Tax Exempt 1099-OID Entries on Schedule B?

Forum|Forum|3 years ago
February 21, 2023
3 replies
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I imported several 1099-OID forms for tax-exempt bonds from a brokerage. They supply one form for each bond. On each one, box 1 (taxable OID) is 0.00. There are entries only in box 6 (acquisition premium) and box 11 (exempt OID). These forms appear to be showing up as 0.00 entries for each one in Schedule B. TurboTax is smart enough to not list my 1099-INT with only tax-exempt interest in schedule B, so why do these OID forms appear to generate 0.00 entries there? These lines should be harmless, but it appears that these entries really don't need to be included in schedule B.

If I go to the forms view, I am not able to remove those entries from Schedule B.

Is this an item that could be improved, or am I missing something?

TurboTax Home & Biz Windows

Best answer by JohnWS

I eventually solved this (really only cosmetic) issue with a simple workaround. In the imported 1099-OID forms, the only non-zero entries were in box 6 (Acquisition premium) and box 11 (Tax-exempt OID). I changed the boxes with 0.00 entries to blank in each of these forms. This eliminated the spurious "0.00" entries for these forms in Schedule B. It would be nice if Turbo Tax could recognize that the original imported forms resulted in no taxable interest, and did not generate Schedule B entries of 0.00.

HopeS

In general, your tax-exempt stated interest should be shown in box 8 of Form 1099-INT or, for a tax-exempt OID bond, in box 2 of Form 1099-OID and your tax-exempt OID should be shown in box 11 of Form 1099-OID. Enter the total on line 2a. However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a (that is, the excess of tax-exempt OID for the year over the amortized acquisition premium for the year).

You can delete Schedule B using these steps:

Select Tax Tools from the menu on the left.
Then select Tools.
When the new menu pops up select Delete a Form.
You will see a list of all the forms in your return.
Find the form that you want to delete.
Select the Form.
Click Delete on the right

Try to report the information from the 1099-OID return using these steps:

Click on Federal Taxes > Income
In the Interest and Dividends section, click on the Start/Update box next to Interest Income on 1099-INT.
On this screen, report the following items from the 1099-OID:
Box 1 (OID) and Box 2 (Other Periodic interest) -- add together and enter in Box 1 of 1099-INT.
Box 3 (early withdrawal penalty) -- Box 2 of 1099-INT.
Box 4 (Fed tax withheld) -- Box 4 of 1099-INT
Box 5 (Market discount) - Box 10 of 1099-INT
Box 6 (Acquisition premium) - Include in Box 1 of 1099-INT
Box 8 (OID on U.S. Treasury obligations) - Box 12 of 1099-INT
Box 9 - Investment expense - Enter in the Deductions section of TurboTax: Federal Taxes > Deductions > Interest expense >Investment interest expense
Box 10 Bond premium - Box 11 of 1099-INT
Box 11 Tax-exempt OID - Box 13 of 1099-INT

See Pub. 550 for more information about OID, bond premium, and acquisition premium.

Publication 550

Review the link below for more information:

Form 1099-OID

@JohnWS

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gdowstock

Depending on which thread you read there are different answers on how to enter Tax Exempt OID, Acquisition Premium and Bond Premium - Tax Exempt.

I applied your answer to the 1099-INT.

For line 13, TT generates an error stating that "Bond prem tax-exemp oblig should be blank".

For line 11, TT generates an error stating that "Bond prem taxable oblig bond premium in excell of interest income must be entered on Other Deduction Stmt (Not Subject to 2% Floor), limited to the excess of prior interest income less bond premiums."

Here is my example, all items are noncovered lots for a Tax Exempt bond, I would like to know what box each number goes into the 1099-INT.

Tax Exempt OID - 47.35

Acquisition Premium - 47.35

Bond Premium - Tax Exempt Obligations - 140.77

How do we keep the input from generating errors?

Why is line 11 referencing "taxable" bonds?

It would be helpful if TT would publish clear instructions on how to handle the 1099-OID. There are too many conflicting answers on this discussion board. And lastly, why not have a 1099-OID for TT Business.

DianeW777

Since the Bond Premium in Box 10 is greater than the interest in Box 2 (Form 1099-OID), then you should leave Box 10 blank and keep your form with your tax files for future use. When the bond is redeemed, for tax purposes will be a sale, you will adjust your cost basis of the bond if necessary before reporting the sale on your tax return.

You can continue with the 1099-INT entry if you wish. I tested the entry using the actual 1099-OID entry without errors by leaving out the Bond Premium from tax exempt obligations. You can use the link below if you want to change your entry.

Where do I report my Form 1099-OID?
26 CFR § 1.171-2 - Amortization of bond premium (see (4) Bond premium in excess of qualified stated interest)

The amount may be a deduction on Schedule A if you itemize your deductions. Miscellaneous Deductions not subject to 2% AGI.

Select Deductions & Credits > Scroll to Other Deductions and Credits > Select Show More > Select Other Deductible Expenses
Start or Revisit > Click No > Click No > Click Yes to the screen 'Did you have any of these other expenses?'
Enter your Bond Premium in excess of the OID interest income
See the image below.

@gdowstock

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JohnWSAuthorAnswer

Michelle G-W

I’ve been reworking the OID entries for 2 days and the instructions in this thread mean that TurboTax is not giving proper instructions. I feel I have no choice but to bring my return to a professional at this point as the errors cannot be fixed. The error refers to OID box 2 being 0 (which does not exist on my statement ). I have various combinations of boxes 6, 10, and 11 filled in. This is likely the last year of TurboTax for me.