For Tax-exempt Obligations, what's the difference among Acquisition Premium vs. Noncovered Acquisition Premium; Bond Premium vs. Noncovered Bond Premium. Are any of those deductible?
The premium is an amount above par that you pay for an investment. For example, if you buy a $10,000 bond for $10,500, you are paying a premium. The higher price you pay results in a lower than stated interest rate of the investment. If it is "covered" it is reported to the IRS. If it is non-covered, it is not reported to the IRS.
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Schwab has issued me a 1099-OID with a Bond Premium (Box 10) included. (I purchased a Tax-free Muni at above par).
TurboTax is complaining that the premium is greater than the interest in Box 2 (which is filled as zero). My reading of the 1099-OID instructions (and/or Schwab's explanation) is that, if that interest income is already declared in a 1099-INT (which, in my case, it is), then Box 2 SHOULD be zero. Should I simply ignore this TurboTax "error"?
My bonds were in-state Muni, (double-) tax free. I did what you did -- changed the 1099-OID , box 2 to the same amount as in box 10, and ran it with no errors, and no change to my taxes.
I *think* these are only 1099-OID worksheets, but, even if they aren't, all the interest is double-tax free, so, as I understand it, the combinations of Box 2 and Box 10 are intended to offset the taxable interest by the bond premium. Since the interest is already tax-free, offsetting it has no effect (since there is no tax anyway). I will turn it in this way -- If I'm wrong, I'm sure the Feds will correct it.
I just did what Richb89600 described - changed box 2 to the amount in box 10 on the OID worksheet, plus on the dropdown below Box 2 clicked Tax Exempt interest. No change to taxes owed based upon this change. Wish somebody could say for sure what the problem is here and how to fix it.
Note: I have the same error based upon a muni bond from the State of California, the 1099-OID is also from Schwab.