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Filing State Tax Free

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Filing State Tax Free

Filing state tax free 7. Filing state tax free   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Filing state tax free Custodian account for your child. Filing state tax free Penalty for failure to supply SSN. Filing state tax free Reporting backup withholding. Filing state tax free Savings account with parent as trustee. Filing state tax free Interest not reported on Form 1099-INT. Filing state tax free Nominees. Filing state tax free Incorrect amount. Filing state tax free Information reporting requirement. Filing state tax free Taxable InterestInterest subject to penalty for early withdrawal. Filing state tax free Money borrowed to invest in certificate of deposit. Filing state tax free U. Filing state tax free S. Filing state tax free Savings Bonds Education Savings Bond Program U. Filing state tax free S. Filing state tax free Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Filing state tax free How To Report Interest IncomeSchedule B (Form 1040A or 1040). Filing state tax free Reporting tax-exempt interest. Filing state tax free U. Filing state tax free S. Filing state tax free savings bond interest previously reported. Filing state tax free Reminder Foreign-source income. Filing state tax free  If you are a U. Filing state tax free S. Filing state tax free citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Filing state tax free S. Filing state tax free law. Filing state tax free This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Filing state tax free Introduction This chapter discusses the following topics. Filing state tax free Different types of interest income. Filing state tax free What interest is taxable and what interest is nontaxable. Filing state tax free When to report interest income. Filing state tax free How to report interest income on your tax return. Filing state tax free In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Filing state tax free Exceptions to this rule are discussed later in this chapter. Filing state tax free You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Filing state tax free See Money borrowed to invest in certificate of deposit , later, and chapter 28. Filing state tax free Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Filing state tax free S. Filing state tax free Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Filing state tax free S. Filing state tax free Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Filing state tax free Recordkeeping. Filing state tax free You should keep a list showing sources and interest amounts received during the year. Filing state tax free Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Filing state tax free Tax on unearned income of certain children. Filing state tax free    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Filing state tax free If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Filing state tax free If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Filing state tax free   Some parents can choose to include the child's interest and dividends on the parent's return. Filing state tax free If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Filing state tax free   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Filing state tax free Beneficiary of an estate or trust. Filing state tax free   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Filing state tax free You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Filing state tax free , from the fiduciary. Filing state tax free Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Filing state tax free Social security number (SSN). Filing state tax free   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Filing state tax free This includes payers of interest. Filing state tax free If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Filing state tax free SSN for joint account. Filing state tax free   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Filing state tax free (For information on who owns the funds in a joint account, see Joint accounts , later. Filing state tax free ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Filing state tax free This is because only one name and SSN can be shown on Form 1099. Filing state tax free   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Filing state tax free For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Filing state tax free Custodian account for your child. Filing state tax free   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Filing state tax free For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Filing state tax free Penalty for failure to supply SSN. Filing state tax free   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Filing state tax free See Failure to supply SSN under Penalties in chapter 1. Filing state tax free Backup withholding also may apply. Filing state tax free Backup withholding. Filing state tax free   Your interest income is generally not subject to regular withholding. Filing state tax free However, it may be subject to backup withholding to ensure that income tax is collected on the income. Filing state tax free Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Filing state tax free   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Filing state tax free For more information, see Backup Withholding in chapter 4. Filing state tax free Reporting backup withholding. Filing state tax free   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Filing state tax free The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Filing state tax free ” Joint accounts. Filing state tax free   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Filing state tax free Income from property given to a child. Filing state tax free   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Filing state tax free   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Filing state tax free Savings account with parent as trustee. Filing state tax free   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Filing state tax free The savings account legally belongs to the child. Filing state tax free The parents are not legally permitted to use any of the funds to support the child. Filing state tax free Form 1099-INT. Filing state tax free   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Filing state tax free This form shows you the interest you received during the year. Filing state tax free Keep this form for your records. Filing state tax free You do not have to attach it to your tax return. Filing state tax free   Report on your tax return the total interest