Income
 
Interest Received
  • Taxable Interest
• Interest from seller financed mortgages
• Municipal Bond Interest exempt from Federal Tax
• You redeem any Series EE or I.U.S. Bonds to pay qualified higher education expenses in 2006.
 
Dividend
 
. Taxable Dividend on form 1099 - DIV
. Municipal Bond Dividend
  More
 
Children's Investment Income
  (For Children under age 14 - born on or after 1st January 1993)
  More
 
What is meaning of Business Code?
  (For Children under age 14 - born on or after 1st January 1993)
  More
 
About Interest
 
  • Any interest you receive or credited to account and can be withdrawn is taxable income.
  • You may be able to deduct expenses you have in earning this income on schedule A, if you itemize your deduction.
  • General types of Interest are Taxable Interest, Non Taxable Interest, Nominee Interest, and Accrued Interest.
  • Interest Income is generally reported to you in the form 1099-INT, Form 1099-OID, or Substitute statements.

May an employer provide me my Form W-2 electronically?

Yes, an employer may furnish your Form W-2 (PDF) electronically provided certain criteria are met. You must affirmatively consent to receive the Form W-2 (PDF) in an electronic format and prior to, or at the time of, your consent, your employer must provide you a disclosure statement containing specific disclosures. Additionally, the electronic version of the Form W-2 (PDF) must contain all required information and comply with applicable revenue procedures relating to substitute statements to recipients. If the statement is furnished on a Web site, then your employer must notify you, via mail, electronic mail, or in person, that the statement is posted on a Web site and provide instructions on accessing and printing the statement.
 
About Dividend
 
  • Dividends are distribution of money, stock, or other property paid to you by a corporation.
  • You may also receive dividends through a partnership, an estate, a trust, or an association that are taxed as corporation.
  • Most distributions are paid in cash. However it may consist of stock, stock rights, other property or services.
 
Interest Received
 
TAXABLE INTEREST
  • Any interest you receive or credited to account and can be withdrawn is taxable.
  • It Includes interest you receive from banks accounts, loans you make to others, and other sources.
  • It includes
o Original Issue Discount.
o Interest on insurance dividends
o Interest on US obligation
o Interest on tax refunds
o Interest on condemnation award
o Interest on differed payments (installment sales payments)
o Interest on annuity contract
o Interest on US Saving Bond
 
 What is Original Issue Discount? 
 
  • OID is the difference between the stated redemption price at maturity and issue price.
  • It is a form of interest. You generally include OID in your income as it accrues over the term of the debt instrument.
  • All instruments that pay no interest before maturity are presumed to be issued at a discount. Zero coupon bonds are one example of these instruments. 
  • The issuer of debt instrument should give you form 1099-OID.
 
  What is Tax Exempt Interest? 
 
  • Tax Exempt Interest means Interest received that is not subject to Federal Tax.
  • Tax Exempt Interest you received e.g. from a regulated investment company (Mutual Fund) or municipal bonds is not included in the taxable income.
  • Exempt interest that you received are not shown on the form 1099-INT.
 
 What is Accrued Interest?
  Accrued Interest is interest accrued on bonds for the period before the date of purchase of bond from the last due date. This interest is the income of the seller of bond and it is not taxable to the purchaser of the bond. Only interest for the period after the date of purchase is taxable.
 
  What is Nominee Distribution of Interest?
  If you received Interest on behalf of somebody else it is Nominee Distribution of Interest. If you received Form 1099-INT, which includes the Nominee Distribution of interest, report full amount of interest in the amount of interest and subtract the amount of interest you received as a nominee from the total interest income.
 
Early Withdrawal Penalty
Interest or principle forfeited because of early withdrawal of time deposits such as early withdrawal from certificate of deposit, is deductible from gross income as adjustment to total income. Do not reduce the gross amount of interest received by you by the amount of forfeiture.
 
 What adjustments are allowed to Interest income?
  An adjustment to interest income is allowed for any of the following:
                        
Original Issue Discount (OID)
If OID amount you are reporting is less than amount shown on the form 1099-OID, enter total amount in the amount of interest and select OID from the options given and enter amount of OID not reported in the adjustment amount. Amortize Bond Premium (ABP)
When the taxpayer elects to amortize the premium over the period of the loan instead of adding the premium to the cost, the amount of amortized bond premium is taken as a deduction against the amount of interest received. Select ABP and enter the amount you want to be deducted against the interest income in the adjustment amount. Tax Exempt Interest
Though Tax Exempt Interest is not included in your taxable income, you must report it on your return if filing. So, Enter the Total Amount of Interest you received in the Interest Received and select Tax Exempt from the options and enter the amount of tax exempt interest in the adjustment amount. Accrued Interest
You can deduct interest accrued for the period before the date of purchase of bond from the total interest you received as it is not your taxable income. Select Accrued interest from the options and enter the amount of interest accrued in the adjustment amount. Nominee Distribution of Interest
Interest received by you on behalf of somebody else is allowed as adjustment from the interest income. Select Nominee from the options and enter the amount of interest you received as nominee distribution in the adjustment amount.
 
Interest from seller financed mortgages
 
  • If you sold your home or other property and the buyer used the property as a personal   residence, any interest paid by buyer to you on a mortgage or other form of seller financing is interest on Seller Finance Mortgage.
  • Be sure to show buyer’s name, address and SSN as well as let the buyer know your SSN. If you don’t you may have to pay $50 as penalty
 
Municipal Bond Interest exempt from Federal Tax
Interest or principle forfeited because of early withdrawal of time deposits such as early withdrawal from certificate of deposit, is deductible from gross income as adjustment to total income. Do not reduce the gross amount of interest received by you by the amount of forfeiture.
What is Municipal Bond Interest?
  Municipal bonds offer investors interest payments that are exempt from federal income taxes, and (for residents of that state) generally exempt from the taxes of the state and/or city in which the bonds are issued. (Income on certain bonds for particular investors, however, may be subject to the federal Alternative Minimum Tax.) While interest income is generally tax-free, capital gains, if any, are subject to taxes.
 
What is Municipal Bond Dividend?
 
Municipal bond funds invest in obligations issued by state and local municipalities to raise money for projects such as new roads and schools. The income these funds pay is generally free from federal income tax for most investors and, in some cases, state and local taxes. Municipal bond funds, like most other types of bond funds, pay dividends, usually on a monthly basis.
 
Redemption of Bonds for Qualified Higher Education Expenses

Interest received or part of interest you received from US savings bonds issued after 1989 may be excludable from income on your tax return if you pay qualified higher educational expenses during the tax year and meet these tax requirements:

  1. You must be at least age 24 before the month in which the US savings bonds are issued. Means the bonds issued in name person age at least age 24. The date of issued of bonds is earlier than the date of bonds purchased because the issued date assigned to a bond is the first day of the month in which it is purchased.
  2. The US savings bonds must be issued in your name (sole owner) or in your or your spouse’s names (co-owners)
  3. In the tax year of redemption of the US savings bonds you must pay qualifying tuition and educational expenses for yourself, your spouse, or your   dependents.
  4. To qualified higher education expenses are tuition and fees required for you, your spouse and your dependent (for whom you claim for an exemption) to attend a college,  university, or vocational school that meets federal financial aid standards. Room and board are not qualifying expenses.
  5. You do not qualify for this exclusion if your filing status is married filing separately.
 
Did not received 1099-INT from Payer?
 
If you received taxable interest of $10 or more, the payer generally must give you form 1099-INT. If you have not received it by January 31, 2006, contact the payer of interest and ask for the form. If you do not receive it by February 15, call IRS for help