Tax season often brings a host of forms and requirements, each with its own set of rules. One such form is the 1099-INT, which reports interest income earned over the year. Understanding when this form is required can help taxpayers avoid potential issues.
Federal Threshold for 1099-INT
The 1099-INT form documents interest income. The federal threshold for issuing a 1099-INT is $10, meaning financial institutions must provide this form to individuals who earn $10 or more in annual interest income. 1Internal Revenue Service. About Form 1099-INT, Interest Income
This threshold, set by the IRS, ensures accurate reporting of interest income. Financial institutions, including banks and credit unions, are responsible for reporting this income to both taxpayers and the IRS. The threshold applies to the total interest earned from a single institution, not the combined interest from multiple sources.
Interest Sources That Usually Meet the Threshold
Interest income can come from various sources. Traditional savings accounts, even with modest annual percentage yields (APY), can generate enough interest over the year to surpass the $10 threshold, especially for larger balances. Certificates of Deposit (CDs) often offer higher interest rates, making it more likely for their interest earnings to exceed the threshold.
U.S. Treasury securities, such as Treasury bills, notes, and bonds, also generate interest that may surpass the threshold. Money market accounts, which combine features of savings and checking accounts, typically offer higher interest rates, allowing interest earnings to accumulate quickly. Money market funds, though slightly different as investment products, can also generate reportable interest income.
Filing Requirements If You Do Not Receive a 1099-INT
Even if you don’t receive a 1099-INT, you’re still required to report all interest income on your tax return. 2Internal Revenue Service. Topic No. 403 Interest Received
Payers generally file Form 1099-INT with the IRS when at least $10 of reportable interest is paid, or for any amount if backup withholding or foreign tax applies. The IRS also matches information returns (like Forms 1099-INT) to filed returns through its Automated Underreporter Program, and discrepancies can lead to notices. 3Internal Revenue Service. IRS Enforcing Laws
Tax Implications If Under the Limit
Even if your interest income falls below the $10 threshold for receiving a 1099-INT, it must still be reported on your tax return. The absence of a 1099-INT does not exempt you from this obligation. Taxpayers should carefully review their accounts and report all income, no matter how small. While the IRS might not immediately notice smaller amounts, discrepancies can arise during cross-referencing with bank submissions, potentially leading to audits or penalties.
Handling Interest From Joint Accounts
For joint accounts, each person reports the share of interest that actually belongs to them, which may be based on ownership or contributions rather than an automatic 50/50 split.
If one owner’s SSN is on the account and they receive the full 1099-INT, that person may need to issue a nominee Form 1099-INT to the other owner for their share and report only their portion on their own return. 4Internal Revenue Service. Publication 550 Investment Income and Expenses
For married couples filing jointly, the total interest from a joint account can be reported on their shared return. However, if filing separately, each individual must accurately report their share. Clear communication and proper documentation between account holders can ensure compliance and prevent misunderstandings.