income you receive for the tax year. Filing state tax free Interest not reported on Form 1099-INT. Filing state tax free   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Filing state tax free For example, you may receive distributive shares of interest from partnerships or S corporations. Filing state tax free This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Filing state tax free , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Filing state tax free Nominees. Filing state tax free   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Filing state tax free   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Filing state tax free Incorrect amount. Filing state tax free   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Filing state tax free The new Form 1099-INT you receive will be marked “Corrected. Filing state tax free ” Form 1099-OID. Filing state tax free   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Filing state tax free For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Filing state tax free Exempt-interest dividends. Filing state tax free   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Filing state tax free (However, see Information reporting requirement , next. Filing state tax free ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Filing state tax free You do not reduce your basis for distributions that are exempt-interest dividends. Filing state tax free Information reporting requirement. Filing state tax free   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Filing state tax free This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Filing state tax free Note. Filing state tax free Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Filing state tax free See Alternative Minimum Tax (AMT) in chapter 30 for more information. Filing state tax free Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Filing state tax free Interest on VA dividends. Filing state tax free   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Filing state tax free This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Filing state tax free Individual retirement arrangements (IRAs). Filing state tax free   Interest on a Roth IRA generally is not taxable. Filing state tax free Interest on a traditional IRA is tax deferred. Filing state tax free You generally do not include it in your income until you make withdrawals from the IRA. Filing state tax free See chapter 17. Filing state tax free Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Filing state tax free The following are some sources of taxable interest. Filing state tax free Dividends that are actually interest. Filing state tax free   Certain distributions commonly called dividends are actually interest. Filing state tax free You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Filing state tax free  The “dividends” will be shown as interest income on Form 1099-INT. Filing state tax free Money market funds. Filing state tax free   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Filing state tax free Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Filing state tax free Certificates of deposit and other deferred interest accounts. Filing state tax free   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Filing state tax free You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Filing state tax free The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Filing state tax free If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Filing state tax free Interest subject to penalty for early withdrawal. Filing state tax free   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Filing state tax free You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Filing state tax free See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Filing state tax free Money borrowed to invest in certificate of deposit. Filing state tax free   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Filing state tax free You must report the total interest you earn on the certificate in your income. Filing state tax free If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Filing state tax free See Interest Expenses in chapter 3 of Publication 550. Filing state tax free Example. Filing state tax free You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Filing state tax free The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Filing state tax free The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Filing state tax free The bank also gives you a statement showing that you paid $310 interest for 2013. Filing state tax free You must include the $575 in your income. Filing state tax free If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Filing state tax free Gift for opening account. Filing state tax free   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Filing state tax free   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Filing state tax free For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Filing state tax free The value is determined by the cost to the financial institution. Filing state tax free Example. Filing state tax free You open a savings account at your local bank and deposit $800. Filing state tax free The account earns $20 interest. Filing state tax free You also receive a $15 calculator. Filing state tax free If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Filing state tax free You must report $35 interest income on your tax return. Filing state tax free Interest on insurance dividends. Filing state tax free   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Filing state tax free However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Filing state tax free Prepaid insurance premiums. Filing state tax free   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Filing state tax free U. Filing state tax free S. Filing state tax free obligations. Filing state tax free   Interest on U. Filing state tax free S. Filing state tax free obligations, such as U. Filing state tax free S. Filing state tax free Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Filing state tax free Interest on tax refunds. Filing state tax free   Interest you receive on tax refunds is taxable income. Filing state tax free Interest on condemnation award. Filing state tax free   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Filing state tax free Installment sale payments. Filing state tax free   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Filing state tax free That interest is taxable when you receive it. Filing state tax free If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Filing state tax free See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Filing state tax