What Is Form 1099-INT: Interest Income?
The term Form 1099-INT refers to an Internal Revenue Service (IRS) tax form that is used by taxpayers to report interest income. Form 1099-INT is issued by all entities that pay interest income to investors at the end of the year. It includes a breakdown of all types of interest income and related expenses. Payers must issue a 1099-INT for any party to whom they paid at least $10 of interest during the year by Jan. 31. One copy goes to the IRS while another copy is sent to the taxpayer.
- Form 1099-INT is an IRS income tax form used by taxpayers to report interest income received.
- Interest-paying entities must issue Form 1099-INT to investors at year-end and include a breakdown of all types of interest income and related expenses.
- Brokerage firms, banks, mutual funds, and other financial institutions must file Form 1099-INT on interest over $10 paid during the year.
- Types of interest income for which Form 1099-INT is issued include interest on deposit accounts, dividends, and amounts paid to the holder of a collateralized debt obligation.
- Forms should be sent to recipients no later than January 31.
Understanding Form 1099-INT
Form 1099-INT is used to remit information relating to the amount of interest paid or received during a tax year. Not all sections of Form 1099-INT may be filled out. As such, only relevant information that pertains to a specific taxpayer may be completed.
Form 1099-INT calls for the payer's name, street address, city, state, country, ZIP code, and telephone number. The payer also needs to report its taxpayer identification number (TIN) on the form.
Form 1099-INT also calls for the recipient's information. Most often, the payer will have obtained this information in advance. For example, when setting up a new bank account, the institution asks for your contact information. One of the reasons for this request is to be able to adequately issue Form 1099-INT at the appropriate time.
Form 1099-INT reports the recipient's TIN, name, street address, city, state, country, and ZIP code. The issuing party may list the individual's account number if multiple accounts are to receive a different Form 1099-INT (though some lending institutions may aggregate the forms).
Box 1: Interest Income
Box 1 of Form 1099-INT reports the taxable amount of interest. This amount does not include amounts reported in Box 3. This box includes amounts $10 or greater paid to an individual's savings account, bank deposits, dividends paid by a life insurance company, and a variety of other interest. This box also includes interest of $600 or more paid in the course of a trade or business.
Box 2: Early Withdrawal Penalty
Box 2 of Form 1099-INT reports the amount of principal or interest forfeited because of the early withdrawal of funds. This early withdrawal must have been tied to a time deposit that had a stipulated maturity date. The amount reported in Box 1 is not reduced by the forfeiture deductible, and the forfeiture is deductible from gross income by the recipient.
Box 3: Interest on U.S> Savings Bonds and Treasury Obligations
Box 3 of Form 1099-INT reports the amount of interest earned on specific bonds, Treasury bills, Treasury notes, and Treasury bonds issued by the U.S. government. This figure is included in the amount of interest earned and reported in Box 1.
Box 4: Federal Income Tax Withheld
Box 4 of Form 1099-INT reports the amount of taxes withheld from interest payments. If a taxpayer does not provide their TIN in a timely manner when requested, the taxpayer must have a portion of the interest earned withheld from their payments. The applicable rate of withholding will vary. The IRS offers guidance on requesting the recipient's TIN as part of federal tax form instructions.
Box 8: Tax-Exempt Interest
The next commonly used box on Form 1099-INT is Box 8, which reports the amount of tax-exempt interest. This type of interest is most often earned off of obligations issued by a state or other governmental entity. This amount is not taxable and is not to be included in the taxpayer's gross income.
Form 1099-INT recipients may not have to pay income tax on the interest a payer reports, but may still need to report it on their return. The IRS uses the information on the form to ensure the interest earner reports the correct amount of interest income on their tax return.
Form 1099-INT has 17 boxes (in addition to the areas for the payer and recipient information). Many of these boxes are for very specific purposes. Consider consulting a local tax advisor to help you if you receive Form 1099-INT with information in any of the other boxes.
These other areas of Form 1099-INT cover foreign taxes, private activity bond interest, market discounts, and more tax-exempt investments. Boxes 15, 16, and 17 are also used by taxpayers who participate in the combined Federal/State Filing Program to provide state tax information.
Types of Interest Income
Amounts paid to taxpayers that must be reported on a 1099-INT include:
- Interest on bank deposits
- Accumulated dividends paid by a life insurance company
- Indebtedness issued in registered form or of a type offered to the public, such as bonds, debentures, notes, and certificates other than those of the U.S. Treasury
- Amounts from which federal income tax or foreign tax was withheld
Much less common amounts that are recorded on Form 1099-INT also include:
- Interest accrued by a real estate mortgage investment conduit (REMIC)
- Financial asset securitization investment trust (FASIT) regular interest holder,
- Amounts paid to a collateralized debt obligation (CDO) holder
Form 1099-INT for Payers
Interest income is any amount paid by banks, investment houses, mutual fund companies, and financial institutions to account holders who deposit money into savings accounts, investments, and other interest-paying ventures. As such, Form 1099-INT must be filed for each person:
- Who receives at least $10 (reported in Box 1, 3, and 8) or at least $600 of interest paid in the course of your trade or business described in the instructions for Box 1.
