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February 27, 2024
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Accured Interest purchased entered in step by step does not agree with amount on TT Federal Schedule B

  • February 27, 2024
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The amount I entered on the TT step-by-step program for accrued interest purchased ($1070) shows up on Schedule B as $954.10. I received more than $1070 in interest income from these investments in 2023 so there should be no limitation on the amount of accrued interest allowable as a deduction. How do I fix this? 

Best answer by SteamTrain

OK.... point to make about the software.

 

IF your 1099-INT has a mix of box 1,3 & 8 $$ on it...then entering any accrued interest (paid out when you purchased a bond)....that accrued interest will be divided proportionally (improperly) among the box 1,3,&8 $$ amounts.

 

The fix is to split out the type of bond interest...for which you are reporting the accrued interest paid...into it's own 1099-INT.

 

So if the accrued interest was paid on a Treasury bond (or bonds) then you need to move the box 3 &12 $$ into a separate 1099-INT before you indicate that accrued interest on the follow-up page for that separate 1099-INT form.

 

Same would go for boxes 1&11 together (If appropriate) or box 8 &13...depending on what bond types you purchased.

 

Thus box 1, 11, and any accrued interest for corporate bonds are on reported one 1099-INT

.....box 3, 12, and any accrued interest you paid for US Govt bonds on a second 1099-INT

....box 8, 13 , and any accrued interest you paid on any MUNI bonds you bought on a third 1099-INT.

 

Of course, if you only bought (say) some Muni's during 2024, then you'd only need to take out the 8 & 13 $$ into their own 1099-INT to report the accrued interest you paid for those.

______

Final Note:  For bonds purchased in the last half of the year...if the bond you bought did not issue interest to you before the end of 2023, then you cannot report that accrued interest payment until 2024 taxes (i.e. after you actually get an interest payment from that bond).  I use a spreadsheet with notes on it to keep track. 

I even bought a Muni bond already in Feb of 2024, that issues its first interest in 2025  (then semiannually thereafter)....so the small amount of accrued interest I paid, will need to wait until I file 2025 taxes in early 2026.

 

1 reply

SteamTrain
Employee
February 28, 2024

OK.... point to make about the software.

 

IF your 1099-INT has a mix of box 1,3 & 8 $$ on it...then entering any accrued interest (paid out when you purchased a bond)....that accrued interest will be divided proportionally (improperly) among the box 1,3,&8 $$ amounts.

 

The fix is to split out the type of bond interest...for which you are reporting the accrued interest paid...into it's own 1099-INT.

 

So if the accrued interest was paid on a Treasury bond (or bonds) then you need to move the box 3 &12 $$ into a separate 1099-INT before you indicate that accrued interest on the follow-up page for that separate 1099-INT form.

 

Same would go for boxes 1&11 together (If appropriate) or box 8 &13...depending on what bond types you purchased.

 

Thus box 1, 11, and any accrued interest for corporate bonds are on reported one 1099-INT

.....box 3, 12, and any accrued interest you paid for US Govt bonds on a second 1099-INT

....box 8, 13 , and any accrued interest you paid on any MUNI bonds you bought on a third 1099-INT.

 

Of course, if you only bought (say) some Muni's during 2024, then you'd only need to take out the 8 & 13 $$ into their own 1099-INT to report the accrued interest you paid for those.

______

Final Note:  For bonds purchased in the last half of the year...if the bond you bought did not issue interest to you before the end of 2023, then you cannot report that accrued interest payment until 2024 taxes (i.e. after you actually get an interest payment from that bond).  I use a spreadsheet with notes on it to keep track. 

I even bought a Muni bond already in Feb of 2024, that issues its first interest in 2025  (then semiannually thereafter)....so the small amount of accrued interest I paid, will need to wait until I file 2025 taxes in early 2026.

 

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*