free Interest on annuity contract. Filing state tax free   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Filing state tax free Usurious interest. Filing state tax free   Usurious interest is interest charged at an illegal rate. Filing state tax free This is taxable as interest unless state law automatically changes it to a payment on the principal. Filing state tax free Interest income on frozen deposits. Filing state tax free   Exclude from your gross income interest on frozen deposits. Filing state tax free A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Filing state tax free   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Filing state tax free If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Filing state tax free   The interest you exclude is treated as credited to your account in the following year. Filing state tax free You must include it in income in the year you can withdraw it. Filing state tax free Example. Filing state tax free $100 of interest was credited on your frozen deposit during the year. Filing state tax free You withdrew $80 but could not withdraw any more as of the end of the year. Filing state tax free You must include $80 in your income and exclude $20 from your income for the year. Filing state tax free You must include the $20 in your income for the year you can withdraw it. Filing state tax free Bonds traded flat. Filing state tax free   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Filing state tax free The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Filing state tax free When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Filing state tax free Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Filing state tax free See Bonds Sold Between Interest Dates , later, for more information. Filing state tax free Below-market loans. Filing state tax free   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Filing state tax free See Below-Market Loans in chapter 1 of Publication 550 for more information. Filing state tax free U. Filing state tax free S. Filing state tax free Savings Bonds This section provides tax information on U. Filing state tax free S. Filing state tax free savings bonds. Filing state tax free It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Filing state tax free For other information on U. Filing state tax free S. Filing state tax free savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Filing state tax free O. Filing state tax free Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Filing state tax free O. Filing state tax free Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Filing state tax free O. Filing state tax free Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Filing state tax free treasurydirect. Filing state tax free gov/indiv/indiv. Filing state tax free htm. Filing state tax free Accrual method taxpayers. Filing state tax free   If you use an accrual method of accounting, you must report interest on U. Filing state tax free S. Filing state tax free savings bonds each year as it accrues. Filing state tax free You cannot postpone reporting interest until you receive it or until the bonds mature. Filing state tax free Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Filing state tax free Cash method taxpayers. Filing state tax free   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Filing state tax free S. Filing state tax free savings bonds when you receive it. Filing state tax free The cash method of accounting is explained in chapter 1 under Accounting Methods. Filing state tax free But see Reporting options for cash method taxpayers , later. Filing state tax free Series HH bonds. Filing state tax free    These bonds were issued at face value. Filing state tax free Interest is paid twice a year by direct deposit to your bank account. Filing state tax free If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Filing state tax free   Series HH bonds were first offered in 1980 and last offered in August 2004. Filing state tax free Before 1980, series H bonds were issued. Filing state tax free Series H bonds are treated the same as series HH bonds. Filing state tax free If you are a cash method taxpayer, you must report the interest when you receive it. Filing state tax free   Series H bonds have a maturity period of 30 years. Filing state tax free Series HH bonds mature in 20 years. Filing state tax free The last series H bonds matured in 2009. Filing state tax free Series EE and series I bonds. Filing state tax free   Interest on these bonds is payable when you redeem the bonds. Filing state tax free The difference between the purchase price and the redemption value is taxable interest. Filing state tax free Series EE bonds. Filing state tax free   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Filing state tax free   Before July 1980, series E bonds were issued. Filing state tax free The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Filing state tax free Paper series EE and series E bonds are issued at a discount. Filing state tax free The face value is payable to you at maturity. Filing state tax free Electronic series EE bonds are issued at their face value. Filing state tax free The face value plus accrued interest is payable to you at maturity. Filing state tax free As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Filing state tax free   Owners of paper series EE bonds can convert them to electronic bonds. Filing state tax free These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Filing state tax free Series I bonds. Filing state tax free   Series I bonds were first offered in 1998. Filing state tax free These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Filing state tax free The face value plus all accrued interest is payable to you at maturity. Filing state tax free Reporting options for cash method taxpayers. Filing state tax free   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Filing state tax free Method 1. Filing state tax free Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Filing state tax free (However, see Savings bonds traded , later. Filing state tax free )  Note. Filing state tax free Series EE bonds issued in 1983 matured in 2013. Filing state tax free If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Filing state tax free The last series E bonds were issued in 1980 and matured in 2010. Filing state tax free If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Filing state tax free Method 2. Filing state tax free Choose to report the increase in redemption value as interest each year. Filing state tax free You must use the same method for all series EE, series E, and series I bonds you own. Filing state tax free