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How do you amend your taxes online Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. How do you amend your taxes online Adjustment for premium. How do you amend your taxes online Adjustment for acquisition premium. How do you amend your taxes online Adjustment for market discount. How do you amend your taxes online Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. How do you amend your taxes online “Original issue discount” is defined first. How do you amend your taxes online The other terms are listed alphabetically. How do you amend your taxes online Original issue discount (OID). How do you amend your taxes online   OID is a form of interest. How do you amend your taxes online It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). How do you amend your taxes online Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. How do you amend your taxes online Accrual period. How do you amend your taxes online   An accrual period is an interval of time used to measure OID. How do you amend your taxes online The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. How do you amend your taxes online Acquisition premium. How do you amend your taxes online   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. How do you amend your taxes online A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. How do you amend your taxes online See Premium, later. How do you amend your taxes online Adjusted issue price. How do you amend your taxes online   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. How do you amend your taxes online In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. How do you amend your taxes online The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. How do you amend your taxes online Debt instrument. How do you amend your taxes online   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). How do you amend your taxes online It generally does not include an annuity contract. How do you amend your taxes online Issue price. How do you amend your taxes online   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. How do you amend your taxes online Market discount. How do you amend your taxes online   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. How do you amend your taxes online An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. How do you amend your taxes online The market discount is the difference between the issue price plus accrued OID and your adjusted basis. How do you amend your taxes online Premium. How do you amend your taxes online   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. How do you amend your taxes online The premium is the excess of the adjusted basis over the payable amounts. How do you amend your taxes online See Publication 550 for information on the tax treatment of bond premium. How do you amend your taxes online Qualified stated interest. How do you amend your taxes online   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. How do you amend your taxes online Stated redemption price at maturity. How do you amend your taxes online   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. How do you amend your taxes online Yield to maturity (YTM). How do you amend your taxes online   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. How do you amend your taxes online The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. How do you amend your taxes online If you do not have this information, consult your broker, tax advisor, or the issuer. How do you amend your taxes online Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. How do you amend your taxes online If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. How do you amend your taxes online The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. How do you amend your taxes online For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. How do you amend your taxes online The following discussions explain what information is contained in each section of the list. How do you amend your taxes online Section I. How do you amend your taxes online   This section contains publicly offered, long-term debt instruments. How do you amend your taxes online Section I-A: Corporate Debt Instruments Issued Before 1985. How do you amend your taxes online Section I-B: Corporate Debt Instruments Issued After 1984. How do you amend your taxes online Section I-C: Inflation-Indexed Debt Instruments. How do you amend your taxes online For each publicly offered debt instrument in Section I, the list contains the following information. How do you amend your taxes online The name of the issuer. How do you amend your taxes online The Committee on Uniform Security Identification Procedures (CUSIP) number. How do you amend your taxes online The issue date. How do you amend your taxes online The maturity date. How do you amend your taxes online The issue price expressed as a percent of principal or of stated redemption price at maturity. How do you amend your taxes online The annual stated or coupon interest rate. How do you amend your taxes online (This rate is shown as 0. How do you amend your taxes online 00 if no annual interest payments are provided. How do you amend your taxes online ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. How do you amend your taxes online The total OID accrued up to January 1 of a calendar year. How do you amend your taxes online (This information is not available for every instrument. How do you amend your taxes online ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. How do you amend your taxes online The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. How do you amend your taxes online Section II. How do you amend your taxes online   This section contains stripped coupons and principal components of U. How do you amend your taxes online S. How do you amend your taxes online Treasury and Government-Sponsored Enterprise debt instruments. How do you amend your taxes online These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. How do you amend your taxes online This section also includes debt instruments backed by U. How do you amend your taxes online S. How do you amend your taxes online Treasury securities that represent ownership interests in those securities. How do you amend your taxes online   The obligations listed in Section II are arranged by maturity date. How do you amend your taxes online The amounts listed are the total OID for a calendar year per $1,000 of redemption price. How do you amend your taxes online Section III. How do you amend your taxes online   This section contains short-term discount obligations. How do you amend your taxes online Section III-A: Short-Term U. How do you amend your taxes online S. How do you amend your taxes online Treasury Bills. How do you amend your taxes online Section III-B: Federal Home Loan Banks. How do you amend your taxes online Section III-C: Federal National Mortgage Association. How do you amend your taxes online Section III-D: Federal Farm Credit Banks. How do you amend your taxes online Section III-E: Federal Home Loan Mortgage Corporation. How do you amend your taxes online Section III-F: Federal Agricultural Mortgage Corporation. How do you amend your taxes online    Information that supplements Section III-A is available on the Internet at http://www. How do you amend your taxes online treasurydirect. How do you amend your taxes online gov/tdhome. How do you amend your taxes online htm. How do you amend your taxes online   The short-term obligations listed in this section are arranged by maturity date. How do you amend your taxes online For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. How do you amend your taxes online Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. How do you amend your taxes online Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. How do you amend your taxes online U. How do you amend your taxes online S. How do you amend your taxes online savings bonds. How do you amend your taxes online Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. How do you amend your taxes online Obligations issued by tax-exempt organizations. How do you amend your taxes online OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. How do you amend your taxes online Mortgage-backed securities and mortgage participation certificates. How do you amend your taxes online Long-term OID debt instruments issued before May 28, 1969. How do you amend your taxes online Short-term obligations, other than the obligations listed in Section III. How do you amend your taxes online Debt instruments issued at a discount by states or their political subdivisions. How do you amend your taxes online REMIC regular interests and CDOs. How do you amend your taxes online Commercial paper and banker's acceptances issued at a discount. How do you amend your taxes online