Accrued interest paid on purchases of treasuries

[kurchian]

I purchased several secondary market treasuries in 2023 from Fidelity that I held to maturity. On the 2023 Tax Reporting statement from Fidelity I notice that there is supplemental information that has an entry  - "Accrued Interest Paid on Purchases" with a dollar amount listed.

I use TurboTax Online to do my taxes and I had my Fidelity 1099s imported. Do I need to make any adjustments based on this accrued interest or does TurboTax do it for me?

[SteamTrain · Accepted solution]

@kurchian 

You have to make some special entries for those $$.

1)  First, a note about entering in the software. ....if the 1099-INT you receive contains box 1 or box 8 $$ in addition to the box 3 $$ from your Treasury Bonds/Notes....take out the box 3 $$ (and box 12 $$ if any), and create a separate 1099-INT (As-IF from Fidelity) with just the box 3 (&12) $$, and report the accrued interest for that separate 1099-INT.  IF you don't do that, the accrued interest you report will be (improperly) divided proportionately between the box 1,3&8 amounts.

2)  You can only claim the accrued interest that you paid out, for bonds bought in 2023....IF..,if those particular bonds issued interest to you during 2023.  The matured bonds are not an issue...but if you bought some that do not mature until 2024..or later, make sure you also received an interest payment from those during 2023....if not, you have to wait until next year's taxes to report those particular accrued interest amounts.  (I create a spreadsheet every year to keep track)

3) OK, you've created a separate 1099-INT (as described in #1) for your box 3 & 12 $$. 

.

..3a)   On a page AFTER the main form, you check a box "I need to adjust the taxable amount"

.....3b)  On the next page, you enter the "Adjustment " amount in the box provided (i.e. the total accrued interest you paid to the sellers of the bonds/notes)  and you mark the selection "My accrued interest is included in this form 1099-INT"

Once entered that way, the accrued interest you paid to the seller of those bonds is subtracted from the box 3 $$, by making a special negative entry on your Schedule B.

[kurchian]

Steam Train -

Thank you for providing such a complete knowledgeable answer!

Outstanding!

Kurchian