If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Filing state tax free    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Filing state tax free To learn how, see Education Savings Bond Program, later. Filing state tax free Change from method 1. Filing state tax free   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Filing state tax free In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Filing state tax free   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Filing state tax free Change from method 2. Filing state tax free   To change from method 2 to method 1, you must request permission from the IRS. Filing state tax free Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Filing state tax free You have typed or printed the following number at the top: “131. Filing state tax free ” It includes your name and social security number under “131. Filing state tax free ” It includes the year of change (both the beginning and ending dates). Filing state tax free It identifies the savings bonds for which you are requesting this change. Filing state tax free It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Filing state tax free   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Filing state tax free   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Filing state tax free On the statement, type or print “Filed pursuant to section 301. Filing state tax free 9100-2. Filing state tax free ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Filing state tax free    By the date you file the original statement with your return, you must also send a signed copy to the address below. Filing state tax free   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Filing state tax free O. Filing state tax free Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Filing state tax free   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Filing state tax free In that case, follow the form instructions for an automatic change. Filing state tax free No user fee is required. Filing state tax free Co-owners. Filing state tax free   If a U. Filing state tax free S. Filing state tax free savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Filing state tax free One co-owner's funds used. Filing state tax free    If you used your funds to buy the bond, you must pay the tax on the interest. Filing state tax free This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Filing state tax free Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Filing state tax free The co-owner who redeemed the bond is a “nominee. Filing state tax free ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Filing state tax free Both co-owners' funds used. Filing state tax free   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Filing state tax free Community property. Filing state tax free   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Filing state tax free If you file separate returns, each of you generally must report one-half of the bond interest. Filing state tax free For more information about community property, see Publication 555. Filing state tax free Table 7-1. Filing state tax free   These rules are also shown in Table 7-1. Filing state tax free Ownership transferred. Filing state tax free   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Filing state tax free But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Filing state tax free   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Filing state tax free Purchased jointly. Filing state tax free   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Filing state tax free The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Filing state tax free This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Filing state tax free   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Filing state tax free But the new co-owner will report only his or her share of the interest earned after the transfer. Filing state tax free   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Filing state tax free    Table 7-1. Filing state tax free Who Pays the Tax on U. Filing state tax free S. Filing state tax free Savings Bond Interest IF . Filing state tax free . Filing state tax free . Filing state tax free THEN the interest must be reported by . Filing state tax free . Filing state tax free . Filing state tax free you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Filing state tax free you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Filing state tax free you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Filing state tax free you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Filing state tax free If you file separate returns, both you and your spouse generally report one-half of the interest. Filing state tax free Example 1. Filing state tax free You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Filing state tax free The bond was issued to you and your spouse as co-owners. Filing state tax free You both postpone reporting interest on the bond. Filing state tax free You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Filing state tax free At that time neither you nor your spouse has to report the interest earned to the date of reissue. Filing state tax free Example 2. Filing state tax free You bought a $1,000 series EE savings bond entirely with your own funds. Filing state tax free The bond was issued to you and your spouse as co-owners. Filing state tax free You both postpone reporting interest on the bond. Filing state tax free You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Filing state tax free You must report half the interest earned to the date of reissue. Filing state tax free Transfer to a trust. Filing state tax free   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Filing state tax free However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Filing state tax free You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Filing state tax free   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Filing state tax free See Savings bonds traded , later. Filing state tax free Decedents. Filing state tax free   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Filing state tax free This is explained in chapter 1 of Publication 550. Filing state tax free Savings bonds traded. Filing state tax free   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Filing state tax free (You cannot trade series I bonds for series HH bonds. Filing state tax free After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Filing state tax free ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Filing state tax free When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Filing state tax free Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Filing