1099-OID: TurboTax complains that box 10 is greater than box 2 (which is zero)... not sure what to do

[Neil_W]

I have a 1099-OID with a positive value in box 10 but a zero in box 2 (this is all from municipal bonds.)  TurboTax doesn't like that box 10 is greater than box 2, but that's what my 1099 says.  The "Check this Entry" text says:

You must reduce the bond premium amount reported on this 1099-OID to the amount of interest income, and report any excess on Schedule A (subject to any required limitations.

OK, so I set the box 10 value to zero and then... exactly how do I report it on Schedule A?  It seems very fishy to me that I would be actually changing the numbers reported on the 1099, but that is what it is clearly asking me to do.  If anyone can enlighten me about what is going on here it would be greately appreciated.  

[baldietax · Accepted solution]

is this a 1099-OID from Schwab by chance?  Box 10 on 1099-OID doesn't work for Munis in TT and I think Schwab clubs reports bond premium (that would otherwise be on 1099-INT) into 1099-OID on certain bonds if they have OID also.  If using desktop you can enter it fine on EasyStep but in Forms mode it flags an error and doesn't like anything above zero.  

Got stuck on this a few yeas ago, since then I just put zero for Box 10 and put that amount in as an "other" adjustment (not the other 'bond premium' adjustment categories, or it complains about Box 10 again).

For me the bulk of Box 11 is due to a few zero coupon munis, technically at individual bond level which have the Box 10 there isn't enough income for the premium adjustment because it's on 1099-INT.  But it doesn't matter for me in the aggregate.  If your Box 10 is bigger than your Box 11 you may still get an error with this approach, in which case I would put the adjustment on 1099-INT.  Presumably these are small amounts and won't affect Fed taxes (assuming no AMT), just State.

Here's a long old thread on this topic

https://ttlc.intuit.com/community/taxes/discussion/1099-oid-bond-premium-on-tax-free/00/2006280

Not a CPA/Expert just my 2 cents on this topic

[Neil_W]

Yes, this is a Schwab 1099-OID... thank you very much for that link, somehow I failed to find that thread when I searched.

As always, any problem one can encounter has already been encountered by many other people. 🙂

This issue has me thinking about getting rid of my muni holdings.  I don't need this hassle.

Thanks again!

[baldietax]

no worries - yes individual muni reporting can be a bit fiddly when it comes to these premium/OID adjustments, and tracking the accrued interest, also TT doesn't handle adjustments for different products on one 1099-INT so I usually enter the munis separately.  Once you figure out a process it's ok, it depends how many you have whether it's worth the hassle for the long term.  I find Schwab's reporting harder to follow also compared to Fidelity but I don't know if Fidelity would also do this Box 10 reporting on 1099-OID, for me it only happens on a few cusips which cause more work than everything else.  Selling munis usually gets a big mark down so you may be better off dealing with the reporting and hopefully enjoying the income until they get called or mature.

[Neil_W]

Yeah, that's what I'm thinking right now... hold them until they mature and simply don't replace them.  Unless at some point I get fed up dealing with this every year and just dump them all out of frustration. 

[Neil_W]

The fix specified in that other thread worked fine, so I'm set for this year at least.