1099OID err-The bond prem adj of 100.00 reported on the 1099OID is greater than the int income reported in Box 2 on this 1099OID of 0.00. Where do I enter excess income?

[yoyotaxman]

1099oid err- Schedule B -- Form 1099-OID: Box 10: Bond premium. The bond premium adjustment of 100.00 reported on the 1099-OID is greater than the interest income reported in Box 2 on this 1099-OID of 0.00. 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).

Where do I enter excess income? The error message tells me to enter it in Schedule A but since I am using a standard deduction, I don't have a Schedule A.

[taxpayer8]

It's not excess income, it's excess bond premium.  If you are not itemizing, give up the deduction and don't enter it anywhere.

[jerlin1]

I have the same problem where  Schwab downloaded a bond premium into box 10 of the form 1099 OID worksheet and there was 0 downloaded into box 2 (bond interest)

The Turbo-tax error message says that box 10 cannot be less than box 2, but that is what was downloaded

Schwab was no help and said that Intuit is incorrectly putting out this message

So what do I do if i am taking the standard deduction and not filing a schedule A to make an adjustment ?

Someone suggested just ignoring it. However Schwab did report the bond premium to the IRS so can I just ignore it?

Please help

[taxpayer8]

I may be the person to whom you refer who suggested ignoring it.  I am not a tax professional and I don't claim to have any special knowledge of what will or won't alarm the IRS.

My strategy is to try to do what makes sense, and not to assume that Charles Schwab and Company know what they are doing.  This has worked well so far.

Amortized bond premium is something you can deduct from interest, so you can lower your taxable income and pay less tax.  If you have it and don't report it, you may pay more tax than necessary, but you won't pay less.  This seems unlikely to upset the IRS.

What alternative do you have?

You don't have a schedule A where you could deduct it as an adjustment.

You could just deduct it yourself and report less interest income (perhaps lie to TurboTax about what was on your 1099-INT), but that seems a lot more risky.

You could argue with Schwab or Intuit or both until you get them to agree on what makes sense to put on your 1099-OID.  Ideally, you should study the tax publications and regulations to determine what should have been on there, so you only have to argue with the company that is wrong (probably Schwab).  This would take a lot of time and a lot of puzzling over obscure documents and would probably fail in the end, so I wouldn't recommend it.  (I have done this, although not with this exact issue.  I have actually gotten Schwab to change their reporting, but it's much easier just to assume that Schwab sometimes does goofy reporting and report what makes sense, if you can even figure that out, than to try to reason with Schwab about it.  Tax accounting for bonds is complex.)

Instead, I would recommend you generously donate to your fellow citizens the tax break you would have gotten by deducting the bond premium and just don't report it.

[PN1]

I have the same issue, also on a 1099-OID issued by Charles Schwab (coincidence?).

The bond is a muni bond, and there was no interest reported in box 2 (the form didn't even have a box 2). The bond did, of course, earn interest, although not taxable.

[norse2]

" I would recommend you generously donate to your fellow citizens the tax break you would have gotten by deducting the bond premium and just don't report it."

How does one do this? Change the Premium Adjustment to 0 in Turbo Tax and not worry that this does not match what Schwab will have reported to the IRS?

[jerlin1]

Hi taxpayer8

I really appreciate your suggestion on treating the 1099 OID error message concerning Bond premium. After downloading Schwab into my Turbo,  I found Schwab to be totally useless in resolving the persistent  error and Turbo also did not help. The best  suggestion  is to ignore the error  and  as you state its not income so I will just leave it "on the table" since I am not itemizing

Thanks again

[rjmswarren]

For several years, TurboTax users have noted that TurboTax claims that Charles Schwab 1099-OID’s for tax-exempt bonds with a positive bond premium in Box 10 must have Box 10 manually reduced to 0 because Schwab provides no Box 2 value and it is treated as being null (0). For young or lower income tax payers it is probably fine to change Box 10 to 0 and simply allow TurboTax to compute an erroneously high 1040 Line 2A value for the net tax-exempt income. After all that doesn’t affect their taxes due.

HOWEVER, for medicare eligible, higher income tax-payers, simply changing Box 10 to 0 might be a costly mistake. If you happen to be very near the top of one of the Medicare IRMAA income brackets you might possibly be subjected to as much as $2,900/year/couple in higher Medicare premiums. Even a single dollar of erroneously high net tax-exempt income could theoretically cause your MAGI (taxable AGI plus net tax-exempt income) to bump you into the next higher IRMAA bracket. Unfortunately the exact IRMAA brackets for 2023 Medicare premiums won’t be announced until December 2022 (much later than when you file your 2021 taxes that are used for determining what your 2023 Medicare premiums will be).

