@dick16
The procedure is the same as shown at the top "solution"...EXCEPT, they missed one critically important change to the instructions:
IF the 1099-INT you receive, has a mix of box 1, box 3, and box 8 $$ on it. Then you have to break out the $$ from that form and put it on it's own 1099-INT ....and only then use the Accrued Interest adjustment that is presented on the follow-up page. IF you don't then the accrued interest is applied (improperly) among the box 1, 3, and 8 values.
So for your 1099-INT with Muni bond interest in box 8......if your 1099-INT also has any box 1 and/or box 3 $$ on it, you remove the box 8 and box 13 $$ from that 1099-INT, and create a second 1099-INT from that payer. with only the box 8 and box 13 $$ on it. Then indicate the accrued interest you paid on the follow-up page and it will all be applied to the box 8 $$.
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With the following qualification, you are not supposed to subtract the accrued interest for any bond you bought, until the year in which you actually receive your first interest payment from it.
Example: So if you bought a bond (say) in November 2024, and it didn't pay out its first interest to YOU, until Feb of 2025, you aren't supposed to deduct the accrued interest for that bond, until you file your 2025 taxes in early 2026.
Details...Details: I keep a spreadsheet with the Muni's I buy and a column showing what year I can claim the accrued interest I paid.
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For others,,,they should also note that the same thing applies to Corporate (box1 $$) and Treasury (box3 $$). If the 1099-INT in question, has some mix of box 1, 3 &* $$ in it.....AND If you pay the seller any accrued interest for those, then those $$ in boxes 1 (&box 11), or boxes 3 (&12), must be taken out of that 1099-INT and put in their own 1099-INT before indicating the accrued interest on the follow-up page.
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Someday, TTX managers need to get their software people have three accrued interest entries on the follow-up page...one each related to only the box 1, 3, &8 $$ amounts. I'd bet thousands of people accidentally mis-enter this data every year because they do not realize how they need to mess with the 1099-INT form.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
