What makes this confusing is that “earned,” “accrued,” and “paid” don’t always mean the same thing with CDs.
Some CDs accrue interest daily but don’t credit it to you until maturity. In that case, nothing is available to you during the term, so many banks wait and report it all at maturity.
Other CDs credit interest monthly or annually, even if you leave it in the account. Once it’s credited and you could withdraw it (even if there’s a penalty), many banks treat that as reportable for that calendar year and issue a 1099-INT.
Then there are CDs longer than one year, which can fall under OID rules. In those cases, interest may have to be reported each year even if it’s not paid out yet, and the bank will usually handle that by issuing the appropriate tax form.
So the real difference is how and when the interest is credited under the terms of that specific CD.
If you’re opening CDs in the future and want to avoid surprises at tax time, check whether the interest is paid only at maturity or credited periodically. Some comparison sites like CD Valet (a CD marketplace listing over 40,000 CDs from federally-insured banks and credit unions across the US) show those term details across different banks and credit unions, which makes it easier to see how it’s structured before committing.
Hope that helps!