Obligations issued at a discount by individuals. How do you amend your taxes online Foreign obligations not traded in the United States and obligations not issued in the United States. How do you amend your taxes online Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. How do you amend your taxes online In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. How do you amend your taxes online You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. How do you amend your taxes online See Backup Withholding, later. How do you amend your taxes online If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. How do you amend your taxes online File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). How do you amend your taxes online Electronic payee statements. How do you amend your taxes online   You can issue Form 1099-OID electronically with the consent of the recipient. How do you amend your taxes online More information. How do you amend your taxes online   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. How do you amend your taxes online Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. How do you amend your taxes online To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. How do you amend your taxes online If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. How do you amend your taxes online Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. How do you amend your taxes online If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. How do you amend your taxes online A special rule is used to determine the original issue price for information reporting on U. How do you amend your taxes online S. How do you amend your taxes online Treasury bills (T-bills) listed in Section III-A. How do you amend your taxes online Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. How do you amend your taxes online This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. How do you amend your taxes online A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. How do you amend your taxes online Example 1. How do you amend your taxes online There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. How do you amend your taxes online The price actually paid by the owner cannot be established by owner or middleman records. How do you amend your taxes online You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. How do you amend your taxes online The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. How do you amend your taxes online Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. How do you amend your taxes online For this purpose, you can rely on Section I of the OID list to determine the following information. How do you amend your taxes online Whether a debt instrument has OID. How do you amend your taxes online The OID to be reported on the Form 1099-OID. How do you amend your taxes online In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. How do you amend your taxes online You also can report OID on other long-term debt instruments. How do you amend your taxes online Form 1099-OID. How do you amend your taxes online   On Form 1099-OID for a calendar year show the following information. How do you amend your taxes online Box 1. How do you amend your taxes online The OID for the actual dates the owner held the debt instruments during a calendar year. How do you amend your taxes online To determine this amount, see Figuring OID, next. How do you amend your taxes online Box 2. How do you amend your taxes online The qualified stated interest paid or credited during the calendar year. How do you amend your taxes online Interest reported here is not reported on Form 1099-INT. How do you amend your taxes online The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. How do you amend your taxes online Box 3. How do you amend your taxes online Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. How do you amend your taxes online Do not reduce the amounts in boxes 1 and 2 by the forfeiture. How do you amend your taxes online Box 4. How do you amend your taxes online Any backup withholding for this debt instrument. How do you amend your taxes online Box 7. How do you amend your taxes online The CUSIP number, if any. How do you amend your taxes online If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. How do you amend your taxes online 50 2006). How do you amend your taxes online If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. How do you amend your taxes online Box 8. How do you amend your taxes online The OID on a U. How do you amend your taxes online S. How do you amend your taxes online Treasury obligation for the part of the year the owner held the debt instrument. How do you amend your taxes online Box 9. How do you amend your taxes online Investment expenses passed on to holders of a single-class REMIC. How do you amend your taxes online Boxes 10-12. How do you amend your taxes online Use to report any state income tax withheld for this debt instrument. How do you amend your taxes online Figuring OID. How do you amend your taxes online   You can determine the OID on a long-term debt instrument by using either of the following. How do you amend your taxes online Section I of the OID list. How do you amend your taxes online The income tax regulations. How do you amend your taxes online Using Section I. How do you amend your taxes online   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. How do you amend your taxes online Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. How do you amend your taxes online For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. How do you amend your taxes online   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. How do you amend your taxes online Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. How do you amend your taxes online Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. How do you amend your taxes online Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. How do you amend your taxes online Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. How do you amend your taxes online If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. How do you amend your taxes online Report the result on Form 1099-OID in box 1. How do you amend your taxes online Using the income tax regulations. How do you amend your taxes online   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. How do you amend your taxes online For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. How do you amend your taxes online (If you use Section I-B, the OID is figured using 6-month accrual periods. How do you amend your taxes online )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. How do you amend your taxes online Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. How do you amend your taxes online You must file an information return showing the reportable interest and OID, if any, on the CD. How do you amend your taxes online These rules apply whether or not you sold the CD to the owner. How do you amend your taxes online Report OID on a CD in the same way as OID on other debt instruments. How do you amend your taxes online See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. How do you amend your taxes online Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. How do you amend your taxes online However, do not report the interest if either of the following apply. How do you amend your taxes online You hold the bond as a nominee for the true owner. How do you amend your taxes online The payee is a foreign person. How do you amend your taxes online See Payments to foreign person under Backup Withholding, later. How do you amend your taxes online Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. How do you amend your taxes online The coupon may have been “stripped” (separated) from the bond and separately purchased. How do you amend your taxes online However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. How do you amend your taxes online Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. How do you amend your taxes online The backup withholding is deducted at the time a cash payment is made. How do you amend your taxes online See Pub. How do you amend your taxes online 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. How do you amend your taxes online Backup withholding generally applies in the following situations. How do you amend your taxes online The payee does not give you a taxpayer identification number (TIN). How do you amend your taxes online The IRS notifies you that the payee gave an incorrect TIN. How do you amend your taxes online The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. How do you amend your taxes online For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. How do you amend your taxes online However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. How do you amend your taxes online S. How do