Where to report interest Income from the IRS?

[steackanie]

I received a statement from the IRS with a "statement showing interest income from the internal revenue service" for 2016.They tell me that I have to report this interest as income on my tax return. Where should I report this?

[HelenaC · Accepted solution]

To enter your IRS interest form:

• Type 1099-int in the search box and click search.
• Click on Jump to 1099-int.
• On the landing screen, click on I'll type it in myself.
• Enter your IRS interest form and continue.
• Enter the Institution ( Internal Revenue Service ) Name
• Enter your interest in Box 1 and any other information

Related information:

• Where do I enter Form 1099-INT?
• Do I need to report my child's 1099-INT on my return?

[abhishekdubey-sv]

How about other boxes? Isn't this income under the category of Federal tax withheld (Box 4)?

[IC9144]

Where to report interest Income from the IRS?

[DoninGA]

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@IC9144 wrote:

Where to report interest Income from the IRS?

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It is the same as reporting interest income received from a bank.

To report interest income received -

• Click on Federal Taxes (Personal using Home & Business)
• Click on Wages and Income (Personal Income using Home & Business)
• Click on I'll choose what I work on
• Under Interest and Dividends
• On Interest on 1099-INT, click on the start or update button

Or enter interest income in the Search box locate in the upper right of the program screen. Click on Jump to interest income

[gg33]

Where does this income actually show up? Does it reduce the tax due? Do I enter the amount somewhere in the tax due calculation?

[Cynthiad66]

Interest Income from IRS is reported as income.  It is interest earned from IRS for money owed to you as a refund or amended return etc.  It is taxable and increases your tax.  Here is where to report it:

To enter your IRS interest form:

• Type 1099-int in the search box and click search.
• Click on Jump to 1099-int.
• On the landing screen, click on I'll type it in myself.
• Enter your IRS interest form and continue.
• Enter the Institution ( Internal Revenue Service ) Name
• Enter your interest in Box 1 and any other information

Most interest income is taxable as ordinary income on your federal tax return, and is therefore subject to ordinary income tax rates. Generally speaking, most interest is considered taxable at the time you receive it or can withdraw it.

[pataylor]

You say report this in box 1 of the 1099-int worksheet.  Why is this not box 3 income, as the interest is an obligation of the treasury?

[DoninGA]

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@pataylor wrote:

You say report this in box 1 of the 1099-int worksheet.  Why is this not box 3 income, as the interest is an obligation of the treasury?

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Box 3 is only used to report interest on  U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes.

Box 1 shows taxable interest paid to you during the calendar year by the payer  

As stated in the instructions for an IRS Form 1099-INT box 3 - https://www.irs.gov/pub/irs-pdf/f1099int.pdf

Box 3. Shows interest on U.S. Savings Bonds, Treasury bills, Treasury bonds, and Treasury notes. This may or may not all be taxable. See Pub. 550. This interest is exempt from state and local income taxes. This interest is not included in box 1.

[pataylor]

I appreciate the feedback, and I see that the instructions give a list of sources for Box 3, but is this an exhaustive or exemplary list? As the IRS instructions do not carry the force of law, can any one link to the 26 USC or appropriate CFR entry to specifically define what goes into the box labeled "US Savings Bonds or Treasury Obligations" (Box 3)?  Note that the IRS issued 1099-INT does NOT indicate a box number, just the Recipient ID number, the tax year, and the Total Interest Paid, no box numbers are provided (if the IRS had reported this amount in an area labeled "Box 1," I wouldn't be asking the question, but since they've left it to the taxpayer to assign the amount to a box, and the amount is undeniably gov't paid interest on an obligation of the treasury, I'm seeking a specific tax reg as to what qualifies for Box 3 treatment).  

Put differently, the question is; is interest on US bonds exempt from state taxes due to some specific carve out for those specific instruments, or is that interest exempt from state taxes due to a general exemption for US Gov't paid interest?  And can anyone point to the code or regs to support one answer or the other? 

[fanfare]

your interest on your refund is ordinary income.

Put the amount in box 1.

If you put it in box 3, IRS, if they choose to notice, will see that you did not report the interest on your refund.

Your state, if they choose to notice, will see that you are cheating.

[pataylor]

you call it cheating.. why? 

The income is reported (in box 3 - you're still taxed on box 3 income).  I'm not asking if I can get away with something.. I'm asking if anyone can point to the code or reg that dictates the distinction is between box 1 and box 3 reporting (especially when the payer hasn't specified, and the payer is the U.S. Dept. of the Treasury). 

Answer 1 is Interest paid on US Treasury Obligations goes in Box 3. (The IRS is a division of the Department of the Treasury) 

Answer 2 is that only interest on specific instruments issued by the Department of the Treasury goes in Box 3.

The code and regs are binding, not the instructions.  So can anyone point the relevant code and or reg? That's all I'm asking.

[DoninGA]

@pataylor 

Go to this website - https://www.law.cornell.edu/cfr/text/26/1.61-7 

• Electronic Code of Federal Regulations (e-CFR)

Title 26 - Internal Revenue

 

CHAPTER I - INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY

 

SUBCHAPTER A - INCOME TAX

 

PART 1 - INCOME TAXES

 

Tax on Corporations

 

1. § 1.61-7 Interest.

(a) In general. As a general rule, interest received by or credited to the taxpayer constitutes gross income and is fully taxable. Interest income includes interest on savings or other bank deposits; interest on coupon bonds; interest on an open account, a promissory note, a mortgage, or a corporate bond or debenture; the interest portion of a condemnation award; usurious interest (unless by State law it is automatically converted to a payment on the principal); interest on legacies; interest on life insurance proceeds held under an agreement to pay interest thereon; and interest on refunds of Federal taxes. For rules determining the taxable year in which interest, including interest accrued or constructively received, is included in gross income, see section 451 and the regulations thereunder. For the inclusion of interest in income for the purpose of the retirement income credit, see section 37 and the regulations thereunder. For credit of tax withheld at source on interest on tax-free covenant bonds, see section 32 and the regulations thereunder. For rules relating to interest on certain deferred payments, see section 483 and the regulations thereunder.

[pataylor]

Right.  And I appreciate you addressing the the actual source of law, but the question isn't "Is it income?" (and therefore taxable).  Of course it is.  (and that's all 26 CFR 1.6-7 addresses.)

The question is, "Is it box 1 income, or box 3 income?"  Maybe going at this from the other direction, if anyone can find the code or reg that addresses why interest on Savings Bonds are Box 3 income we'd be able to see that language and determine if federal tax refund interest deserves the same treatment.

[fanfare]

Interest reported in Box 3 is not taxable on your state income tax return.

Isn't that why you want to use Box 3 ?

Otherwise, there is no difference.