Form 1099-INT Interest Income: A Complete Guide for 2019

What Form 1099-INT Is For

Form 1099-INT is an information return that reports interest income you received during the tax year. Think of it as a receipt from banks, credit unions, or other financial institutions showing how much interest they paid you. This form ensures both you and the IRS have matching records of your taxable interest income.

You'll receive a 1099-INT from any payer who paid you at least $10 in interest during 2019. Common sources include savings accounts, certificates of deposit (CDs), money market accounts, U.S. Savings Bonds, Treasury notes and bills, and certain types of bonds. The form breaks down different types of interest—some taxable, some tax-exempt—so you can properly report them on your federal income tax return.

The key boxes on the form include Box 1 (taxable interest), Box 2 (early withdrawal penalties that you can deduct), Box 3 (interest on U.S. Treasury obligations), and Box 8 (tax-exempt interest from municipal bonds). Understanding these distinctions is crucial because different types of interest receive different tax treatment.

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

You should receive all your 1099-INT forms by January 31, 2020 (for tax year 2019). If you discover you forgot to report interest income after filing your original tax return, you'll need to file an amended return using Form 1040-X. Generally, you have three years from the date you filed your original return or two years from when you paid the tax (whichever is later) to file an amended return and claim a refund.

If you receive a corrected 1099-INT after you've already filed, don't panic. Review the corrected form to see if the changes affect your tax liability. If the new amount increases your taxable income, file an amended return promptly to avoid potential penalties and interest charges. If it decreases your income, you can amend to claim a refund—but remember that three-year deadline.

Late filing penalties for taxpayers generally start at 5% of unpaid tax per month (up to 25%), so if you owe additional tax due to unreported interest, file as soon as possible. For payers who fail to issue 1099-INT forms on time, penalties can apply depending on how late the filing occurs.

Key Rules or Details for 2019

The most important threshold to remember is the $10 minimum reporting requirement. Payers must issue you a 1099-INT if they paid you at least $10 in interest during 2019 (or $600 for interest paid in the course of a trade or business). However, you must report all taxable interest income on your return, even amounts under $10 that don't trigger a 1099-INT.

If your total taxable interest for the year exceeds $1,500, you must complete and attach Schedule B to your Form 1040. Schedule B requires you to list each payer and the amount of interest received, providing the IRS with a detailed breakdown of your interest income. If your interest is $1,500 or less, you can simply report the total on Line 2b of Form 1040.

Tax-exempt interest from municipal bonds (Box 8) doesn't count toward your taxable income, but you still must report it on Form 1040. This information affects certain calculations like the taxation of Social Security benefits and eligibility for certain credits. Interest on U.S. Treasury obligations (Box 3) is exempt from state and local income taxes, though it's still federally taxable.

Backup withholding applies if you failed to provide your taxpayer identification number (TIN) to the payer or provided an incorrect TIN. In these cases, the payer withholds federal income tax from your interest and reports it in Box 4. You can claim this withholding as a credit against your total tax liability.

Step-by-Step (High Level)

Step 1: Gather Your Forms

Wait until early February to ensure you've received all 1099-INT forms. Check statements from every financial institution where you had accounts in 2019. If you expect a form but don't receive it by mid-February, contact the payer directly.

Step 2: Review Each Form Carefully

Verify your name, address, and Social Security number are correct. Check that the interest amounts match your records. Look at each box to understand what type of interest you received. Pay special attention to Box 1 (taxable interest), Box 3 (U.S. Treasury interest), and Box 8 (tax-exempt interest).

Step 3: Calculate Your Total Taxable Interest

Add up all the amounts from Box 1 across all your 1099-INT forms. Add any interest from Box 3 (though you'll report this separately if needed). Don't include Box 8 amounts in your taxable interest calculation. If your total exceeds $1,500, prepare Schedule B.

Step 4: Report on Your Tax Return

If your taxable interest is $1,500 or less, enter the total on Line 2b of Form 1040. Report tax-exempt interest on Line 2a. If your taxable interest exceeds $1,500, complete Schedule B first, then transfer the totals to Form 1040. If you had any backup withholding (Box 4), include it on your Form 1040 as tax withheld.

Step 5: Keep Records

Retain all 1099-INT forms along with your tax return for at least three years. The IRS may request documentation if they have questions about your reported interest income.

Common Mistakes and How to Avoid Them

Mistake #1: Not reporting small amounts of interest

Many taxpayers mistakenly believe they don't need to report interest if they didn't receive a 1099-INT. Wrong! You must report all taxable interest, even $5 from a savings account. The IRS computers are sophisticated—they'll notice the discrepancy.