you amend your taxes online savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. How do you amend your taxes online Short-term obligations. How do you amend your taxes online   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. How do you amend your taxes online However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. How do you amend your taxes online   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. How do you amend your taxes online However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. How do you amend your taxes online If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. How do you amend your taxes online Long-term obligations. How do you amend your taxes online   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. How do you amend your taxes online The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. How do you amend your taxes online The amount to be withheld is limited to the cash paid. How do you amend your taxes online Registered long-term obligations with cash payments. How do you amend your taxes online   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. How do you amend your taxes online The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. How do you amend your taxes online If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. How do you amend your taxes online For any payment, the required withholding is limited to the cash paid. How do you amend your taxes online Payee not the original owner. How do you amend your taxes online   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). How do you amend your taxes online The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. How do you amend your taxes online Bearer long-term obligations with cash payments. How do you amend your taxes online   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. How do you amend your taxes online For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. How do you amend your taxes online For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. How do you amend your taxes online The required withholding at maturity is limited to the cash paid. How do you amend your taxes online Sales and redemptions. How do you amend your taxes online   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. How do you amend your taxes online Backup withholding applies in the following situations. How do you amend your taxes online The payee does not give you a TIN. How do you amend your taxes online The IRS notifies you that the payee gave an incorrect TIN. How do you amend your taxes online For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. How do you amend your taxes online Payments outside the United States to U. How do you amend your taxes online S. How do you amend your taxes online person. How do you amend your taxes online   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. How do you amend your taxes online S. How do you amend your taxes online person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. How do you amend your taxes online S. How do you amend your taxes online trade or business. How do you amend your taxes online Payments to foreign person. How do you amend your taxes online   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. How do you amend your taxes online U. How do you amend your taxes online S. How do you amend your taxes online -source amount. How do you amend your taxes online   Backup withholding and information reporting are not required for payments of U. How do you amend your taxes online S. How do you amend your taxes online -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. How do you amend your taxes online A U. How do you amend your taxes online S. How do you amend your taxes online resident is not a foreign person. How do you amend your taxes online For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. How do you amend your taxes online Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. How do you amend your taxes online S. How do you amend your taxes online person. How do you amend your taxes online   For information about the 28% withholding tax that may apply to payments of U. How do you amend your taxes online S. How do you amend your taxes online -source OID or interest to foreign persons, see Publication 515. How do you amend your taxes online Foreign-source amount. How do you amend your taxes online   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. How do you amend your taxes online However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. How do you amend your taxes online More information. How do you amend your taxes online   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. How do you amend your taxes online 6049-5. How do you amend your taxes online Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. How do you amend your taxes online It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. How do you amend your taxes online It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. How do you amend your taxes online However, the information provided does not cover every situation. How do you amend your taxes online More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. How do you amend your taxes online Including OID in income. How do you amend your taxes online   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. How do you amend your taxes online Exceptions. How do you amend your taxes online   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. How do you amend your taxes online U. How do you amend your taxes online S. How do you amend your taxes online savings bonds. How do you amend your taxes online Tax-exempt obligations. How do you amend your taxes online (However, see Tax-Exempt Bonds and Coupons, later. How do you amend your taxes online ) Obligations issued by individuals before March 2, 1984. How do you amend your taxes online Loans of $10,000 or less between individuals who are not in the business of lending money. How do you amend your taxes online (The dollar limit includes outstanding prior loans by the lender to the borrower. How do you amend your taxes online ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. How do you amend your taxes online   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. How do you amend your taxes online Publication 550 also discusses rules for holders of REMIC interests and CDOs. How do you amend your taxes online De minimis rule. How do you amend your taxes online   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. How do you amend your taxes online 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. How do you amend your taxes online Debt instruments with de minimis OID are not listed in this publication. How do you amend your taxes online There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. How do you amend your taxes online Also, the de minimis rules generally do not apply to tax-exempt obligations. How do you amend your taxes online Example 2. How do you amend your taxes online You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. How do you amend your taxes online One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. How do you amend your taxes online Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. How do you amend your taxes online Example 3. How do you amend your taxes online Assume the same facts as Example 2, except the debt instrument was issued at $950. How do you amend your taxes online You must report part of the $50 OID each year because it is more than $25. How do you amend your taxes online Choice to report all interest as OID. How do you amend your taxes online   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. How do you amend your taxes online See Constant yield method under Debt Instruments Issued After 1984, later, for more information. How do you amend your taxes online   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. How do you amend your taxes online For more information, see Regulations section 1. How do you amend your taxes online 1272-3. How do you amend your taxes online Purchase after date of original issue. How do you amend your taxes online   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. How do you amend your taxes online If so, the OID reported to you on Form 1099-OID may have to be adjusted. How do you amend your taxes online For more information, see Showing an OID adjustment under How To Report OID, later. How do you amend your taxes online The following rules generally do not apply to contingent payment debt instruments. How do you amend your taxes online Adjustment for premium. How do you amend your taxes online   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. How do you amend your taxes online Your adjustment is the total OID shown on your Form 1099-OID. How do you amend your taxes online Adjustment for acquisition premium. How do you amend your taxes online   If