a credit allowance date and for bonds that are redeemed or mature, prorate the credit amount based on the portion of the three months during which the bond was outstanding.
FATCA Filing Requirement
The FATCA filing requirement checkbox on the 2023 Form 1099-INT indicates that the payer is satisfying its Chapter 4 account reporting requirement. If this box is checked, the recipient may have separate filing obligations and should review the Instructions for Form 8938 to determine whether Form 8938 must be filed with their 2023 tax return. U.S. payers check this box when reporting on Form 1099-INT as part of satisfying account reporting requirements under Regulations Section 1.1471-4(d)(2)(iii)(A).
Electronic Filing Threshold Change
Beginning with the 2023 tax year returns filed in 2024, the electronic filing threshold decreased from 250 to 10 information returns. Calculate the threshold by aggregating all information return types. If you file 10 or more returns in total, you must file all returns electronically. This change significantly expands the number of payers required to file electronically. Paper filing with Form 1096 is only permitted for payers filing fewer than 10 returns.
Nonresident Alien Withholding
For 2023, payers must apply withholding rules under IRC Chapter 3 for nonresident aliens receiving interest income. File Form 1042-S for each nonresident alien recipient receiving 2023 interest subject to withholding per Publication 515 and Form 1042-S instructions. Different rules apply to portfolio interest and U.S. bank deposit interest paid to nonresident aliens.
Copy A Scanability Requirement
The January 2024 revision reiterates that only the official IRS-printed Copy A (in red ink) is scannable by IRS processing equipment. Your Copy A, downloaded from the IRS website and printed, cannot be scanned and must not be filed with the IRS. Penalties apply for filing non-scannable forms per Publication 1141. Order official forms at IRS.gov/OrderForms or file electronically to avoid this issue.
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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.