After several failed attempts to get Schwab to send me and others corrected 1099’s, I have decided to change the 1099-OID Box 10 value to 0, AND TO REPORT in TurboTax for the Schwab 1099-INT a positive “adjustment to interest” of type “T --- Bond premium on tax-exempt”. The positive amount of the adjustment is the total amount of the 1099-OID box 10 value that had to be set to 0. This seems to then allow TurboTax to compute the correct net tax-exempt income for Line 1040 Line 2A. Schwab clients shouldn’t have to know how to make these manual adjustments (that could be error prone) in order to get the proper net tax-exempt interest for 1040 Line 2A.

After careful reading of IRS Pub 550 and Instructions for Forms 1099-INT and 1099-OID it is clear that for tax-exempt bonds subject to OID reporting, the IRS requires the payer to report the usually relatively insignificant net tax-exempt OID as Box 11 minus Box 6 of the 1099-OID (and I agree that Schwab must generate a 1099-OID with Box 11 and Box 6 populated for the bonds subject to OID reporting). The IRS also describes two options for payers to report net tax-exempt income (for the usually much larger semi-annual interest payments). It can be reported VIA 1099-INT (Box 8 minus Box 13) OR VIA 1099-OID (Box 2 minus Box 10).

Without any apparent justification in those IRS documents, the dimwits at Schwab (or their subcontractors) apparently decided to report the total gross tax-exempt income (for all OID and non-OID bonds) on 1099-INT Box 8 but to only report the non-OID bond premium in Box 13. Without any apparent justification, they decided to separate out and report the individual bond premium for OID bonds on individual 1099-OID’s Box 10 without reporting the gross tax-exempt interest for those bonds in the same 1099-OID’s Box 2 (as implied by the IRS instructions giving payers the option to report the semi-annual periodic interest for those bonds in the 1099-OID rather than the 1099-INT).

There appear to be absolutely no IRS instructions telling tax payers or tax prep software developers that they should match up gross tax exempt interest on the single 1099-INT with the bond premiums on multiple 1099-OID’s Box 10. It appears perfectly valid for TurboTax to complain about the Schwab 1099-OID’s. While I have no easy way of knowing, I seriously doubt that other tax-prep software would handle the bizarre reporting by Schwab any better, and I seriously doubt that the IRS would adjust the 1040 Line 2A value before passing it along to CMS/Medicare for IRMAA based premium calculations. It would seem reasonable and probably required by the IRS to treat a negative value for 1099-OID Box 2 minus 1099-OID Box 10 as 0 rather a negative value to be used as an adjustment to Form 1040 Line 2A. At least TurboTax warns about the reporting error. Some tax-prep software might silently discard the adjustment that should reduce the Form 1040 Line 2A value.

Frankly, I could find no REALLY REALLY explicit IRS instructions specifically forbidding the bizarre Schwab manner of reporting bond premiums, but then why should they have to forbid all cases of stupidity. Rather than this possible omission tacitly implying that Schwab has reported the data properly, I believe that it is merely indicative of the IRS document authors simply never considering that any payer would be so incredibly naive as to split up the reporting of gross interest and the associated premium onto separate forms (as Schwab has done). The 1099-INT Box 13 instructions seem clear enough to me that Box 13 is supposed to contain the bond premium for any bond interest reported in 1099-INT Box 8 (that seems to implicitly include bonds subject to OID if the payer has chosen to report the semi-annual gross tax-exempt income in 1099-INT Box 8). The instructions very definitely DO NOT say ANYWHERE that it is OK for the payer to report the semi-annual gross tax-exempt income in 1099-INT Box 8, report $0 premium in 1099-INT Box 13, and then turn around and report the premium associated with that gross income in a completely different form (in this case 1099-OID Box 10) where the premium will be ignored by tax-prep software rather than used to compute the correct net tax-exempt income.

It appears to me that Schwab (or their subcontractors) had incredibly poor understanding of proper accounting methods to report an adjustment to income on a completely separate form from the form that reports the associated gross income that needs to be adjusted. I have repeatedly asked that this issue be escalated to the proper level, but I have repeatedly been told that Schwab thinks what they have been doing is correct and that their software cannot generate the corrected consolidated 1099 that I have requested (at least I agree that bad software cannot magically become good software without putting some effort into fixing it). I understand that this issue is again being reviewed, but so far after several alleged reviews I have heard no credible justification for the manner of reporting that Schwab has done for years. I have so far gotten no commitment from Schwab to correct their software and otherwise take responsibility for what sure appears to be improper reporting for several years.