your debt instrument has acquisition premium, reduce the OID you report. How do you amend your taxes online Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. How do you amend your taxes online Adjustment for market discount. How do you amend your taxes online   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. How do you amend your taxes online Your adjustment is the accrued market discount for the year. How do you amend your taxes online See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. How do you amend your taxes online If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. How do you amend your taxes online The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. How do you amend your taxes online For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. How do you amend your taxes online 1275-7. How do you amend your taxes online Sale, exchange, or redemption. How do you amend your taxes online   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. How do you amend your taxes online If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. How do you amend your taxes online Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). How do you amend your taxes online   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. How do you amend your taxes online Your basis, generally, is your cost increased by the OID you have included in income each year you held it. How do you amend your taxes online In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. How do you amend your taxes online   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. How do you amend your taxes online Example 4. How do you amend your taxes online Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. How do you amend your taxes online 00 on November 1 of Year 1. How do you amend your taxes online The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. How do you amend your taxes online The debt instrument provides for semiannual payments of interest at 10%. How do you amend your taxes online Assume the debt instrument is a capital asset in Larry's hands. How do you amend your taxes online The debt instrument has $13,765. How do you amend your taxes online 00 of OID ($100,000 stated redemption price at maturity minus $86,235. How do you amend your taxes online 00 issue price). How do you amend your taxes online Larry sold the debt instrument for $90,000 on November 1 of Year 4. How do you amend your taxes online Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. How do you amend your taxes online 00 of OID in income and has increased his basis by that amount to $90,791. How do you amend your taxes online 00. How do you amend your taxes online Larry has realized a loss of $791. How do you amend your taxes online 00. How do you amend your taxes online All of Larry's loss is capital loss. How do you amend your taxes online Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. How do you amend your taxes online Form 1099-OID shows all OID income in box 1 except OID on a U. How do you amend your taxes online S. How do you amend your taxes online Treasury obligation, which is shown in box 8. How do you amend your taxes online It also shows, in box 2, any qualified stated interest you must include in income. How do you amend your taxes online (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. How do you amend your taxes online ) A copy of Form 1099-OID will be sent to the IRS. How do you amend your taxes online Do not attach your copy to your tax return. How do you amend your taxes online Keep it for your records. How do you amend your taxes online If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. How do you amend your taxes online A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. How do you amend your taxes online Form 1099-OID not received. How do you amend your taxes online   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. How do you amend your taxes online Refiguring OID. How do you amend your taxes online   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. How do you amend your taxes online You bought the debt instrument at a premium or at an acquisition premium. How do you amend your taxes online The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. How do you amend your taxes online S. How do you amend your taxes online Treasury securities). How do you amend your taxes online The debt instrument is a contingent payment or inflation-indexed debt instrument. How do you amend your taxes online See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. How do you amend your taxes online Refiguring interest. How do you amend your taxes online   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. How do you amend your taxes online Nominee. How do you amend your taxes online   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. How do you amend your taxes online ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. How do you amend your taxes online Show the owner of the debt instrument as the “recipient” and you as the “payer. How do you amend your taxes online ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. How do you amend your taxes online You must also give a copy of the Form 1099-OID to the actual owner. How do you amend your taxes online However, you are not required to file a nominee return to show amounts belonging to your spouse. How do you amend your taxes online See the Form 1099 instructions for more information. How do you amend your taxes online   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. How do you amend your taxes online How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. How do you amend your taxes online Form 1040 or Form 1040A required. How do you amend your taxes online   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. How do you amend your taxes online You received a Form 1099-OID as a nominee for the actual owner. How do you amend your taxes online Your total interest and OID income for the year was more than $1,500. How do you amend your taxes online Form 1040 required. How do you amend your taxes online   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. How do you amend your taxes online For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. How do you amend your taxes online Also, you must use Form 1040 if you were charged an early withdrawal penalty. How do you amend your taxes online Where to report. How do you amend your taxes online   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. How do you amend your taxes online Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. How do you amend your taxes online Also include any other OID and interest income for which you did not receive a Form 1099. How do you amend your taxes online Showing an OID adjustment. How do you amend your taxes online   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. How do you amend your taxes online   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. How do you amend your taxes online If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. How do you amend your taxes online Under your last entry on line 1, subtotal all interest and OID income listed on line 1. How do you amend your taxes online Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. How do you amend your taxes online Subtract that OID from the subtotal and enter the result on line 2. How do you amend your taxes online If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. How do you amend your taxes online Under your last entry on line 1, subtotal all interest and OID income listed on line 1. How do you amend your taxes online Below the subtotal, write “OID Adjustment” and show the additional OID. How do you amend your taxes online Add that OID to the subtotal and enter the result on line 2. How do you amend your taxes online Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. How do you amend your taxes online It also may depend on the type of the debt instrument. How do you amend your taxes online There are different rules for each of the following debt instruments. How do you amend your taxes online Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. How do you amend your taxes online Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. How do you amend your taxes online Debt instruments issued after July 1, 1982, and before 1985. How do you amend your taxes online Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). How do you amend your taxes online Contingent payment debt instruments issued after August 12, 1996. How do you amend your taxes online Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. How do you amend your taxes online Zero coupon bonds. How do you amend your taxes online   The rules for figuring OID on zero coupon bonds backed by U. How do you amend your taxes online S. How do you amend your taxes online Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. How do you