I agree that it was probably due to exchange of Series E/EE or even possibly matured H (client does not know since her spouse who purchased them is recently deceased and she never knew), however, shouldn’t there be a 1099-INT issued with the deferred interest from the previously held E/EE bonds exchanged for HH/H that would make the interest taxable if the interest was truly deferred and not instead reinvested into HH/H bonds?   

The client received nothing from the Dept of Treasury that would require her to include the possible deferred interest in her interest income.  She only received a 1099-INT from the Dept of the Treasury in the amount of $200 in box 3 for the portion listed as “Annual Interest Paid” that was for interest she received in 2022. She received a second 1099-INT from the Dept of the Treasury in 2022 in the amount of $25,000 in box 3 for “Accrued Interest Reported”.  If I put the amount listed as “Accrued Interest Reported” into the box worded as "Accrued Interest” in the "Adjustments to Federal Taxable Interest" section of the "Interest Income" page of the "ProConnect" software it makes it a negative number on Schedule B. Therefore, it only shows a credit and there isn’t a 1099-INT to which she would pay taxes on the redeemed bond.  It seems to me that there should be something to say you redeemed this bond for say $35,000 but you have already paid taxes on $25,000 so you are required to pay taxes on the remaining $10,000 so include that in your Interest Income.  Obviously not in that language.  Shouldn’t the 1099-INT showing the amount of “Annual Interest Paid” have been for $10,000 rather than $200?  If the 1099-INT with the amount of $25,000 in box 3 for “Accrued Interest Reported” had not been sent, I would not have had a clue that she even redeemed the bond (she didn’t mention it until I told her that the accrued amount isn’t given until the bond is mature or redeemed).  It originally appeared that the only payment she received was the usual 1099-INT “Annual Interest Paid” that they had received for years, at least until I questioned her about the second 1099-INT. 

I have researched this matter on the internet and it seems other preparers have had the same question.  Where is the 1099-INT to report the redeemed bond as taxable interest?  Should I be putting the “Accrued Interest Reported” in a different box? If it doesn’t say “Annual Interest Paid” then how would I justify putting it in that box?  What is the precedence if that is the case?