- When a financial institution withholds and pays foreign tax on interest.
- From whom a financial institution withholds and doesn't refund federal income tax under the backup withholding rules regardless of how much is paid.
The interest paid is considered taxable income and must be reported to the IRS on annual tax returns every year. The interest-paying entity must file a 1099-INT on any interest over $10 paid during the year. The form must be reported to the IRS and sent to each interest recipient by January 31 of each year.
The amounts and types of interest impact which tax form is to be used. Taxpayers who receive over $1,500 of taxable interest must list all of their payers on Part 1 of Schedule B on Form 1040. Form 1099-INT will always report interest paid as cash-basis income, which means that income that is owed but not yet paid cannot be reported on this form.
All copies of Form 1099-INT are available on the IRS website. You can download a copy of the form here.
Form 1099-INT for Recipients
Taxpayers who receive Form 1099-INT may be required to report certain income on their Federal tax return. Taxable interest is taxed at the same rate as ordinary income. This means it is taxed at the same rate as an individual's salary or wages. This obviously excludes tax-exempt income or income that is exempt at various tax reporting levels.
Most interest income is reported on Part 1 of Schedule B: Interest and Ordinary Dividends. The taxpayer must list their taxable income as part of a list of all forms of taxable interest. This amount is aggregated, and interest earned from Series EE and Series I U.S. bonds is excluded. This new subtotal is reported on Form 1040, Line 2b.
Interest is a component of a taxpayer's adjusted gross income (AGI) when it is added to wages, salaries, tips, and other forms of income.
Not receiving a form doesn't absolve taxpayers from having to report their interest income. Individuals who don't receive their 1099-INT should contact the issuer and get a new one issued so they can include the interest received on their tax returns. And although the minimum amount to issue a 1099-INT is $10, you must report all of your interest income on Form 1040 each year.
Some types of entities or taxpayers are not required to receive Form 1099-INT even if they receive interest payments. This list of exempt entities includes corporations, tax-exempt organizations, any individual retirement arrangement, certain health accounts, U.S. agencies, and other payees.
In addition, Form 1099-INT is only used for interest issued by an individual from sources inside the United States paid inside the United States. There are specific criteria that make interest payments exempt if paid by non-U.S. payers or related to non-U.S. instruments.
Timing of Payments
Form 1099-INT is used for interest payments but there may be vague conditions on when interest is actually paid. Consider payments where an individual is credited illiquid interest or is not allowed to withdraw interest earned.
In general, interest is paid when it is credited to a taxpayer without substantial limits or restrictions. Interest must be made available so the taxpayer can draw on it at any time. For savings bonds or other demand obligations, interest is paid when the obligation is presented for payment (i.e. when a coupon is detached from a bond and presented for payment).
What Is Form 1099-INT?
Form 1099-INT is a tax form issued by interest-paying entities, such as banks, investment firms, and other financial institutions, to taxpayers who receive interest income of $10 or more. The information recorded on the form must be reported to the IRS.
Who Must File Form 1099-INT?
Form 1099-INT must be filed by any entity that pays interest, such as banks, brokerages, investment firms, mutual funds, and other financial institutions. They must file the form to anyone who receives interest income of at least $10, when they withhold and pay foreign taxes on interest, and whenever the issuer withholds federal income tax without refunding it. One copy must be sent to the IRS and another to the taxpayer.
When Do You Receive a Form 1099-INT?
Interest-paying entities must submit Form 1099-INT by January 31. Anyone who doesn't receive one should contact the issuer to get another copy. Be mindful that many lending institutions may offer Form 1099-INT as a downloadable form. Upon logging into your online banking portal, search for 'Tax Forms' or a similar area of reporting.
Do I Have to Report Form 1099-INT?
Form 1099-INT often reports taxable income earned during the year. This information is remitted to the IRS and must be included as ordinary income on your tax return. Disregarding tax-exempt income, taxpayers are required to report the contents of Form 1099-INT on their federal tax returns.
Why Did I Receive Form 1099-INT?
Taxpayers receive Form 1099-INT because they earned more than $10 of interest from the savings in their bank account. Lending institutions are required to issue Form 1099-INT to account holders who earn this threshold. There are many other situations why a taxpayer may have received Form 1099-INT, all of which relate to interest paid to the taxpayer.
The Bottom Line
Form 1099-INT is used to remit tax information relating to the amount of interest paid and received. Payers have certain thresholds and conditions to meet in order to issue Form 1099-INT copies to taxpayers and the IRS. On the other hand, receiving a Form 1099-INT often means a taxpayer has taxable interest income it must report on its Federal income tax return.