Publication 17
taxmap/pub17/p17-031.htm#en_us_publink1000171398taxmap/pub17/p17-031.htm#en_us_publink1000171402Foreign-source income.
(p55)If you are a U.S. citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign
payer.
taxmap/pub17/p17-031.htm#en_us_publink1000273217This chapter discusses the following topics.
- Different types of interest income.
- What interest is taxable and what interest is nontaxable.
- When to report interest income.
- How to report interest income on your tax return.
In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Exceptions to this rule are discussed later in this chapter.
taxmap/pub17/p17-031.htm#TXMP18ab9405Useful items
You may want to see:
Publication 537
Installment Sales 550
Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) :
Interest and Ordinary Dividends 8815:
Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After
1989 8818:
Optional Form To Record Redemption of Series EE and I U.S. Savings Bonds Issued After
1989 taxmap/pub17/p17-031.htm#en_us_publink1000171404A few items of general interest are covered here.
| Recordkeeping.
You should keep a list showing sources and interest amounts received during the year. Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your
records. |
taxmap/pub17/p17-031.htm#en_us_publink1000171406Part of a child's 2012 investment income may be taxed at the parent's tax rate. If so, Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, must be completed and attached to the child's tax return. If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate.
Some parents can choose to include the child's interest and dividends on the parent's return. If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose.
For more information about the tax on investment income of children and the parents' election, see
chapter 30.
taxmap/pub17/p17-031.htm#en_us_publink1000171408Interest you receive as a beneficiary of an estate or trust is generally taxable income. You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc., from the fiduciary. Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040.
taxmap/pub17/p17-031.htm#en_us_publink1000171409You must give your name and SSN to any person required by federal tax law to make a return, statement, or other document that relates to you. This includes payers of interest.
taxmap/pub17/p17-031.htm#en_us_publink1000171410If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. (For information on who owns the funds in a joint account, see
Joint accounts, later.) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. This is because only one name and SSN can be shown on Form
1099.
These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN.
taxmap/pub17/p17-031.htm#en_us_publink1000171412If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian.
taxmap/pub17/p17-031.htm#en_us_publink1000171413If you do not give your SSN to the payer of interest, you may have to pay a penalty. See
Failure to supply SSN under
Penalties in chapter 1. Backup withholding also may apply.
taxmap/pub17/p17-031.htm#en_us_publink1000171415Your interest income is generally not subject to regular withholding. However, it may be subject to backup withholding to ensure that income tax is collected on the income. Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding
rate.
Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. For more information, see
Backup Withholding in chapter 4.
taxmap/pub17/p17-031.htm#en_us_publink1000171417If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. The Form 1099-INT will show any backup withholding as "Federal income tax withheld."
taxmap/pub17/p17-031.htm#en_us_publink1000171418If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law.
taxmap/pub17/p17-031.htm#en_us_publink1000171419Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property.
Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation.
taxmap/pub17/p17-031.htm#en_us_publink1000171420Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true.
- The savings account legally belongs to the child.
- The parents are not legally permitted to use any of the funds to support the child.
taxmap/pub17/p17-031.htm#en_us_publink1000171421Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. This form shows you the interest you received during the year. Keep this form for your records. You do not have to attach it to your tax return.
Report on your tax return the total interest income you receive for the tax year.
taxmap/pub17/p17-031.htm#en_us_publink1000171422Even if you do not receive Form 1099-INT, you must still report all of your taxable interest income. For example, you may receive distributive shares of interest from partnerships or S corporations. This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc., or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits,
etc.
taxmap/pub17/p17-031.htm#en_us_publink1000171423Generally, if someone receives interest as a nominee for you, that person will give you a Form 1099-INT showing the interest received on your behalf.
If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under
How To Report Interest Income
in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040)
instructions.
taxmap/pub17/p17-031.htm#en_us_publink1000171424If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. The new Form 1099-INT you receive will be marked "Corrected."
taxmap/pub17/p17-031.htm#en_us_publink1000171425Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. For more information about amounts shown on this form, see
Original Issue Discount (OID), later in this chapter.
taxmap/pub17/p17-031.htm#en_us_publink1000171427Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. (However, see
Information reporting requirement, next.) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. You do not reduce your basis for distributions that are exempt-interest
dividends.
taxmap/pub17/p17-031.htm#en_us_publink1000171429Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. This is an information reporting requirement and does not change the exempt-interest dividends into taxable income.
Note.Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. See
Alternative Minimum Tax (AMT) in chapter 29 for more information. Chapter 1 of Publication
550 contains a discussion on private activity bonds under
State or Local Government Obligations.
taxmap/pub17/p17-031.htm#en_us_publink1000171432Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies.
taxmap/pub17/p17-031.htm#en_us_publink1000171433Interest on a Roth IRA generally is not taxable. Interest on a traditional IRA is tax deferred. You generally do not include it in your income until you make withdrawals from the IRA. See
chapter 17.