1099-INT NOT take into account PAID accrued interest for Treasury

[stridder]

South Carolina

Hi,

In 2022 I bought some of same kind treasuries WITH ACCRUED INTEREST and PAID for ACCRUED INTEREST at the time of purchase (1st time, it was a stupid deal).

I had no experience and ended up paying slightly MORE than the total I received at treasury maturity (broker interface/information about accrued interest was misleading and treasuries were expiring a few days from my purchase, only 1 kind of treasury).

Broker sent me 1099-INT that shows large interest in field #3 (showing 100% of total interest at maturity), citing:
"3 Interest on U.S. Savings Bonds and Treas. Obligations".

Since I paid 100% of interest at maturity (actually a bit over 100%), I earned NEGATIVE profit at treasury maturity.

The amount I lost is indicated in field 12 (small):
"12 Bond Premium on U.S. Treasury Obligations".

Questions:
Should 1099-INT report the difference in field 3 between
1) total interest at maturity
and
2) accrued interest paid at the time of purchase?

Should 1099-INT show somewhere accrued interest PAID at the time of purchase?

How can I substract from AGI accrued interest PAID at the time of purchase?

=============
There's also FORM 1099-B in the document from broker, but I still need to learn about it.
Is 1099-B reported to IRS?
1099-B does NOT show my payment for accrued interest either.
"Gain/Loss" field is ZERO.

Thank you!

 

[adjusterjack]

I don't think you subtract from AGI.

I think you just show the adjusted amount on line 2b taxable interest. No reason it can't be a negative number. Just keep your records permanently.

As for the 1099-b I think you can ignore it since the gain/loss field is Zero.

But here's some info about 1099-b from the IRS.

About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions | Internal Revenue Service (irs.gov)

Our tax people will come along and comment if I am in error.

 

[LdiJ]

South Carolina

Hi,

In 2022 I bought some of same kind treasuries WITH ACCRUED INTEREST and PAID for ACCRUED INTEREST at the time of purchase (1st time, it was a stupid deal).

I had no experience and ended up paying slightly MORE than the total I received at treasury maturity (broker interface/information about accrued interest was misleading and treasuries were expiring a few days from my purchase, only 1 kind of treasury).

Broker sent me 1099-INT that shows large interest in field #3 (showing 100% of total interest at maturity), citing:
"3 Interest on U.S. Savings Bonds and Treas. Obligations".

Since I paid 100% of interest at maturity (actually a bit over 100%), I earned NEGATIVE profit at treasury maturity.

The amount I lost is indicated in field 12 (small):
"12 Bond Premium on U.S. Treasury Obligations".

Questions:
Should 1099-INT report the difference in field 3 between
1) total interest at maturity
and
2) accrued interest paid at the time of purchase?

Should 1099-INT show somewhere accrued interest PAID at the time of purchase?

How can I substract from AGI accrued interest PAID at the time of purchase?

=============
There's also FORM 1099-B in the document from broker, but I still need to learn about it.
Is 1099-B reported to IRS?
1099-B does NOT show my payment for accrued interest either.
"Gain/Loss" field is ZERO.

Thank you!

If you are using software to prepare your taxes (or a tax professional) then the amount in box 12 ends up being an adjustment on Schedule B, reducing the overall amount of interest income. If you are not using software, then you would need to do that as a manual adjustment. So, for example, if your interest in box 1 was 10,000 and the amount in box 12 was 7,000 then that would net out to 3,000 of interest income on Schedule B which would then transfer to line 2b on the 1040.

That of course is assuming that I understood you correctly. One good rule of thumb is that if you cannot figure out how to do something on your taxes, using the instructions, then its maybe a year when it would be in your best interest to use a tax professional to prepare your taxes.

A 1099-B gets reported on Schedule D, as either a short term or long term capital gain/loss. I would definitely recommend at least software for handling your return this time as the calculations involved with capital gains/losses are not necessarily simple.

 

[LdiJ]

I don't think you subtract from AGI.

I think you just show the adjusted amount on line 2b taxable interest. No reason it can't be a negative number. Just keep your records permanently.

As for the 1099-b I think you can ignore it since the gain/loss field is Zero.

But here's some info about 1099-b from the IRS.

About Form 1099-B, Proceeds from Broker and Barter Exchange Transactions | Internal Revenue Service (irs.gov)

Our tax people will come along and comment if I am in error.

The bolded is not correct. It still has to be reported as sales proceeds of X and cost basis of X, even if the result is a zero gain or loss.

 

[stridder]

If you are using software to prepare your taxes

Yes, I will use online software this year.

Thank you ALL guys for your responses!