amend your taxes online Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. How do you amend your taxes online The OID, which is taxed as ordinary income, generally equals the following amount. How do you amend your taxes online   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. How do you amend your taxes online If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. How do you amend your taxes online Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. How do you amend your taxes online For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. How do you amend your taxes online Your basis in the debt instrument is increased by the OID you include in income. How do you amend your taxes online Form 1099-OID. How do you amend your taxes online   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. How do you amend your taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How do you amend your taxes online See Reduction for acquisition premium, later. How do you amend your taxes online If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. How do you amend your taxes online irs. How do you amend your taxes online gov/pub1212 by clicking the link under Recent Developments. How do you amend your taxes online Form 1099-OID not received. How do you amend your taxes online    The OID listed is for each $1,000 of redemption price. How do you amend your taxes online You must adjust the listed amount if your debt instrument has a different principal amount. How do you amend your taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How do you amend your taxes online   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. How do you amend your taxes online (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. How do you amend your taxes online ) If you did not hold the debt instrument the entire year, figure your OID using the following method. How do you amend your taxes online Divide the OID shown by 12. How do you amend your taxes online Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. How do you amend your taxes online This is the OID to include in income unless you paid an acquisition premium. How do you amend your taxes online The reduction for acquisition premium is discussed next. How do you amend your taxes online Reduction for acquisition premium. How do you amend your taxes online   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. How do you amend your taxes online Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. How do you amend your taxes online This is the monthly OID. How do you amend your taxes online Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. How do you amend your taxes online (If the result is zero or less, stop here. How do you amend your taxes online You did not pay an acquisition premium. How do you amend your taxes online ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. How do you amend your taxes online Subtract the amount figured in (3) from the amount figured in (1). How do you amend your taxes online This is the OID to include in income for each month you hold the debt instrument during the year. How do you amend your taxes online Transfers during the month. How do you amend your taxes online   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. How do you amend your taxes online Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. How do you amend your taxes online Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. How do you amend your taxes online For information about showing the correct OID on your tax return, see How To Report OID, earlier. How do you amend your taxes online Form 1099-OID. How do you amend your taxes online   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. How do you amend your taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How do you amend your taxes online See Constant yield method and the discussions on acquisition premium that follow, later. How do you amend your taxes online If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. How do you amend your taxes online irs. How do you amend your taxes online gov/pub1212 by clicking the link under Recent Developments. How do you amend your taxes online Form 1099-OID not received. How do you amend your taxes online    The OID listed is for each $1,000 of redemption price. How do you amend your taxes online You must adjust the listed amount if your debt instrument has a different principal amount. How do you amend your taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How do you amend your taxes online   If you held the debt instrument the entire year, use the OID shown in Section I-A. How do you amend your taxes online (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. How do you amend your taxes online ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. How do you amend your taxes online Method 1. How do you amend your taxes online    Divide the total OID for a calendar year by 365 (366 for leap years). How do you amend your taxes online Multiply the result in (1) by the number of days you held the debt instrument during that particular year. How do you amend your taxes online  This computation is an approximation and may result in a slightly higher OID than Method 2. How do you amend your taxes online Method 2. How do you amend your taxes online    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. How do you amend your taxes online (See Accrual period under Constant yield method, next. How do you amend your taxes online ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. How do you amend your taxes online If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. How do you amend your taxes online Add the results of (2) and (3). How do you amend your taxes online This is the OID to include in income, unless you paid an acquisition premium. How do you amend your taxes online (The reduction for acquisition premium is discussed later. How do you amend your taxes online ) Constant yield method. How do you amend your taxes online   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. How do you amend your taxes online OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. How do you amend your taxes online   Figure the OID allocable to any accrual period as follows. How do you amend your taxes online Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. How do you amend your taxes online Subtract from the result in (1) any qualified stated interest allocable to the accrual period. How do you amend your taxes online Accrual period. How do you amend your taxes online   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. How do you amend your taxes online Your tax year will usually include parts of two accrual periods. How do you amend your taxes online Daily OID. How do you amend your taxes online   The OID for any accrual period is allocated equally to each day in the accrual period. How do you amend your taxes online You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. How do you amend your taxes online If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. How do you amend your taxes online Figuring daily OID. How do you amend your taxes online   The daily OID for the initial accrual period is figured using the following formula. How do you amend your taxes online   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. How do you amend your taxes online Reduction for acquisition premium on debt instruments purchased before July 19, 1984. How do you amend your taxes online   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How do you amend your taxes online Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. How do you amend your taxes online Reduction for acquisition premium on debt instruments purchased after July 18, 1984. How do you amend your taxes online   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How do you amend your taxes online However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. How do you amend your taxes online To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. How do you amend your taxes online The numerator is the acquisition premium. How do you amend your taxes online The denominator is the total OID remaining for the debt instrument after your purchase date. How do you amend your taxes online Section I-A is available at www. How do you amend your taxes online irs. How do you amend your taxes online gov/pub1212 and clicking the link under Recent Developments. How do you amend your taxes online Using Section I-A to figure accumulated OID. How do you amend your taxes online   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. How do you amend your taxes online The amount from the “Total OID to January 1, YYYY” column for your debt instrument. How do you amend your taxes online The OID from January 1 of a calendar year to the date of purchase, figured as follows. How do you amend your taxes online Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. How do you amend your taxes online Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. How do you amend your taxes online Add the amounts figured in (2a) and (2b). How do you amend your taxes online Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. How do you amend your taxes online You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. How do you amend your taxes online Your basis in the debt instrument is increased by the OID you include in income. How do you amend your taxes online For information about showing the correct OID on your tax return, see How To Report OID, earlier. How do you amend your taxes online Form 1099-OID. How do you amend your taxes online   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. How do you amend your taxes online However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How do you amend your taxes online See Constant yield method and Reduction for acquisition premium, later. How do you amend your taxes online   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. How do you amend your taxes online See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. How do you amend your taxes online If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. How do you amend your taxes online irs. How do you amend your taxes online gov/pub1212 by clicking the link under Recent Developments. How do you amend your taxes online Form 1099-OID not received. How do you amend your taxes online   The OID listed is for each $1,000 of redemption price. How do you amend your taxes online You must adjust the listed amount if your debt instrument has a different principal amount. How do you amend your taxes online For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How do you amend your taxes online   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. How do you amend your taxes online (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. How do you amend your taxes online ) If you did not hold the debt instrument the entire year, figure your OID as follows. How do you amend your taxes online Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. How do you amend your taxes online (See Accrual period under Constant yield method, later. How do you amend your taxes online ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. How do you amend your taxes online Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. How do you amend your taxes online Add the results of (2) and (3). How do you amend your taxes online This is the OID to include in income for that year, unless you paid an acquisition premium. How do you amend your taxes online (The reduction for acquisition premium is discussed later. How do you amend your taxes online ) Tax-exempt bond. How do you amend your taxes online   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. How do you amend your taxes online You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. How do you amend your taxes online In general, use the rules that follow to determine your OID. How do you amend your taxes online Constant yield method. How do you amend your taxes online   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. How do you amend your taxes online (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. How do you amend your taxes online ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. How do you amend your taxes online   Figure the OID allocable to any accrual period as follows. How do you amend your taxes online Multiply the adjusted issue price at the beginning of the accrual period by a fraction. How do you amend your taxes online The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. How do you amend your taxes online The yield must be stated appropriately taking into account the length of the particular accrual period. How do you amend your taxes online Subtract from the result in (1) any qualified stated interest allocable to the accrual period. How do you amend your taxes online Accrual period. How do you amend your taxes online   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. How do you amend your taxes online For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. How do you amend your taxes online Any short period is included as the first accrual period. How do you amend your taxes online   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. How do you amend your taxes online However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. How do you amend your taxes online Daily OID. How do you amend your taxes online   The OID for any accrual period is allocated equally to each day in the accrual period. How do you amend your taxes online Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. How do you amend your taxes online Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. How do you amend your taxes online If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. How do you amend your taxes online Figuring daily OID. How do you amend your taxes online   The daily OID for the initial accrual period is figured using the following formula. How do you amend your taxes online   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. How do you amend your taxes online Example 5. How do you amend your taxes online On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. How do you amend your taxes online 17. How do you amend your taxes online According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. How do you amend your taxes online The yield to maturity is 12%, compounded semiannually. How do you amend your taxes online The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. How do you amend your taxes online The accrual periods are the 6-month periods ending on each of these dates. How do you amend your taxes online The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). How do you amend your taxes online The daily OID for the first accrual period is figured as follows. How do you amend your taxes online   ($86,235. How do you amend your taxes online 17 x . How do you amend your taxes online 12/2) – $5,000     181 days     = $174. How do you amend your taxes online 11020 = $. How do you amend your taxes online 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. How do you amend your taxes online 17 + $174. How do you amend your taxes online 11), or $86,409. How do you amend your taxes online 28. How do you amend your taxes online The number of days for the second accrual period (July 1 through December 31) is 184 days. How do you amend your taxes online The daily OID for the second accrual period is figured as follows. How do you amend your taxes online   ($86,409. How do you amend your taxes online 28 x . How do you amend your taxes online 12/2) – $5,000     184 days     = $184. How do you amend your taxes online 55681 = $1. How do you amend your taxes online 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. How do you amend your taxes online 11 ($. How do you amend your taxes online 95665 × 182 days) plus $184. How do you amend your taxes online 56 ($1. How do you amend your taxes online 00303 × 184 days), or $358. How do you amend your taxes online 67. How do you amend your taxes online Add the OID to the $10,000 interest you report on your income tax return for Year 1. How do you amend your taxes online Example 6. How do you amend your taxes online Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. How do you amend your taxes online Also, the interest payment dates are October 31 and April 30 of each calendar year. How do you amend your taxes online The accrual periods are the 6-month periods ending on each of these dates. How do you amend your taxes online The number of days for the first accrual period (May 1 through October 31) is 184 days. How do you amend your taxes online The daily OID for the first accrual period is figured as follows. How do you amend your taxes online   ($86,235. How do you amend your taxes online 17 x . How do you amend your taxes online 12/2) – $5,000     184 days     = $174. How do you amend your taxes online 11020 = $. How do you amend your taxes online 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). How do you amend your taxes online The daily OID for the second accrual period is figured as follows. How do you amend your taxes online   ($86,409. How do you amend your taxes online 28 x . How do you amend your taxes online 12/2) – $5,000     181 days     = $184. How do you amend your taxes online 55681 = $1. How do you amend your taxes online 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. How do you amend your taxes online 31 of OID in income. How do you amend your taxes online This is $174. How do you amend your taxes online 11 ($. How do you amend your taxes online 94625 × 184 days) for the period May 1 through October 31 plus $62. How do you amend your taxes online 20 ($1. How do you amend your taxes online 01965 × 61 days) for the