Consolidated Form 1099 can report several different types of bond income and each one receives specific tax treatment. This can be confusing for preparers because, although you have the summary information, you need to know what details to pull from to make sure you are accurately reporting the income.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.
Q: Does the broker report accretion on the consolidated Form 1099 each year?
A: Some brokers do and some don’t. It would be beneficial to review the details in the consolidated Form 1099-B package to verify.
Q: Does the broker report amortization on the consolidated Form 1099?
A: No, the taxpayer must make the election by simply claiming the deduction on the return and attaching a statement. Generally, there is a check box in the software to help with the election.
Q: If a taxpayer purchased a tax-exempt bond at premium and must amortize the premium, then sell it due to maturity, the taxpayer will always have a loss, correct?
A: No, there wouldn’t be a deductible capital loss because the bond’s basis must be reduced by the amortized premium.
Q: Do the banks issue a Form 1099-INT, Interest Income, on CDs every year?
A: Yes, if the interest income is at least $10, the bank will issue a Form 1099-INT.
To learn more about the tax implications of reporting bond income, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.