1099-INT taxable accrued interest paid

[aaaabbbbb11111]

I have a 1099-INT

Box 1 interest: $100 (cds)

Box 3 interest: $200 (us/treasury obligations)

Under the boxes:

Taxable accrued Treasury interest paid: $50

I imported electronically directly from TD Ameritrade. I don't see where the $50 was imported. Should it be under:

Schedule B -> Form 1099-INT (TD Ameritrade)

Adjustments to Interest -> Accrued interest (A)

Adjustments to Interest -> Enter adjustment amount -> $50

[SteamTrain · Accepted solution]

@aaaabbbbb11111 

_________________________

You use the Interview to EDIT that 1099-INT, then on a page after the 1099-INT, there is a box to check to:

"I need to adjust the interest reported on my form"

Then the next page you put in the $50 and indicate it is for accrued interest.
____________________________________________

BUT.... a point to make about the software and getting it fully correct.

IF your 1099-INT has a mix of box 1,3 & 8 $$ on it...then entering any accrued interest (paid out when you purchased a bond)....that accrued interest will be divided proportionally (improperly) among the box 1,3,&8 $$ amounts.

The fix is to split out the type of bond interest...for which you are reporting the accrued interest paid...into it's own 1099-INT.

So if the accrued interest was paid on a Treasury bond (or bonds) then you need to move the box 3 &12 $$ into a separate 1099-INT before you indicate that accrued interest on the follow-up page for that separate 1099-INT form.

Same would go for boxes 1&11 together (If appropriate) or box 8 &13...depending on what bond types you purchased.

Thus box 1, 11, and any accrued interest for corporate bonds are on reported one 1099-INT

.....box 3, 12, and any accrued interest you paid for US Govt bonds on a second 1099-INT

....box 8, 13 , and any accrued interest you paid on any MUNI bonds you bought on a third 1099-INT.

Of course, if you only bought (say) some Muni's during 2024, then you'd only need to take out the 8 & 13 $$ into their own 1099-INT to report the accrued interest you paid for those.

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Final Note:  For bonds purchased in the last half of the year...if the bond you bought did not issue interest to you before the end of 2023, then you cannot report that accrued interest payment until 2024 taxes (i.e. after you actually get an interest payment from that bond).  I use a spreadsheet with notes on it to keep track. 

I even bought a Muni bond already in Feb of 2024, that issues its first interest in 2025  (then semiannually thereafter)....so the small amount of accrued interest I paid, will need to wait until I file 2025 taxes in early 2026.

[aaaabbbbb11111]

Thanks for the detailed response. I think I understand what you are saying. Why doesn't TT import this correctly?

[aaaabbbbb11111]

This s$#$ software cost me $1500 looking at last year's return (that I didn't catch) where this wasn't imported properly either.

[SteamTrain]

@aaaabbbbb11111 

Reporting the accrued interest properly thru a data import, would require an agreement between the various software companies, and the financial institutions, as to how the data transfer would be structured in the actual data files that they provide for importation.   The data files that are imported, are structured entirely different from the paper/PDF forms that you see in a printout form the financial provider.

So far, no such agreement has been made, but perhaps might be in the works in some kind of background negotiations we are not aware of. 

[Bisso Steve]

On my 1099-INT, I have 2 input (taxable accrued interest paid and tax exempt accrued interest paid). I can only enter one entry. How can the second entry be reported?

[SteamTrain]

@Bisso Steve 

Answered in my Tuesday post.

..i.e. you have to break the 1099-INT into at least two separate 1099-INT forms....maybe even three of them in your case.

See the details I posted in my extended comment above.

[Bisso Steve]

Hi.

Thanks for the answer ... I found out that TT suggests to add up these 2 entries and to characterize that single entry as "others" instead of a specific type. Will try both ways to see if I can see a difference.

[deallaw]

I see this as a flaw in the Turbotax software. There should be a prompt if you have interest income that asks: "Did you purchase a bond during the year?" and if you answer yes, it prompts you to check your 1099 for accrued interest paid information.