state tax free Example. Filing state tax free You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Filing state tax free You reported the $223 as taxable income on your tax return. Filing state tax free At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Filing state tax free You hold the series HH bonds until maturity, when you receive $2,500. Filing state tax free You must report $300 as interest income in the year of maturity. Filing state tax free This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Filing state tax free (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Filing state tax free ) Choice to report interest in year of trade. Filing state tax free   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Filing state tax free If you made this choice, it is treated as a change from method 1. Filing state tax free See Change from method 1 under Series EE and series I bonds, earlier. Filing state tax free Form 1099-INT for U. Filing state tax free S. Filing state tax free savings bonds interest. Filing state tax free   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Filing state tax free Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Filing state tax free However, your Form 1099-INT may show more interest than you have to include on your income tax return. Filing state tax free For example, this may happen if any of the following are true. Filing state tax free You chose to report the increase in the redemption value of the bond each year. Filing state tax free The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Filing state tax free You received the bond from a decedent. Filing state tax free The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Filing state tax free Ownership of the bond was transferred. Filing state tax free The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Filing state tax free You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Filing state tax free The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Filing state tax free (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Filing state tax free ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Filing state tax free The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Filing state tax free (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Filing state tax free , for the year of distribution. Filing state tax free )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Filing state tax free Publication 550 includes examples showing how to report these amounts. Filing state tax free    Interest on U. Filing state tax free S. Filing state tax free savings bonds is exempt from state and local taxes. Filing state tax free The Form 1099-INT you receive will indicate the amount that is for U. Filing state tax free S. Filing state tax free savings bond interest in box 3. Filing state tax free Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Filing state tax free S. Filing state tax free savings bonds during the year if you pay qualified higher educational expenses during the same year. Filing state tax free This exclusion is known as the Education Savings Bond Program. Filing state tax free You do not qualify for this exclusion if your filing status is married filing separately. Filing state tax free Form 8815. Filing state tax free   Use Form 8815 to figure your exclusion. Filing state tax free Attach the form to your Form 1040 or Form 1040A. Filing state tax free Qualified U. Filing state tax free S. Filing state tax free savings bonds. Filing state tax free   A qualified U. Filing state tax free S. Filing state tax free savings bond is a series EE bond issued after 1989 or a series I bond. Filing state tax free The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Filing state tax free You must be at least 24 years old before the bond's issue date. Filing state tax free For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Filing state tax free    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Filing state tax free Beneficiary. Filing state tax free   You can designate any individual (including a child) as a beneficiary of the bond. Filing state tax free Verification by IRS. Filing state tax free   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Filing state tax free Qualified expenses. Filing state tax free   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Filing state tax free   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Filing state tax free   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Filing state tax free Eligible educational institutions. Filing state tax free   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Filing state tax free S. Filing state tax free Department of Education. Filing state tax free Reduction for certain benefits. Filing state tax free   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Filing state tax free Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Filing state tax free Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Filing state tax free Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Filing state tax free Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Filing state tax free Any expense used in figuring the American Opportunity and lifetime learning credits. Filing state tax free Amount excludable. Filing state tax free   If the total proceeds (interest and principal) from the qualified U. Filing state tax free S. Filing state tax free savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Filing state tax free If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Filing state tax free   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Filing state tax free The numerator of the fraction is the qualified higher educational expenses you paid during the year. Filing state tax free The denominator of the fraction is the total proceeds you received during the year. Filing state tax free Example. Filing state tax free In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Filing state tax free S. Filing state tax free savings bond they bought in April 1997. Filing state tax free They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Filing state tax free In 2013, they paid $4,000 of their daughter's college tuition. Filing state tax free They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Filing state tax free They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Filing state tax free They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Filing state tax free Modified adjusted gross income limit. Filing state tax free   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Filing state tax free You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Filing