How do I claim a loss on OID interest paid?

[HelenC12]

When you purchase a bond or note at a discount, you'll get Form 1099-OID (Original Issue Discount). The discount is taxable interest over the life of the bond, which gets reported every year you hold the bond, even if you don't actually receive any interest.

If the Original Issue Discount boxes 1 through 11 aren't the adjustment you're looking for, continue with the interview. You may be able to adjust the taxable amount on the Tell us if any of these uncommon situations apply screen.

Here's how to enter your 1099-OID in TurboTax:

1. Inside TurboTax, open or continue your return and then search for this exact phrase (we recommend you copy/paste from here): 1099-oid original issue discount
2. Select the Jump to link at the top of your search results.
3. On the Miscellaneous Investment Income screen, check the first box for Form 1099-OID and Continue.
4. Answer Yes on the next screen, and continue to follow the onscreen instructions to import or manually enter your 1099-OID.
5. If you land on the Form 1099-OID Summary screen, select Add Another Payer, and then follow the instructions to import or manually enter.

[JohnnyJack1]

I don't have an OID form.  I bought a CD  in 2015, then each year for the next 5 years I received an OID which I entered into my taxes.  In 2020, I received the original amount of the CD, but  I did not recover the $200+ that I reported on the OID forms.  Therefore, I need a procedure on how to claim this $ 200 previously reported  over the past 5 years.  

[fanfare]

what make you think you recover the tax on the OID discount ?

[JohnnyJack1]

Because I never received the discount.  The CD I bought wasn't the standard type, it was based on the Metal Market.  If the metal prices went up, I would be paid a profit at maturity, but if metal prices stayed the same or went down I would not take a loss.  For example:  Buy a  Market safe CD for $ 2000 that matures in 5 years and over the 5 year period report $ 250 in OID discount.  Because the metal market does not go up, at CD maturity it is only worth the original price paid, $ 2,000.00.  Therefore, the $250 OID discount reported was never received and I need to claim it.

[sathya9]

I have the same issue. Was this resolved?

[JohnnyJack1]

No, I never received a solution.  Turbo tax sent me links on how to process an OID, which as you know does not provide a way to recover tax paid on interest income you never received.

[sathya9]

Thanks. I'll keep looking and post it here if I get an answer from elsewhere. Someone has to know.

[osudb98]

If the OID instrument has matured and been redeemed you should use the instructions below.

The correct procedure is to adjust the basis on the sale.  In other words add all previously taxed income to the cost basis of the bond and then report the sale.

Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. Your basis, generally, is your cost increased by the OID you have included in income each year you held it. In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. For a covered security, your broker will report the adjusted basis of the debt instrument to you on Form 1099-B