Form 1099-INT Interest Income: What It Is & How It Works?

KEY TAKEAWAYS

• Form 1099-INT is a tax form used to report interest income.
• The form is issued by banks, financial institutions, and other entities that pay interest.
• All taxable and tax-exempt interest income must be reported on your tax return.
• You may also receive a Form 1099-INT if you have earned interest from investments, such as bonds or CDs.

What is Form 1099-INT?

Form 1099-INT is the form used to report interest income. This includes interest earned on savings accounts, bonds, and other income to investors. The payer (the person or institution who paid the interest) will send a copy of Form 1099-INT to the IRS. And they will also send a copy to the person who earned the interest.

What Is The Purpose Of Form 1099-INT?

Form 1099-INT is used to report interest income. This form is generally issued by banks and financial institutions. They are provided to customers who have earned interest on their deposits. The form is also used to report certain types of bond interest.

Banks and financial institutions report the total amount of interest earned. This information goes on an account holder’s deposits during the year in Box 1 of Form 1099-INT. They also report any federal income tax withheld from the interest payments in Box 4. Form 1099-INT must be filed for each taxpayer who received at least $10 in interest payments or $600 of interest paid in the course of business.

Account holders use the information reported on Form 1099-INT to help them complete their annual tax returns. The form is typically filed with the IRS along with the account holder’s return.

If you fail to file Form 1099-INT interest income on your return when required, you may be subject to a penalty of 20% of the portion of the underpayment of tax due to negligence or disregard.

If you fail to issue Form 1099-INT, you may be subject to a penalty of $50 to $280 per form (for the tax year 2022), depending on how long past due the form is. This penalty may be increased to $570 for intentional disregard.

What Are The Filing Requirements Of Form 1099-INT?

Form 1099-INT, also known as the “Interest Income” form, is used to report interest income earned on investments. The form is filed with the IRS and gets used to calculate taxes owed on investment income. 

Investors who earn interest on their investments are required to report interest income with the IRS. Form 1099-INT is usually issued by banks or other financial institutions that make interest payments and sent to the IRS and the payee.

Who Can File Form 1099-INT?

You’ll receive a Form 1099-INT from any financial institution from which you earned interest income of $10 or more in a year. This includes banks, credit unions, and brokerages. The form may also come from the U.S. government or a private borrower, such as a friend or family member, if you lent them money and they paid you interest on it.

If you didn’t earn at least $10 in interest income from a single source during the year, the payer isn’t required to send you a Form 1099-INT. However, they may still report the interest payments to the IRS.

How To File Form 1099-INT with the IRS?

To file Form 1099-INT, you will need the following information:

• The name, address, and Taxpayer Identification Number (TIN) of the payee.
• The total amount of interest paid during the year.
• The date interest was paid.
• Any federal income tax withheld from the interest payments.
• The account number to which the interest was paid (if applicable).

You will also need to provide your own name and contact information as the filer. Once you have gathered all of the necessary information, you can file Form 1099-INT electronically or by mail. 

If you are filing electronically, you can do so through the IRS website or through a third-party provider. If you are filing by mail, you will need to send the form to the address listed in the instructions. 

It is important to note that you are required to file Form 1099-INT if you have paid $10 or more in interest to a single payee during the year. You will also need to file a separate form for each payee. For example, if you have two savings accounts and paid interest to each account holder, you would need to file two Form 1099-INTs. 

Failure to file Form 1099-INT when required can result in penalties from the IRS. The specific penalties will depend on a number of factors. This includes whether you filed Form 1099-INT, whether you furnished the payee with the correct information, and whether you filed the form on time.

The best way to avoid penalties is to make sure that you file Form 1099-INT when required and that all of the information included on the form is accurate. You can also use tax software or a professional tax preparer to help ensure that the form is filed correctly.

Example of Form 1099-INT

Here’s an example of a 1099-INT form:

As you can see from the example, the 1099-INT form reports the total amount of interest earned during the year. It also provides information about any federal income tax that was withheld from the interest payments. The 1099-INT form is sent to the taxpayer so they can use the information to file their taxes.

If you receive a 1099-INT form, you will need to report the interest income on your tax return. The interest income will be taxed at your marginal tax rate. This means that if you are in the 25% tax bracket, you will owe 25% in taxes on the interest income reported on the 1099-INT form.

To avoid paying taxes on your interest income, you can invest in a municipal bond fund. Municipal bonds are exempt from federal income taxes. This means that you will not owe any taxes on the interest income from these bonds. Municipal bond funds are a good option for investors who want to keep their taxable income low.

Summary

Form 1099-INT is a tax form used to report interest income. The payer of the interest must provide the form to the recipient, and the recipient must use the information on the form to prepare their taxes. Generally, interest income is taxable, so it is important to accurately report it on your tax return.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

Written by Sandra Habiger, CPA

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.