state tax free   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Filing state tax free   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Filing state tax free If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Filing state tax free   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Filing state tax free Recordkeeping. Filing state tax free If you claim the interest exclusion, you must keep a written record of the qualified U. Filing state tax free S. Filing state tax free savings bonds you redeem. Filing state tax free Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Filing state tax free You can use Form 8818 to record this information. Filing state tax free You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Filing state tax free U. Filing state tax free S. Filing state tax free Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Filing state tax free S. Filing state tax free Government. Filing state tax free Taxation of interest. Filing state tax free   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Filing state tax free You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Filing state tax free   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Filing state tax free Treasury bills. Filing state tax free   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Filing state tax free They are generally issued at a discount in the amount of $100 and multiples of $100. Filing state tax free The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Filing state tax free Generally, you report this interest income when the bill is paid at maturity. Filing state tax free If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Filing state tax free Treasury notes and bonds. Filing state tax free   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Filing state tax free Maturity periods for Treasury bonds are longer than 10 years. Filing state tax free Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Filing state tax free Generally, you report this interest for the year paid. Filing state tax free For more information, see U. Filing state tax free S. Filing state tax free Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Filing state tax free For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Filing state tax free O. Filing state tax free Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Filing state tax free treasurydirect. Filing state tax free gov/indiv/indiv. Filing state tax free htm. Filing state tax free For information on series EE, series I, and series HH savings bonds, see U. Filing state tax free S. Filing state tax free Savings Bonds , earlier. Filing state tax free Treasury inflation-protected securities (TIPS). Filing state tax free   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Filing state tax free For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Filing state tax free Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Filing state tax free You must report that part of the sales price as interest income for the year of sale. Filing state tax free If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Filing state tax free When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Filing state tax free See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Filing state tax free Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Filing state tax free But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Filing state tax free For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Filing state tax free Annuity. Filing state tax free   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Filing state tax free See chapter 10 for information on pension and annuity income from nonqualified plans. Filing state tax free State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Filing state tax free Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Filing state tax free Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Filing state tax free For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Filing state tax free Information reporting requirement. Filing state tax free   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Filing state tax free This is an information reporting requirement only. Filing state tax free It does not change tax-exempt interest to taxable interest. Filing state tax free Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Filing state tax free You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Filing state tax free A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Filing state tax free OID is the difference between the stated redemption price at maturity and the issue price. Filing state tax free All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Filing state tax free Zero coupon bonds are one example of these instruments. Filing state tax free The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Filing state tax free See Discount on Short-Term Obligations in chapter 1 of Publication 550. Filing state tax free De minimis OID. Filing state tax free   You can treat the discount as zero if it is less than one-fourth of 1% (. Filing state tax free 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Filing state tax free This small discount is known as “de minimis” OID. Filing state tax free Example 1. Filing state tax free You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Filing state tax free One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Filing state tax free Because the $20 discount is less than $25, the OID is treated as zero. Filing state tax free (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Filing state tax free ) Example 2. Filing state tax free The facts are the same as in Example 1, except that the bond was issued at $950. Filing state tax free The OID is $50. Filing state tax free Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Filing state tax free Debt instrument bought after original issue. Filing state tax free   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Filing state tax free If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Filing state tax free See Market Discount Bonds in chapter 1 of Publication 550. Filing state tax free Exceptions to reporting OID. Filing state tax free   The OID rules discussed in this chapter do not apply to the following debt instruments. Filing state tax free Tax-exempt obligations. Filing state tax free (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Filing state tax free U. Filing state tax free S. Filing state tax free savings bonds. Filing state tax free Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Filing state tax free Obligations issued by an individual before March 2, 1984. Filing state tax free