 

[stridder]

Should 1099-B reflect somehow ACCRUED interest I paid at the time of purchase?

Let N denote the number of treasuries I bought.
1099-B looks like this (all numbers below are in "Redemption" line):
Quantity: N thousand.00
1d Proceeds: N thousand.00
1e Cost or Other Basis (b): N thousand.00
1f Accrued Market Discount: 0.00
1g Wash Sale Loss Disallowed: 0.00
Gain/Loss (-): 0.00
Box A Short-Term Realized Gain: 0.00
Box A Short-Term Realized Loss 0.00

There're also fields with dates, which doesn't seem very relevant, so I don't post them.
===========
Trying to figure out how do I prove to IRS that I paid ACCRUED interest and whether it has to be reflected in any 1099 form or other tax document from the broker?

Is it correct that "1e Cost or Other Basis (b)" shows the nominal value of treasuries and not the actual amount I paid?

 

[davew9128]

OP, you are clearly in over your head here. Experienced tax professionals don't need to ask questions like this because we know a) how the law requires the reporting b) what the result should look like and c) how to make our software generate that result.

 

[stridder]

OP, you are clearly in over your head here. Experienced tax professionals don't need to ask questions like this because we know a) how the law requires the reporting b) what the result should look like and c) how to make our software generate that result.

Where did I say I'm "Experienced tax professionals" or even a tax professional?
Only "Experienced tax professionals" allowed to ask questions here?
Why would they even ask?

 

[Zigner]

Where did I say I'm "Experienced tax professionals" or even a tax professional?
Only "Experienced tax professionals" allowed to ask questions here?
Why would they even ask?

The POINT is that you would be much better served by seeking the guidance of a local tax professional who can look at ALL of your records and assist you.

 

[stridder]

The POINT is that you would be much better served by seeking the guidance of a local tax professional who can look at ALL of your records and assist you.

One single time I've been to so called tax pro, he completely messed up my tax return and it took way longer to fix than if I would do it myself upfront (I just knew absolutely nothing at that point).
I prefer to do everything possible myself, thanks.

 

[LdiJ]

One single time I've been to so called tax pro, he completely messed up my tax return and it took way longer to fix than if I would do it myself upfront (I just knew absolutely nothing at that point).
I prefer to do everything possible myself, thanks.

As a tax professional of pushing 40 years now, I find that statement to be a little offensive. I suspect that you went someplace that did have much depth of experience.

The reality of things is that you have a bit of a complex situation that you clearly don't understand well therefore I am not completely confident that you understand it well enough to give us good information to give you good advice. However, in general when you report a capital transaction you are reporting the date purchased, the date sold the amount of the proceeds, and your cost basis. Other things can get thrown into the mix in more complicated situations, but those are the basics. The 1099-B in most circumstances will have all of that information. In most cases the accrued interest (bond premium) would be dealt with on the 1099-INT so that would be irrelevant for the 1099-B.

I feel you would be best served to use a tax professional this year. Anyone who would still be working now, past the deadline, is going to be someone with experience, who would know what they are doing.

 

[stridder]

I feel you would be best served to use a tax professional this year.

1) The amount of accrued interest is LESS (or SAME) than even cost of tax pro service, so it would be CHEAPER (or SAME) to just bite the bullet and indicate it as earned interest.
2) I simply do NOT want to. Yes, there's plenty of stuff I need to learn, but believe me I've been working on projects that not many people would be able to comprehend. Not sure why do we even have to discuss this.
Its my choice.

If people do not believe I can figure this out and/or not willing to help, thats fine.
We can stop here.

 

[Zigner]

1) The amount of accrued interest is LESS (or SAME) than even cost of tax pro service, so it would be CHEAPER (or SAME) to just bite the bullet and indicate it as earned interest.
2) I simply do NOT want to. Yes, there's plenty of stuff I need to learn, but believe me I've been working on projects that not many people would be able to comprehend. Not sure why do we even have to discuss this.
Its my choice.

If people do not believe I can figure this out and/or not willing to help, thats fine.
We can stop here.

Best of luck to you - good day.

 

[Bali Hai Again]

One single time I've been to so called tax pro, he completely messed up my tax return and it took way longer to fix than if I would do it myself upfront (I just knew absolutely nothing at that point).
I prefer to do everything possible myself, thanks.

I can relate to your point of view. Not only with tax professionals but any other so-called professional these days. If you can reach these people on the phone, you will find you are dealing with a bunch of idiots who try to talk over you without listening to the details you need to provide and screw things up. After all it is YOUR responsibility for your messed up tax return. This seldom happened 40 years ago.