Form 1099-INT Basics

The IRS Form 1099-INT (Interest Income) is used by banks, financial institutions, and other entities to report interest income paid to their customers during the tax year.

In general, if the account holder receives $10 or more in interest income, the payor must file Form 1099-INT and provide the recipient with a copy.

Sample Video Tutorial

The topic covered in this video tutorial and blog post covers interest income subject to the 24% backup withholding tax under IRC Section 3406.

In general, the payor of interest income may be required to withhold federal income taxes on interest payments to the recipient if one of the following applies:

  • The payee account holder fails to furnish his taxpayer identification number (TIN) to the payor;
  • The IRS notifies the payor that the TIN furnished by the account holder was incorrect;
  • The payee account holder has underreported their income on their annual tax return; or
  • The payee account holder is already subject to backup withholding on their income.

In this example, the account holder has $200 of interest income and is subject to backup withholding taxes at 24%. The broker withholds $48 of tax, which it reports in Box 4 (Federal Income Tax Withheld) of the Form 1099-INT.

The taxpayer reports the $200 of interest income on Schedule B (Interest & Dividends), and he reports $48 of federal income taxes withheld on Line 25b of Page 2 of his Form 1040 (US Individual Income Tax Return).

Key Elements on Form 1099-INT for 2023

Box 1: Interest Income: The gross taxable interest income received during the calendar year.

Box 2: Early Withdrawal Penalty: Penalties charged the account holder for the early withdrawal of certain types of savings accounts, such as certificates of deposit.

Box 3: Interest on U.S. Savings Bonds and Treasury Obligations: Taxable interest from U.S. Treasury bonds, bills, notes, and savings bonds. Federal interest income is subject to federal income taxes; however, it is generally exempt from state income taxes.

Box 4: Federal Income Tax Withheld: Any federal income tax withheld under the backup withholding rules under IRC Section 3406.

Box 6: Foreign Taxes Paid: If the amount of interest income includes any foreign source interest income that was subject to foreign withholding taxes, the foreign tax withheld is generally passed to the account holder and can be used as a foreign tax credit (FTC). FTC for individuals is reported on Form 1116 (Foreign Tax Credit).

Box 8: Tax-Exempt Interest: Interest income that is exempt from federal income tax, such as municipal bond interest income. Although the interest may be exempt from federal income taxes, it may be subject to state income taxes, depending upon your residency.

Box 9: Specified Private Activity Bonds Interest: The amount in Box 9 represents the portion of tax-exempt interest income that is private activity bond (PAB) interest income. PAB interest income is subject to special tax rules for alternative minimum tax (AMT) purposes.

Box 11: Bond Premium: The bond premium amortization on tax-exempt bonds.

Other Helpful Resources

Additional Information on Interest Income

Taxpayers can find more information on 1099-INT by visiting the form instructions and IRS Publication 550 (Investment Income and Expenses).