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J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return by J.K. Lasser Institute

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4.12 Reporting Interest on Your Tax Return

You must report all taxable interest. Forms 1099-INT, sent by payers of interest income, give you the amount of interest to enter on your tax return. Although they are generally correct, you should check for mistakes, notify payers of any error, and request a new form marked “corrected.” If tax was withheld (26.12), claim this tax as a payment on your tax return. The IRS will check interest reported on your return against the Forms 1099-INT sent by banks and other payers. If you earn over $1,500 of taxable interest, you list the payers of interest on Part I of Schedule B if you file either Form 1040 or Form 1040A. Form 1040EZ may not be used if your taxable interest exceeds $1,500. You must also list tax-exempt interest on your return even though it is not taxable.

You must report interest that has been shown on a Form 1099-INT in your name although it may not be taxable to you. For example, you may have received interest as a nominee or as accrued interest on bonds bought between interest dates. In these cases, list the amounts reported on Form 1099 along with your other interest income on Schedule B (Form 1040 or Form 1040A). On a separate line, label the amount as “Nominee distribution,” or “Accrued interest” (4.15), and subtract it from the total interest shown. Accrued interest is discussed below. Nominee distributions are discussed below under “Joint Accounts.”

If you received interest on a frozen account (4.13), include the interest ...

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