Get your taxes done using TurboTax

Yes, accrued interest reported does get reported on your return, and you are correct in that annual interest paid is not the same thing as accrued interest reported.  In TurboTax you will make an adjustment to the annual interest paid to reflect the accrued interest reported.  

To get to the page where you will enter information about the annual interest paid and eventually the accrued interest reported, go to Wages & Income.  Scroll down the page to the Interest and Dividends section.  Click Start and enter information when prompted.  In our test return, we chose the option "I'll type it in myself." 

After entering the annual interest paid as reflected on your Form 1099-INT, you will see this page or a similar page:

While the page topics are reflected as "uncommon," select the first box to begin entering information about your accrued interest.  In the pages that follow you will enter the actual dollar amount of the accrued interest as reflected on your 1099-INT.  The accrued interest will be reflected on your tax return as a non-taxable item.