period November 1 through December 31. How do you amend your taxes online The OID is added to the $5,000 interest income paid on October 31 of Year 1. How do you amend your taxes online Your basis in the debt instrument is increased by the OID you include in income. How do you amend your taxes online On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. How do you amend your taxes online 48 ($86,235. How do you amend your taxes online 17 + $236. How do you amend your taxes online 31). How do you amend your taxes online Short first accrual period. How do you amend your taxes online   You may have to make adjustments if a debt instrument has a short first accrual period. How do you amend your taxes online For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. How do you amend your taxes online (The remaining accrual periods begin on May 1 and November 1. How do you amend your taxes online ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. How do you amend your taxes online You may use any reasonable compounding method in determining OID for a short period. How do you amend your taxes online Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). How do you amend your taxes online Consult your tax advisor for more information about making this computation. How do you amend your taxes online   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. How do you amend your taxes online Reduction for acquisition premium. How do you amend your taxes online   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How do you amend your taxes online To figure the daily acquisition premium, multiply the daily OID by the following fraction. How do you amend your taxes online The numerator is the acquisition premium. How do you amend your taxes online The denominator is the total OID remaining for the debt instrument after your purchase date. How do you amend your taxes online Example 7. How do you amend your taxes online Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. How do you amend your taxes online The adjusted issue price on November 1 of Year 1 is $86,409. How do you amend your taxes online 28 ($86,235. How do you amend your taxes online 17 + $174. How do you amend your taxes online 11). How do you amend your taxes online In this case, you paid an acquisition premium of $590. How do you amend your taxes online 72 ($87,000 − $86,409. How do you amend your taxes online 28). How do you amend your taxes online The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. How do you amend your taxes online 1) Daily OID on date of purchase (2nd accrual period) $1. How do you amend your taxes online 01965*  2)  Acquisition premium $590. How do you amend your taxes online 72    3)  Total OID remaining after purchase date ($13,764. How do you amend your taxes online 83 − $174. How do you amend your taxes online 11) 13,590. How do you amend your taxes online 72   4) Line 2 ÷ line 3 . How do you amend your taxes online 04346  5)  Line 1 × line 4 . How do you amend your taxes online 04432  6)  Daily OID reduced for the acquisition premium. How do you amend your taxes online Line 1 − line 5 $0. How do you amend your taxes online 97533  * As shown in Example 6. How do you amend your taxes online The total OID to include in income for Year 1 is $59. How do you amend your taxes online 50 ($. How do you amend your taxes online 97533 × 61 days). How do you amend your taxes online Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. How do you amend your taxes online In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. How do you amend your taxes online If you hold a contingent payment bond, you must report OID as it accrues each year. How do you amend your taxes online Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. How do you amend your taxes online To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. How do you amend your taxes online Noncontingent bond method. How do you amend your taxes online    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. How do you amend your taxes online In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. How do you amend your taxes online When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. How do you amend your taxes online If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. How do you amend your taxes online If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. How do you amend your taxes online Form 1099-OID. How do you amend your taxes online   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. How do you amend your taxes online For example, the amount may not be correct if the contingent payment was different from the projected amount. How do you amend your taxes online If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. How do you amend your taxes online For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. How do you amend your taxes online Figuring OID. How do you amend your taxes online   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. How do you amend your taxes online The issuer must make these available to you. How do you amend your taxes online Comparable yield. How do you amend your taxes online   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. How do you amend your taxes online The comparable yield is determined as of the debt instrument's issue date. How do you amend your taxes online Projected payment schedule. How do you amend your taxes online   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. How do you amend your taxes online The projected payment schedule is created by the issuer as of the debt instrument's issue date. How do you amend your taxes online It is used to determine the issuer's and holder's interest accruals and adjustments. How do you amend your taxes online Steps for figuring OID. How do you amend your taxes online   Figure the OID on a contingent payment debt instrument in two steps. How do you amend your taxes online Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. How do you amend your taxes online Use the comparable yield as the yield to maturity. How do you amend your taxes online In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). How do you amend your taxes online Do not treat any amount payable as qualified stated interest. How do you amend your taxes online Adjust the OID in (1) to account for actual contingent payments. How do you amend your taxes online If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. How do you amend your taxes online If the contingent payment is less than the projected fixed amount, you have a negative adjustment. How do you amend your taxes online Net positive adjustment. How do you amend your taxes online   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. How do you amend your taxes online Treat a net positive adjustment as additional OID for the tax year. How do you amend your taxes online Net negative adjustment. How do you amend your taxes online   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. How do you amend your taxes online Use a net negative adjustment to offset OID on the debt instrument for the tax year. How do you amend your taxes online If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. How do you amend your taxes online However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. How do you amend your taxes online You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. How do you amend your taxes online Basis adjustments. How do you amend your taxes online   In general, increase your basis in a contingent payment debt instrument by the OID included in income. How do you amend your taxes online Your basis, however, is not affected by any negative or positive adjustments. How do you amend your taxes online Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. How do you amend your taxes online Treatment of gain or loss on sale or exchange. How do you amend your taxes online   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. How do you amend your taxes online If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. How do you amend your taxes online If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. How do you amend your taxes online See Regulations section 1. How do you amend your taxes online 1275-4 for exceptions to these rules. How do you amend your taxes online Premium, acquisition premium, and market discount. How do you amend your taxes online   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. How do you amend your taxes online See Regulations section 1. How do you amend your taxes online 1275-4 to determine how to account for these items. How do you amend your taxes online Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. How do you amend your taxes online An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d
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IRS Criminal Investigation Combats Identity Theft Refund Fraud

