My investment 1099 has Accrued Interest Paid on Purchases which was not picked up on my imported document. I thought this would show as a deduction on my Form B.?

Forum|Forum|1 year ago
March 5, 2025
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Turbo Tax did pick up and subtract Bond Premiums on US Treasury Obligations, which appeared in box 12 on my 1099, but not the Accrued Interest Paid on Purchases, which is on the last page an not reported to the IRS.

SteamTrain

Employee

That's apparently a 1099-INT (telling us the "-INT" part is important).

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The tax software doesn't know where to put it, because it isn't in an offical 1099-INT box, and it doesn't know if the "Accrued interest" belongs to a Corporate bond, a US Treasury bond, or a Municipal bond....and that makes a difference.

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Even if it did know, entering it properly is a messy.

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Long story:

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

The fix is to split out the type of bond interest...for which you are reporting the accrued interest paid...and you put it 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 in 2024.

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 US Treasuries during 2024, then you'd only need to take out the 3 & 12 $$ into their own 1099-INT to report the accrued interest you paid for those.

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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.*

frankel2944Author

I appreciate your response, but I misstated something on my initial post. On my 1099 INT, there is information in boxes 1 Interest Income, 3 Interest on US Savings Bonds and Treasury Obligations and 11 Bond Premiums. The amount shown in Box 3 is based on 3 Interest payments as follows: US Treas Ser AJ-2025 1.25500% 1/15/24 in Interest payment for US Treas Ser J-2024 2.12500% in the amount of $531.25 paid on Apr 1, 2025. This totals to $756.25, which is shown in the Turbo Tax Box 3, then there is a Bond Premium of $55 which is shown on Box 11 of the Turbo Tax online program (Bond Premiums). However, on the next page of my 1099 there is an item termed Accrued Interest Paid on Purchases in the amount of $105.77, which has a date of 4/4/24 and is for US Treasury Ser AJ-2025 1.12500%. This is the item that is not showing anywhere on my Turbo Tax online program. Should this go in Box 12 Bond Premium on Treasury Obligations or Box 13 Bond Premium on Tax Exempt Bond? I don't know if I am not supposed to provide such specific information, but I feel pretty safe not much can be done with it by itself. If I did violate some rule, sorry and apologize, but I want to get this finalized and filed. Hopefully, I am not confusing the issue.

SteamTrain

Employee

@frankel2944

The $$ in box 11 should be referring to some premium you paid for some type of Corporate or "Agency" bond you bought in some year either in 2024, or in a prior year...and the $$ there relate to the box 1 $$. But, if you never bought that type of bond, make sure the $$ aren't supposed to be in box 12 (Look at your paper form)

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Anyhow:

The accrued interest you PAID to the seller of that Treasury bond, is subtracted on a follow-up page after the main 1099-INT form...so it isn't entered in any of the boxes on the 1099-INT itself.

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In order to report it properly, in your situation, is to:

1) delete the box 3$ and (box 12 $, if any) from that 1099-INT.

2) manually create another 1099-INT as-if from that same brokerage and put the box 3 and (12 $$, if any) on that separate new 1099-INT.

THEN

3) ...as you Continue on to the page after that main form, the software presents a page "Do any of these uncommon situations apply?" .

On that page you need to check the checkbox for "I need to adjust the interest reported on my form".

4) On the next page you enter the Accrued Interest you paid for the bond in one box, and select "My accrued interest is included in this 1099-INT" as the reason selection.

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That handles the accrued interest properly as just belonging to the box 3 $$ amount.

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