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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13316
Experience:  15years with H & R Block. Divisional leader, Instructor
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Need help understanding if I need to report OID on a tax

Customer Question

Need help understanding if I need to report OID on a tax return - No 1099 OID was received.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.
Hello,
OID is a form of interest. It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID.
In general, you must receive a Form 1099 for the debt instrument if the interest or OID to be included in your income for a calendar year totals $10 or more. If it is not $10 you and that is why you did not receive the 1099 OID, you would still report.
Customer: replied 1 year ago.
On the brokerage statement - "2014 non-reportable original issue discount"
"Broker will not report information to the IRS - however, the income from these securities may be subject to AMT. "So the interest shown is the amount that has accumulated since the purchase of the bond? When would it be subject to AMT?
Expert:  Robin D. replied 1 year ago.
If you have accumulated interest on the bond then yes, that is the interest to report. The alternative minimum tax (“AMT”) is a separate tax calculation that must be performed by both individual and corporate taxpayers and the resulting tax is then compared to the regular tax. Whichever tax is higher is the one that must be paid. In general, investors in the 35% federal tax bracket will not encounter an AMT problem because their regular income tax will exceed their AMT.
Customer: replied 1 year ago.
So is this accumulated interest that much be reported? How do I determine this?Where is this type of interest included for AMT calculations?
Expert:  Robin D. replied 1 year ago.
The interest is reported like any other interest you would receive, Form 1040, Schedule B, line 1.Form 6251 is used if AMT does apply to your specific situation.
Customer: replied 1 year ago.
So is this accumulated interest that much be reported? How do I determine this?
Expert:  Robin D. replied 1 year ago.
The OID listed is for each $1,000 of redemption price. You must adjust the listed amount if your debt instrument has a different principal amount.
The IRS uses the example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID.
Customer: replied 1 year ago.
So it sounds like you think the OID should be included on Schedule B. The amount shown on the brokerage statement is $2130.81. In the "quantity" column it shows 65000. How do I determine if the debt instrument has a different list principal amount?
Expert:  Robin D. replied 1 year ago.
What were these bonds exactly? Municipal original issue discount (OID) is exempt from 1099 reporting and is shown in the Nonreportable to the IRS, Supplemental Tax Information section too.
Customer: replied 1 year ago.
That's where it's reported - from above -On the brokerage statement - "2014 non-reportable original issue discount"
"Broker will not report information to the IRS - however, the income from these securities may be subject to AMT. "I can't see the full description ...Kane-Dekalb IL Cmty USD Maybe a school district bond from Illinois?
Expert:  Robin D. replied 1 year ago.
OID represents interest paid by the issuer and, for municipals, is generally treated as tax exempt interest. , You are required to show any tax-exempt interest you received on your return but this is an information reporting requirement only. It does not change tax-exempt interest to taxable interest.1040 line 8b.
Customer: replied 1 year ago.
okay - so what is amount is reported as exempt interest based on the information I have provided? The entire $2130.81?
Expert:  Robin D. replied 1 year ago.
Yes, based on what you have stated, the $2031 would be listed as tax exempt.
Customer: replied 1 year ago.
and then from what I'm seeing on my research - the muni will state whether it's subject to AMT -yes?I'm going back to the broker and ask more questions. Thanks for your help. If I close the case and have a followup question after she get back to me, can we "talk" again?
Expert:  Robin D. replied 1 year ago.
AMT would be based on your total income and deductions. It’s very difficult to tell if you’ll have to pay AMT by income alone because there are so many factors that go into determining the calculation. The people who are most likely to pay the AMT have incomes over $100,000 and very large deductions.
Customer: replied 1 year ago.
I know that.Is it true that some muni's are specifically stated to be subject to AMT and other's are not?
Expert:  Robin D. replied 1 year ago.
In general, the bonds on which interest is taxable for AMT purposes are private activity bonds that were originally issued after August 7, 1986 except forqualified 501(c)(3) bonds, andcertain refunding bonds.Private activity bonds typically include any municipal bond the proceeds of which are used to benefit, or finance a facility for the use of, a private business. A school would not be a private activity.