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ID Theft: IRS Efforts on Identity Theft

FS-2014-3, January 2014

The Internal Revenue Service (IRS) has seen a significant increase in refund fraud that involves identity thieves who file false claims for refunds by stealing and using someone's Social Security number. The investigative work done by Criminal Investigation (CI) is a major component of the IRS’s efforts to combat tax-related identity theft. 

Statistical Data 

In Fiscal Year (FY) 2013, the IRS initiated approximately 1,492 identity theft related criminal investigations, an increase of 66 percent over investigations initiated in FY 2012. Direct investigative time applied to identity theft related investigations has increased 216 percent over the last two years. Prosecution recommendations, indictments, and those convicted and sentenced for identity theft violations have increased dramatically since FY 2011. Sentences handed down for convictions relating to identity theft have been significant, ranging from two months to 317 months.  
 

 

FY2013

FY 2012

  FY 2011

 Investigations Initiated

1492

898

276

 Prosecution Recommendations

1257

544

218

 Indictments/Informations

1050

494

165

 Sentenced

438

223

80


Enforcement Efforts 

Criminal Investigation is committed to investigating and prosecuting identity thieves who attempt to defraud the federal government by filing fraudulent refund claims using another person’s identifying information.

The IRS continues to seek out and identify additional tools and methods to combat the proliferation of tax-related identity theft.  FY 2013 efforts include: 

Identity Theft Enforcement Sweeps - In January 2013, Criminal Investigation conducted a coordinated identity theft enforcement sweep in collaboration with DOJ-Tax and United States Attorney’s Offices throughout the country.  This nationwide effort resulted in 734 enforcement actions related to identity theft and refund fraud and involved 389 individuals, 109 arrests, 48 search warrants, and 189 indictments, information and criminal complaints.

Law Enforcement Assistance Program - In March 2013, IRS announced to the public that the Law Enforcement Assistance Program, formerly known as the Identity Theft Pilot Disclosure Program, was expanded nationwide.  This program provides for the disclosure of federal tax return information associated with the accounts of known and suspected identity victims of identity theft with the express written consent of those victims.  There are currently more than 300 state/local law enforcement agencies from 35 states participating.  For FY 2013, more than 2,400 requests had been received from state and local law enforcement agencies.

Identify Theft Clearinghouse (ITC) - The Identity Theft Clearinghouse (ITC) continues to develop and refer identity theft refund fraud schemes to CI Field Offices for investigation.  For FY 2013 the ITC had received more than 1,400 identity theft related leads. 

Data Processing Center(DPC) Identity Theft Victims List Process - This process centralizes identity theft victims’ lists and information forwarded to IRS-CI by other federal, state and local agencies during nationwide investigative efforts.  The information is analyzed and necessary adjustments are made to accounts of taxpayers that are likely targets of ID theft.  The DPC processed over 71.7 percent more identity records in FY 2013 than it did in FY 2012.

Multi-Agency Task Forces and Working Groups - CI is the lead agency or actively involved in more than 30 multi-regional task forces or working groups including state/local and federal law enforcement agencies solely focusing on identity theft.      

The following are highlights from significant identity-theft cases. All details are based on court documents.

Self-Proclaimed “First Lady” of Tax Fraud Sentenced

On July 16, 2013, in Tampa, Fla., Rashia Wilson, was sentenced to 234 months in prison on wire fraud and aggravated identity theft charges stemming from her scheme to defraud the IRS, and to a consecutive 18 months in prison for being a felon in possession of a firearm.  Wilson was also ordered to forfeit $2,240,096, which constituted the proceeds traceable to the offense.  According to court documents, from at least April 2009 through their arrests in September 2012, Wilson and her co-conspirator, Maurice J. Larry, engaged in a scheme to defraud the IRS by negotiating fraudulently obtained tax refunds. They did so by receiving U.S. Treasury checks and pre-paid debit cards that were loaded with proceeds derived from filing false and fraudulent federal income tax returns in other persons' names, without those persons’ permission or knowledge.  Wilson and Larry filed these false and fraudulent federal income tax returns from multiple locations, including Wilson's residence and hotels in the Tampa area.  Wilson, Larry, and others then used these fraudulently obtained tax refunds to make hundreds of thousands of dollars’ worth of retail purchases, to purchase money orders, and to withdraw cash. Larry was sentenced to 174 months in prison and ordered to forfeit $2,240,096.

Woman Sentenced for Running Stolen Identity Tax Fraud Scheme
On July 30, 2013, in St. Louis, Mo., Tania Henderson was sentenced to 144 months in prison and ordered to pay $835,883 in restitution to the IRS. Henderson pleaded guilty on April 29, 2013, to theft of government funds and aggravated identity theft. According to her plea agreement and other court documents, Henderson stole the identities of more than 400 individuals, many of whom were deceased, and filed fraudulent tax returns using their names and Social Security account numbers. Between August and November 2012, Henderson filed 236 fraudulent tax returns. Using a network of family and friends, she would collect refund checks or prepaid debit cards for the refund amounts and liquidate the proceeds of her scheme.  

Leaders of Multi-Million Dollar Fraud Ring Sentenced
On May 8, 2012, in Montgomery, Ala., Veronica Dale and Alchico Grant, who jointly ran a stolen identity refund fraud ring that attempted to defraud the United States of millions of dollars over several years, were sentenced to prison. Veronica Dale was sentenced to 334 months in prison and Alchico Grant was sentenced to 310 months in prison.  Dale and Grant were both ordered to pay more than $2.8 million in restitution to the IRS. In September 2011, Grant pleaded guilty to five charges from two separate indictments, including conspiracy, wire fraud and aggravated identity theft. In October 2011, Dale pleaded guilty to seven charges from two indictments, including conspiracy, filing false claims, wire fraud and aggravated identity theft.  According to court documents, beginning in 2009 and continuing through 2010, the defendants were part of a scheme that involved fraudulently obtaining tax refunds by filing false tax returns using stolen identities. Dale admitted that she filed more than 500 fraudulent returns that sought at least $3,741,908 in tax refunds.  These returns were filed using the names of Medicaid beneficiaries, whose personal information Dale obtained while working for a company that serviced Medicaid programs.  Dale directed the refunds to different bank accounts that she and other co-conspirators controlled.

The latest information on Identity Theft enforcement efforts and individual cases are available on IRS.gov.

Page Last Reviewed or Updated: 07-Jan-2014

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