The accrued interest you paid to the seller....it is not included on the actual 1099-INT form...because the IRS has not yet created an actual field on the form to report it. Thus, even though it is allowed to be deducted, they jsut have a workaround way to do it.
At some time in the future, if they (the IRS) does create actual form fields for it to be reported , I would hope they would create three new boxes...one relating to Corporate bond $$ from box 1, one to report for Treasury bonds/notes $$ from box 3, and another one for tax-exempt $$ reported in box 8.
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As far as not reporting it...you aren't forced to, but it does reduce the $$ coming in as taxable income for just the one year when you paid accrued interest to that seller.
The amortized bond premiums showing in boxes 11,12,13...where you overpaid those bonds. those $$ are a smaller amount that must be amortized a bit at a time over the life of the bond....or to the first call date....whichever happens first.
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One subtle requirement about reporting the accrued interest you paid, to reduce reported taxable interest paid out on the 1099-INT...is that you don't get to report that accrued interest until the year you actually get an interest payment on that particular bond.
Example: You buy a treasury bond with $100 of accrued interest in December of 2023, but it doesn't pay any interest to you until say Feb of 2024....you don't declare that accrued interest until you prepare 2024 taxes in 2025. I keep a spreadsheet for the bonds I buy, to keep track of when I can post the accrued interest I paid for any particular purchase. My brokerage (Fidelity) doesn't keep track of the allowed "tax Year" amounts....just gives me a total paid during 2023.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
