US Treasury Bill Interest - 1099-B vs 1099-OID vs 1099-INT

[x9redhill]

Had a short-term US Treasury Bill that I held through maturity and resulted in $478 interest.

The Treasury Bill is listed on 1099-B as a short-term transaction "for which the basis is not reported to the IRS".  The cost basis is shown as the same as the proceeds (amount received at maturity) and the Gain / Loss is reported as $0.

The Treasury Bill is also listed on 1099-OID with the $478 reported as the Original Issue Discount.

From looking at other answers in the TurboTax community, it looks like this interest should actually be reported on my 1099-INT so that I can then mark it as interest on US Treasury obligations and hence would not be taxed at the state level (in my case, Colorado).

Is this correct way to handle this?  That means I'll remove the 1099-B US Treasury entry that automatically came through when transactions were downloaded by TurboTax.  And I'd then manually create a 1099-INT entry in TurboTax.

[DianeW777]

No, that is not the correct way. The 1099-OID is reported under and the amount should be listed in Box 8 which should exempt it from your state return. This will still show up on your federal return as it should. If it is not in Box 8, you can list it there. This will exempt it from your state return.

1. Open your TurboTax return
2. Search (upper right) > type 1099oid > Open the FAQ (TurboTax Online) > Click 1099-oid original issue discount > TurboTax Desktop click the Jump to... link

The 1099-B should not be skipped.  You would enter it with a sales/redemption price equal to the cost basis.  The interest you included in your taxable income becomes part of your cost basis for the redemption.

[x9redhill]

Thanks for the reply.

I did locate the 1099-OID and was able to get the $478 interest exempt from my Colorado return.

As I previously mentioned, the Treasury Bill is listed on 1099-B as a short-term transaction "for which the basis is not reported to the IRS".  On the 1099-B, the cost basis is shown as equal to the proceeds ($75,000 redemption amount) - not the other way around as you stated in your response, in which case both would show $74,522.  Are you telling me I should override these values on the 1099-B in TurboTax?

[DianeW777]

No, do not override.  The 1099-B shows the cost and selling price as the same which should be the accurate zero gain or loss for this redemption.

@x9redhill 

[feiwenw]

1099-B US Treasury Bill form shows gain/loss with $0 amount, however the amount of cost basis and proceeds are different. Turbo tax is making the difference taxable, but the form shows $0 gain. Please advise. Thank you

[Mike9241]

is this type A - short-term basis and cost reported to iRS or more likely type B - short-term basis not reported to the IRS? if it's B, just change the cost to match the proceeds. The interest should be on your 1099-INT in box 3. 

for type A enter the difference in the adjustment column so you have no gain or loss and enter code B

[feiwenw]

Thank you, Mike for your response.

Where I can find type A or B? It shows on 1099-B form only. Total gain is zero, but the detailed breakdown shows Gain/Loss with the positive difference. I uploaded the 1099-B directly from the brokerage who offers US Treasury bonds. 

After I uploaded the 1099-B, Turbox tax shows zero in Summary, however the difference got taxed.

- question, where I can overwrite the number? Will it be a problem because the form reported to IRS is different than what I submit? 

[feiwenw]

Hi,

The Turbotax worksheet shows i.e. $200 gain, adjustment -$200 with type D. It seems right. However the $200 is still taxed. 

If I remove the entire 1099-B form, I see the overall tax is reduced which exclude $200. Please advise.

Thanks

[DianeW777]

You can leave the 1099-B off of your return since the cost and selling price should equal. Keep it with your tax files should you need it later and keep notes about the cost basis which is your original discounted purchase and the interest income reported each year (equals the redemption price).

Due to the amount and type of transaction, it's not likely the IRS will question it later.

If you want to manually enter it, then you can follow the steps below. Do Not Import.

1. Open or continue your return.
2. Navigate to the 1099-B section:
   • TurboTax Online/Mobile: Go to 1099-B.
   • TurboTax Desktop: Search for 1099-B and select the Jump to link.
3. Follow the onscreen instructions. When you reach Let's import your tax info, choose how you want to enter your 1099-B:
   • If you want to enter your 1099-B manually, select Enter a different way, then select your investment type on the next screen.
4. On the following screens, answer the questions about your 1099-B. When you reach the Review your sales screen, the form you just entered should be listed. 

@feiwenw 

[feiwenw]

Thank you for your help. 

I purchase US treasury bonds with discounted value. I received 1099-B in addition to 1099-INT and 1099-DIV  for the bonds. My question is the difference between cost basis and proceeds from the 1099-B is taxable or not?

[baldietax]

the difference between cost basis and proceeds, usually referred to as Accrued Market Discount, is generally taxable as ordinary income (entirely ordinary income if you hold to maturity; if you sell prior to maturity there could be some amount of gain in excess of the AMD at time of sale, depending on the market price).  AMD will be reflected in Box 1f which reduces your gain when input to Form 8949 (adjustment in col g) and is reported as income on Schedule B.  For Treasury Notes this is separate from the coupon interest which will be reported on 1099-INT Box 3.

If you have AMD sales on 1099-B it's best to input them to TT as "one by one" with the details (same with wash sales and non-covered securities), if you make adjustments to sales summaries it will trigger the need to mail the 1099-B to the IRS.  The other issue with AMD is it will not be reflected as exempt on your state return due to ambiguities in tax code interpretation (there is nowhere in TT to indicate the AMD relates to a US Gov Obligation), if this is an issue we can get into more details.

For T-Bills there are probably some different ways brokers may report them - the simplest is just on 1099-INT Box 3 as interest and nothing on 1099-B.  If they report them as Proceeds/Cost/Gain and AMD on 1099-B instead then there shouldn't be anything on 1099-INT.

Bonds held directly won't generate a 1099-DIV that will only be for Money Market funds where you have to specify the amount of Box 1 that related to US Government Obligations to get the state exemption.

Haven't followed this whole thread, but generally you shouldn't have to 'adjust' anything, brokers should certainly not duplicate reporting of interest; by inputting the 1099-B as provided with Box 1f, TT will take care of the calculations required for Schedule D and B.

If you have more specifics that may be helpful, what the CUSIP is and what amounts you are seeing if there is still confusion between what is on 1099-INT and 1099-B.