[rcarter99]

Same problem with Schwab 1099-OID (Box 10 with a number, Box 2 blank or zero).

I tried what I believe was your recommendation to zero out 1099-OID Box 10, then I entered that same dollar amount into the TurboTax Schwab 1099-INT Worksheet in the "Adjustments to Interest" section, with Box T checked.   The instructions state to enter adjustment amount (positive if subtracting / negative if adding). I entered a positive number xxx.xx that matched what I removed from 1099-OID Box 10.

When I ran the TurboTax check, it then complained that 1099-INT had a problem: "The bond premium adjustment of xxx.xx reported on this Form 1099-INT (CHARLES SCHWAB & CO., INC) is greater than the related Box 8 tax-exempt interest of yyy.yy.  You must reduce the bond premium amount reported on this 1099-INT to the amount of Box 3.  Any excess amount is a nondeductible loss."

If I reduce that Box T "Adjustment to Interest" to be zero (to match my 1099-INT Box 3), then the TurboTax check shows no errors.

Did you experience the same issue?

[Linds]

I realize this thread is related to 2021 tax year, but the error still exists and was encountered again.

The additional issue I have is in the calculation of New Hampshire Dividends and Interest taxes, normally 5%, with NH Municipal Bonds exempt. If I enter any data from a 1099-OID box 10, Bond Premium, it is ported to NH as a taxable bond.

My work around which appears to clear both problems is:

• Enter any 1099-INT containing Box 8 tax exempt interest as a separate form.
• Enter any OID Bond Premium on the INT in box 13 as tax-exempt. That gets it into the 1040 data.
• For NH, under "uncommon situations", ticked "Our state doesn't tax all ..."
• Click through selecting "NH" in drop downs in two places.
• Enter any 1099-OID data EXCEPT Box 10 Bond Premium. It was entered on the 1099-INT.
• For NH, select State Exempt
• For NH, select Special Handling, and NH in the drop down.

I do not know how this might affect other state returns. The only side effect is that a number of useless entries are flagged while Smart Checking the NH return, but I clicked through ignoring them with no effect on the NH return.

[phraxos]

I encountered this problem in the 2022 tax year.

The explanation by rjmswarren was superbly clear and detailed, and I verified that it properly accounts for the values reported in Schwab's 1099s and what is computed by TurboTax.

I applied the suggested fix and it seems both sensible and effective.

Shame on Schwab for causing this problem!

Shame on TurboTax for not suggesting a fix!

[PN10]

Does the option of just leaving the TT error uncorrected have any downside? I'm thinking at least that way the return will still match the 1099OID from Schwab.

That wouldn't prevent e-filing would it?

[phraxos]

I don't believe it is possible to file a return containing an error, but I'm not sure. Perhaps there is some way to override it. Certainly that would invalidate any guarantees of accuracy by TurboTax.

[RobertB4444]

Some errors are flagged for your attention and some require correcting the return.  In this instance the bond premium is a deduction and the IRS does not have a problem with you not taking a deduction that you are entitled to.  Leaving the bond premium off your tax return should not cause any issues at all.  

I just read @rjmswarren 's extraordinarily well written essay.  That is the best advice - if you have a 1099-INT and a separate 1099-OID then you should combine them in order to take advantage of the deduction that you're entitled to.  

@PN10 

[PN10]

@RobertB4444

I was thinking that if you left OID box 10 unchanged, you would still get the benefit of a deduction for the premium. Is that not the case?

In my case, the OID for this bond shows -

Box 10 = 310.41

Box 6 = 15.76

Box  11 = 15.76

I re-read rjmswarren's post and it bolded what you might be referring to below -

The instructions very definitely DO NOT say ANYWHERE that it is OK for the payer to report the semi-annual gross tax-exempt income in 1099-INT Box 8, report $0 premium in 1099-INT Box 13, and then turn around and report the premium associated with that gross income in a completely different form (in this case 1099-OID Box 10) where the premium will be ignored by tax-prep software rather than used to compute the correct net tax-exempt income.

When I inserted 310.41 in box 2 (a fix previously mentioned elsewhere), the amount of my tax refund did not change, so I was assuming that the software was recognizing the premium even with the error in place.