Mistake #2: Confusing Box 1 and Box 3

Some people add Box 3 (U.S. Treasury interest) to Box 1 and report a combined total. These should generally be reported separately because Treasury interest is state-tax-exempt. Keep them distinct unless instructions specifically tell you to combine them for your particular situation.

Mistake #3: Forgetting Schedule B

If your taxable interest exceeds $1,500, Schedule B is required, not optional. The IRS uses this schedule to match your reported amounts with the 1099-INT forms in their system. Skipping it can trigger an inquiry letter.

Mistake #4: Ignoring nominee situations

If you received a 1099-INT for an account that actually belongs to someone else (like a child's account in your name), you're considered a "nominee." You must file a Form 1099-INT showing that person as the recipient and provide them with a copy. Then on your Schedule B, list the interest income and subtract it as a nominee distribution. Many taxpayers forget this step and end up paying tax on someone else's income.

Mistake #5: Mishandling early withdrawal penalties

Box 2 shows penalties for early CD withdrawals. This is an "above-the-line" deduction—it reduces your adjusted gross income even if you don't itemize. Don't forget to claim it on Schedule 1 of Form 1040; it can save you a surprising amount.

What Happens After You File

Once you file your tax return with the reported interest income, the IRS matches your reported amounts against the 1099-INT forms filed by payers. This computer matching typically occurs several months after the filing deadline—often in summer or fall.

If the IRS finds a discrepancy (you reported less interest than they have on file), you'll receive a CP2000 notice. This isn't an audit, but rather an automated notice proposing changes to your return. You'll have an opportunity to respond, either agreeing with the changes and paying additional tax, or explaining why the IRS information is incorrect. Common reasons for legitimate discrepancies include nominee situations, corrected 1099-INT forms you never received, or computational errors by the payer.

If everything matches, you simply continue your normal tax life. The IRS won't send you a letter congratulating you on correct reporting—no news is good news. Your refund or payment proceeds normally, and your 2019 return becomes part of your permanent tax history.

If you claimed early withdrawal penalties (Box 2) or backup withholding (Box 4), these reduce your tax liability or increase your refund. The IRS processes these automatically when they process your return—no special action needed from you.

FAQs

Q: What if I receive a 1099-INT after I've already filed my tax return?

If the amount is significant (generally more than a few dollars), file an amended return using Form 1040-X. Include the additional interest income and pay any resulting tax to avoid interest and penalties. If it's truly minimal (like $2), some tax professionals suggest the administrative burden outweighs the tiny tax impact, but technically you should still report it.

Q: Do I need to report interest from my savings account if it's only $3?

Yes, technically all interest income is taxable and reportable, regardless of amount. However, if you didn't receive a 1099-INT (because it was under $10), the IRS has no matching document and is unlikely to question small amounts. That said, the law requires reporting all income.

Q: Can I deduct interest I paid on a loan against interest I received?

No, this is a common misconception. Interest you pay (like mortgage interest) is handled completely separately from interest you receive. They don't offset each other. Received interest increases your income; paid interest might be a deduction depending on the type of loan, but they're reported in different places on your tax return.

Q: 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. Tax-exempt interest (Box 8) comes from municipal bonds and isn't subject to federal income tax—though you still must report it. Some states also exempt their own municipal bond interest from state tax. Tax-exempt interest can still affect your tax situation indirectly by impacting Social Security taxation and certain credits.

Q: I received a 1099-INT from the IRS itself. What is this?

The IRS issues 1099-INT forms when they pay you interest on a tax refund. This happens when your refund is delayed or when you're owed interest on overpaid taxes. Yes, interest on a tax refund is taxable income—even though it came from the IRS!

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

No, interest earned inside retirement accounts isn't reported on Form 1099-INT. These accounts grow tax-deferred, and you'll pay taxes when you take distributions in retirement. Your IRA custodian won't send you a 1099-INT for interest earned within the account.

Q: What if my 1099-INT shows an incorrect Social Security number?

Contact the payer immediately to request a corrected form. The IRS matches forms using your SSN, so an incorrect number could cause matching problems. While you should still report the income correctly on your return, having the payer submit a corrected form to the IRS helps prevent automated notices later.

Additional Resources

• 2019 Instructions for Forms 1099-INT and 1099-OID
• Form 1099-INT (2019)
• About Form 1099-INT, Interest Income
• About Schedule B (Form 1040)
• 1099-INT Interest Income FAQs

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