Interest is a fee charged by a lender to a borrower for the use of money. Interest may be earned from many different sources, including bank accounts, loans, bonds, and notes. For tax purposes, interest may be taxable or nontaxable.
Interest income is reported to the taxpayer (lender) on Form 1099-INT, Interest Income, when the amount of interest received for the year is at least $10. Interest under $10 is still taxable to the taxpayer, although it is not formally reported on Form 1099-INT. Generally, interest income is taxable unless a special rule or exemption applies, such as interest from municipal bonds.
Interest income usually is not subject to withholding. However, in certain situations, the payments may be subject to backup withholding and will be reported as such on Form 1099-INT.
There are special reporting rules for interest earned on foreign accounts or through foreign trusts. These rules are designed to ensure that such interest is reported on U.S. tax returns by those who are U.S. citizens or residents and are required to report their worldwide income.
Taxable Interest Income
Banks, savings and loans, and credit unions are just a few of the entities that pay and report annual interest payments made to taxpayers on Form 1099-INT. Taxpayers ...