On a Fidelity 1099-INT, one treasury had a Bond Premium amount set in Box 12 but nothing filled in for the Accrued Interest? How do adjust for the accrued interest?

[jazzlover17]

I tried continuing and set the "My accrued interest is included in this 1099-INT"

[SteamTrain · Accepted solution]

@jazzlover17 

That is the correct way to do it...ALMOST.

OK.... point to make about the software.

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

[jazzlover17]

Thank you for that well thought out explanation. That makes good sense.

There is one case I'm not clear about. What if I buy a T-Note at market which has an accrued amount and sell it before the first interest payment? There will be no interest to deduct from except what accrued the buyer pays me which may be less then my original accrued amount. I have this situation on one T-Note I sold after 2 months to take advantage of a good buy in on 10 year Treasury. Thanks again for any help you can give me.

[SteamTrain]

Never encountered that situation.

BUT you might check with whatever brokerage you use.....

I "think", but am not sure, that the next buyer will also pay you all the interest accrued since the last coupon date...thus what you paid out, plus whatever $$ were added on while you held it.  So the interest amount you get will be greater than what you paid.