Loans between individuals if all the following are true. Filing state tax free The lender is not in the business of lending money. Filing state tax free The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Filing state tax free Avoiding any federal tax is not one of the principal purposes of the loan. Filing state tax free Form 1099-OID. Filing state tax free   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Filing state tax free Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Filing state tax free It also will show, in box 2, the stated interest you must include in your income. Filing state tax free A copy of Form 1099-OID will be sent to the IRS. Filing state tax free Do not file your copy with your return. Filing state tax free Keep it for your records. Filing state tax free   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Filing state tax free But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Filing state tax free Form 1099-OID not received. Filing state tax free   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Filing state tax free gov that list total OID on certain debt instruments and have information that will help you figure OID. Filing state tax free For the latest OID tables, go to www. Filing state tax free irs. Filing state tax free gov and enter “OID tables” in the Search box. Filing state tax free If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Filing state tax free Nominee. Filing state tax free   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Filing state tax free Refiguring OID shown on Form 1099-OID. Filing state tax free   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Filing state tax free You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Filing state tax free The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Filing state tax free For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Filing state tax free Refiguring periodic interest shown on Form 1099-OID. Filing state tax free   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Filing state tax free Certificates of deposit (CDs). Filing state tax free   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Filing state tax free   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Filing state tax free , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Filing state tax free Bearer CDs. Filing state tax free   CDs issued after 1982 generally must be in registered form. Filing state tax free Bearer CDs are CDs not in registered form. Filing state tax free They are not issued in the depositor's name and are transferable from one individual to another. Filing state tax free   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Filing state tax free More information. Filing state tax free   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Filing state tax free When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Filing state tax free Cash method. Filing state tax free   Most individual taxpayers use the cash method. Filing state tax free If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Filing state tax free However, there are special rules for reporting the discount on certain debt instruments. Filing state tax free See U. Filing state tax free S. Filing state tax free Savings Bonds and Original Issue Discount (OID) , earlier. Filing state tax free Example. Filing state tax free On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Filing state tax free You are not in the business of lending money. Filing state tax free The note stated that principal and interest would be due on August 31, 2013. Filing state tax free In 2013, you received $2,508. Filing state tax free 80 ($2,000 principal and $508. Filing state tax free 80 interest). Filing state tax free If you use the cash method, you must include in income on your 2013 return the $508. Filing state tax free 80 interest you received in that year. Filing state tax free Constructive receipt. Filing state tax free   You constructively receive income when it is credited to your account or made available to you. Filing state tax free You do not need to have physical possession of it. Filing state tax free For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Filing state tax free This is true even if they are not yet entered in your passbook. Filing state tax free   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Filing state tax free Accrual method. Filing state tax free   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Filing state tax free Interest is earned over the term of the debt instrument. Filing state tax free Example. Filing state tax free If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Filing state tax free You would report the interest as follows: 2011, $80; 2012, $249. Filing state tax free 60; and 2013, $179. Filing state tax free 20. Filing state tax free Coupon bonds. Filing state tax free   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Filing state tax free It does not matter when you mail the coupon for payment. Filing state tax free How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Filing state tax free You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Filing state tax free Instead, you must use Form 1040A or Form 1040. Filing state tax free Form 1040A. Filing state tax free   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Filing state tax free Your taxable interest income is more than $1,500. Filing state tax free You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Filing state tax free You received interest from a seller-financed mortgage, and the buyer used the property as a home. Filing state tax free You received a Form 1099-INT for U. Filing state tax free S. Filing state tax free savings bond interest that includes amounts you reported before 2013. Filing state tax free You received, as a nominee, interest that actually belongs to someone else. Filing state tax free You received a Form 1099-INT for interest on frozen deposits. Filing state tax free You are reporting OID in an amount less than the amount shown on Form 1099-OID. Filing state tax free You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Filing state tax free You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Filing state tax free List each payer's name and the amount of interest income received from each payer on line 1. Filing state tax free If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Filing state tax free   You cannot use Form 1040A if you must use Form 1040, as described next. Filing state tax free Form 1040. Filing state tax free   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Filing state tax free Schedule B (Form 1040A or 1040). Filing state tax