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@pataylor wrote:

You say report this in box 1 of the 1099-int worksheet.  Why is this not box 3 income, as the interest is an obligation of the treasury?


Box 3 is only used to report interest on  U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes.

Box 1 shows taxable interest paid to you during the calendar year by the payer  

 

As stated in the instructions for an IRS Form 1099-INT box 3 - https://www.irs.gov/pub/irs-pdf/f1099int.pdf

Box 3. Shows interest on U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes. This may or may not all be taxable. See Pub. 550. This interest is exempt from state and local income taxes. This interest is not included in box 1.