Form 1099-INT Interest Income: A Complete Guide for Tax Year 2014
What the Form Is For
Form 1099-INT (Interest Income) is an official IRS tax document that reports interest income you received during the 2014 tax year. If you earned at least $10 in interest from bank accounts, savings bonds, certificates of deposit (CDs), or other interest-bearing investments, the financial institution that paid you that interest must send you this form.
Think of Form 1099-INT as a receipt showing the IRS—and you—exactly how much interest income various financial institutions paid you throughout the year. Banks, credit unions, brokerage firms, and other payers issue this form to report taxable interest, tax-exempt interest, interest on U.S. Treasury obligations, and any federal tax that was withheld from your interest payments. The form helps ensure you report all your interest income accurately on your tax return, and it allows the IRS to verify that your reported income matches what payers have reported about you.
Source: IRS.gov
When You’d Use It (Late or Amended Filing)
You should receive your Form 1099-INT by February 2, 2015, for interest earned during 2014. However, situations arise where you might need to deal with late or amended forms:
Late Forms
If you haven't received your 1099-INT by mid-February but you know you earned interest, contact your financial institution immediately. Don't wait to file your tax return—estimate the interest amount based on your records and file on time. You can amend later if needed.
Corrected Forms
Financial institutions sometimes discover errors after sending the original form. If you receive a corrected Form 1099-INT (marked “CORRECTED” in the checkbox), you must determine whether you've already filed your tax return.
- If you haven't filed yet: Use the corrected form.
- If you've already filed: File an amended tax return using Form 1040-X if the correction significantly changes your tax liability.
The IRS generally allows three years from your original filing date to amend returns and claim refunds.
Source: IRS.gov
Key Rules for 2014
Several important thresholds and rules governed Form 1099-INT reporting in 2014:
Reporting Threshold
Payers must issue Form 1099-INT if you received at least $10 in interest during the year. For interest paid in the course of a trade or business (such as interest on delayed payments), the threshold is $600 or more.
Backup Withholding
If you failed to provide a correct taxpayer identification number (TIN) to your bank or other payer, or if the IRS notified the payer that you under-reported interest income, the payer may withhold federal income tax at a rate of 28% from your interest payments. This backup withholding appears in Box 4 of your Form 1099-INT.
Exempt Recipients
Certain entities don't receive 1099-INT forms even if they earned interest, including corporations, tax-exempt organizations, IRAs, health savings accounts (HSAs), and government agencies. Individual taxpayers, however, must receive the form if they meet the dollar thresholds.
Multiple Forms
If you have accounts at several financial institutions, or multiple accounts at the same institution, you'll receive a separate Form 1099-INT for each account where you earned the minimum reportable interest.
Source: IRS.gov
Step-by-Step Guide (High Level)
Filing your Form 1099-INT information is straightforward when broken into simple steps:
Step 1 – Gather Your Forms
Collect all Forms 1099-INT you receive by mid-February. Check that your name, address, and Social Security number or taxpayer identification number are correct on each form.
Step 2 – Review the Boxes
The most important information appears in specific boxes:
- Box 1: Taxable interest income
- Box 3: Interest from U.S. Savings Bonds and Treasury obligations (taxable federally, but may be exempt from state taxes)
- Box 8: Tax-exempt interest (e.g., municipal bonds)
- Box 4: Any backup withholding
Step 3 – Report on Your Tax Return
When filing Form 1040, 1040A, or 1040EZ, report the total of all Box 1 amounts from all your 1099-INT forms on the “taxable interest” line.
If your total taxable interest exceeds $1,500, you must also complete Schedule B (Interest and Ordinary Dividends) to list each payer. Report Box 8 tax-exempt interest on the appropriate line—it’s not taxable but must still be reported.
Step 4 – Account for Withholding
If Box 4 shows backup withholding, include this amount with your other federal tax withholding when calculating whether you owe additional tax or will receive a refund.
Step 5 – Keep Records
Retain copies of all Forms 1099-INT along with your tax return for at least three years in case of IRS questions or if you need to amend your return.
