How To Report Interest From 1099 OID

PS88
  |     |   2 posts since 2022

I opened a 16 mo, $100,000 CD at a regular FDIC insured American bank. Come January when 1099’s are mailed, I received a 1099 OID for that acct. When I contacted the bank, from the branch to the regional hdqtrs, I was told to just treat it as interest. I said that my E.A. tax preparer insisted that I had bought this CD at a discounted rate and that he needed more paperwork in order to calculate how to report this to the IRS on my 1040. They said “no, this is just a CD and they hadn’t sold me anything at a discount.” I consulted with a different tax preparer (30 years in the biz), who told me he simply reports it as interest. Has anyone had a similar experience? If I was filling out my return, how should I handle that 1099? Please don’t advise to change my tax guy, cause I’m already considering that. Thanks to anyone who can share some information, PS88



Answers
alan1
  |     |   684 posts since 2015
Based on the very limited information you provided, I do not believe it is possible to determine whether the bank should have issued a Form 1099-OID. Ken Tumin's old article, "CD Interest, Bank 1099-INT Forms and Taxes" may (or may not) shed some light on that matter, especially the section "Original Issue Discount (OID) and CDs".
https://www.depositaccounts.com/blog/cd-interest-bank-1099int-forms-and-taxes.html

But, in response to your question ("If I was filling out my return, how should I handle that 1099?"):

I would suggest that, if you are going to fill out your tax return based on the Form 1099-OID that you received, that you follow the instructions of the IRS re filling out tax returns for Form 1099-OID.

In addition to reading Ken Tumin's article (which is not terribly recent) 

1. look on the back (or bottom, or on an additional page) of the Form 1099-OID, which should contain "Instructions for Recipients" re what to do with the amounts listed in the various boxes on the form.

2. see "Specific Instructions for Form 1099-OID" at
https://www.irs.gov/instructions/i1099int

3. see IRS Publication 550, "Investment Income and Expenses"; I don't know if the 2021 publication has been issued. The 2020 publication is at
https://www.irs.gov/pub/irs-prior/p550--2020.pdf

3. see IRS Publication 1212, "Guide to Original Issue Discount (OID) Instruments"
https://www.irs.gov/publications/p1212#en_US_202201_publink1000206306
alan1
  |     |   684 posts since 2015
re IRS Publication 550, 2020 (item 3 in my earlier post), see especially pp. 13-14
PS88
  |     |   2 posts since 2022
alan1, I very much appreciate your timely response. I have recently looked over some of what you’ve mentioned, but I will now go back and read everything carefully. My thanks to you, PS88
alan1
  |     |   684 posts since 2015
PS88 -- I suspect (I do not know) that if you follow the "Instructions for Recipients" that [should] come with Form 1099-OID, you'll be ok.
enduser
  |     |   395 posts since 2015
What is Form 1099-OID?
Written by a TurboTax Expert • Reviewed by a TurboTax CPA
Updated for Tax Year 2021 • November 3, 2021

TABLE OF CONTENTS
Who files Form 1099-OID?
How this form works with your taxes

https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-form-1099-oid/L5kJapPr0


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