free   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Filing state tax free Your taxable interest income is more than $1,500. Filing state tax free You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Filing state tax free You received interest from a seller-financed mortgage, and the buyer used the property as a home. Filing state tax free You received a Form 1099-INT for U. Filing state tax free S. Filing state tax free savings bond interest that includes amounts you reported before 2013. Filing state tax free You received, as a nominee, interest that actually belongs to someone else. Filing state tax free You received a Form 1099-INT for interest on frozen deposits. Filing state tax free You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Filing state tax free You are reporting OID in an amount less than the amount shown on Form 1099-OID. Filing state tax free Statement (2) in the preceding list under Form 1040 is true. Filing state tax free In Part I, line 1, list each payer's name and the amount received from each. Filing state tax free If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Filing state tax free Reporting tax-exempt interest. Filing state tax free   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Filing state tax free Add these amounts to any other tax-exempt interest you received. Filing state tax free Report the total on line 8b of Form 1040A or 1040. Filing state tax free   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Filing state tax free Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Filing state tax free   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Filing state tax free These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Filing state tax free Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Filing state tax free    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Filing state tax free Form 1099-INT. Filing state tax free   Your taxable interest income, except for interest from U. Filing state tax free S. Filing state tax free savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Filing state tax free Add this amount to any other taxable interest income you received. Filing state tax free You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Filing state tax free Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Filing state tax free Your identifying number may be truncated on any paper Form 1099-INT you receive. Filing state tax free   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Filing state tax free See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Filing state tax free   Box 3 of Form 1099-INT shows the interest income you received from U. Filing state tax free S. Filing state tax free savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Filing state tax free Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Filing state tax free If part of the amount shown in box 3 was previously included in your interest income, see U. Filing state tax free S. Filing state tax free savings bond interest previously reported , later. Filing state tax free   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Filing state tax free Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Filing state tax free   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Filing state tax free See chapter 28 for more information about investment expenses. Filing state tax free   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Filing state tax free You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Filing state tax free To take the credit, you may have to file Form 1116, Foreign Tax Credit. Filing state tax free For more information, see Publication 514, Foreign Tax Credit for Individuals. Filing state tax free U. Filing state tax free S. Filing state tax free savings bond interest previously reported. Filing state tax free   If you received a Form 1099-INT for U. Filing state tax free S. Filing state tax free savings bond interest, the form may show interest you do not have to report. Filing state tax free See Form 1099-INT for U. Filing state tax free S. Filing state tax free savings bonds interest , earlier, under U. Filing state tax free S. Filing state tax free Savings Bonds. Filing state tax free   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Filing state tax free Then follow these steps. Filing state tax free Several lines above line 2, enter a subtotal of all interest listed on line 1. Filing state tax free Below the subtotal enter “U. Filing state tax free S. Filing state tax free Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Filing state tax free Subtract these amounts from the subtotal and enter the result on line 2. Filing state tax free More information. Filing state tax free   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Filing state tax free Prev  Up  Next   Home   More Online Publications
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The Filing State Tax Free

Filing state tax free It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Filing state tax free Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. Filing state tax free Select the Scenario that Applies to You: Filing state tax free I am an independent contractor or in business for myself Filing state tax free If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center. Filing state tax free I hire or contract with individuals to provide services to my business Filing state tax free If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are. Filing state tax free Determining Whether the Individuals Providing Services are Employees or Independent Contractors Filing state tax free Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be - Filing state tax free An independent contractor Filing state tax free An employee (common-law employee) Filing state tax free A statutory employee Filing state tax free A statutory nonemployee Filing state tax free In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. Filing state tax free Common Law Rules Filing state tax free Facts that provide evidence of the degree of control and independence fall into three categories: Filing state tax free Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? Filing state tax free Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) Filing state tax free Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? Filing state tax free Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. Filing state tax free The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. Filing state tax free Form SS-8 Filing state tax free If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status. Filing state tax free Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).