Source: IRS.gov
Common Mistakes and How to Avoid Them
Taxpayers frequently make preventable errors with Form 1099-INT that can trigger IRS notices or penalties:
Mistake 1 – Not Reporting All Interest
Receiving multiple 1099-INT forms from different institutions makes it easy to overlook one. Create a checklist of all your financial accounts at the beginning of tax season, then check off each form as it arrives. If a form doesn't arrive, contact the institution.
Mistake 2 – Math Errors When Totaling
When you have several forms, adding errors can happen. Use a calculator, spreadsheet, or tax software to total your Box 1 amounts accurately. Double-check before transferring totals to your return.
Mistake 3 – Mixing Up Tax-Exempt and Taxable Interest
Box 1 interest is taxable; Box 8 interest is not. Never combine these amounts. Report them on separate lines. Even tax-exempt interest must be reported, as it can affect calculations like Social Security benefit taxation.
Mistake 4 – Forgetting Schedule B
If your taxable interest exceeds $1,500, you must file Schedule B listing each payer. Failing to do so can trigger an IRS inquiry. Most tax software automatically generates this schedule when needed.
Mistake 5 – Ignoring Corrected Forms
If you receive a corrected 1099-INT after filing, don’t ignore it. Compare the corrected form to your original, and if the numbers changed significantly, file an amended return promptly.
Mistake 6 – Joint Account Confusion
Joint accounts are often reported under the primary account holder’s SSN. If you’re the secondary owner, you may still need to report your share even if you didn’t receive the form.
Source: IRS.gov
What Happens After You File
After you've reported your Form 1099-INT information on your tax return, several things occur behind the scenes:
IRS Matching Process
The IRS receives copies of all Forms 1099-INT that payers send to taxpayers. Its computer systems match these amounts against what you report on your return, typically several months after the filing deadline.
If Everything Matches
When your reported interest matches IRS data, no action is taken. Your return processes normally, and your refund (if applicable) is issued.
If There’s a Discrepancy
If the IRS finds unreported interest income, you may receive a CP2000 notice (underreporter inquiry) proposing additional tax, penalties, and interest. You’ll have an opportunity to agree, disagree, or partially agree and provide documentation.
Refund Timing
Interest income reporting rarely delays refunds. Most e-filed returns with direct deposit are processed within 21 days.
State Tax Implications
If you file a state income tax return, you must report interest income there as well. Some types (like U.S. Treasury interest) may be state-tax exempt. States also receive 1099-INT data and conduct matching.
Source: IRS.gov
Frequently Asked Questions (FAQs)
Q1: I earned only $8 in interest. Will I receive a Form 1099-INT, and do I need to report it?
No, you won’t receive the form since it’s below the $10 threshold. However, all income is technically taxable, so you should still report it, even though the IRS rarely pursues such small amounts.
Q2: I received interest on U.S. Savings Bonds (Box 3). Is this taxable?
Yes, it’s taxable on your federal return but exempt from state and local taxes.
Q3: What if I receive a 1099-INT for a jointly owned account, but we file separately?
The primary account holder reports it. If both own the account, each should report their share and possibly issue a “nominee” 1099-INT or attach an explanation.
Q4: I closed my account and moved. Will the bank know where to send my 1099-INT?
Banks send it to your last known address. Update your information by January to ensure delivery or contact the bank if you don’t receive it.
Q5: My 1099-INT shows backup withholding, but I provided my SSN. Why?
Backup withholding can occur if your TIN was incorrect, you failed to report past income, or didn’t certify that you’re not subject to withholding. Contact the payer to resolve mismatches.
Q6: Why does my 1099-INT show tax-exempt interest in Box 8?
That reflects municipal bond interest—exempt from federal tax but still reportable since it can affect credits and Social Security benefit calculations.
Q7: What’s the difference between Form 1099-INT and Form 1099-OID?
Form 1099-INT reports actual interest paid. Form 1099-OID reports original issue discount—interest that accrues over time on discounted bonds.
Source: IRS.gov
