@JaneChen if you paid accrued interest when you bought a bond, then that reduces your taxable income in the tax year the first coupon is paid to you. For example if you paid $50 accrued interest on a bond and on the first coupon date after purchase you received $200, then your taxable income is $150. Your 1099-INT will report $200 and the supplemental info from the broker may show that you paid $50 in accrued interest. The $50 should be entered as an adjustment (as a positive number, TT will subtract) after the interview questions for the 1099 and your Schedule B will report the net amount of $150.
Brokers are not required to track and report accrued interest to the IRS it's up to the bond holder to manage it.
2 caveats:
1. I said "may show" above - the broker may report the accrued interest in the year you paid it not the year you received the first coupon and aren't obligated to show how they line up or get carried over if they fall in different years. Some do it better than others. So if you bought the bond in 2023 in this example it may get reported in that appendix in your 2023 consolidated 1099 statement from the broker, but should be applied against the interest reporting on your 1099-INT for 2024.
2. If your 1099-INT has multiple income types i.e. Box 1, 3, 8 and any of them have accrued interest, TT doesn't know which box to apply the accrued interest against and will try and apply it across all them which will affect your Fed and/or State taxes. If you have this situation you need to split the 1099-INT into parts along with any associated boxes for premium etc (e.g. Box 3 and Box 12 stay together).
Gets a little complicated depending on your situation but unfortunately goes with the territory of holding individual bonds.
