When 1099-OID bond premium exceeds the amount on line 2 (zero), and you have to reduce the bond premium to zero, how do you enter the bond premium on Schedule A?

[JohnW152]

First, you need to compute the deductible amount, if there actually is one. 

According to Deduction for excess premium in the IRS' Publication 529, when the amount of a bond premium allocable to a period exceeds the amount of stated interest allocable to the period, you need to "treat the excess as an itemized deduction on your Schedule A (Form 1040). However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods."  

Please read the entire section of Publication 529 before proceeding.

If you determine that you are entitled to a deduction, then, to enter the deduction for your excess premium in TurboTax Online:

1. If you don’t see 2022 TAXES in the left pane, scroll down and select the dropdown to the right of Deductions & Credits and select Let’s get started, Pick up where you left off, or Review/Edit. 
   • Otherwise, in the left pane, select the dropdown to the right of Federal, then select Deductions & Credits 
2. On the  Your tax breaks page, scroll down and select the Show more dropdown to the right of Other Deductions and Credits
3. Select  Start or Revisit to the right of Other Deductible Expenses
4. Answer No on each screen until you come to the Did you have any of these other expenses? screen.  Here, you'll answer Yes because you had amortizable bond premiums 
5. On the Tell us about your other expenses page, you'll enter your amount in the Amortizable bond premiums box, then select Continue

According to Other Itemized Deductions in the Instructions for Schedule A, a deduction for amortizable bond premium will be claimed as an Other Itemized Deduction on Line 16 of Schedule A. 

[bobowobo]

OK, this raises a related question.  I have a 1099-OID.  Box 1 is $24.26.  Box 6 is $24.26.  TurboTax correctly reported the amount in Box 1 as interest income.  The amount in Box 6 offsets the OID income in some fashion.  Can I just keep it simple and report the amount in Box 6 as an itemized deduction?

[JohnW152]

No… if anything, you'll reduce the amount of Box 1 you'll report, perhaps to zero.

According to Adjustment for acquisition premium in IRS Publication 1212 (01/2022), Guide to Original Issue Discount (OID) Instruments: 

If your debt instrument has acquisition premium, reduce the OID you report. Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments.

Then, if you'll scroll down to Reduction for acquisition premium in the Figuring OID… link above, you'll see the formula to be applied.

If you have an adjustment amount to make, when you're entering this 1099-OID in TurboTax Online you'll come to the Tell us if any of these uncommon situations apply screen.  There, select the box next to I need to adjust these amounts, then select Continue, and you'll be able to adjust your amount.