Entering an Original issue discount from form 1099-OID in Lacerte

Definition of Original Issue Discount (OID)

Original Issue Discount (OID) regards interest income; it is the discount from par value at the time a bond or other debt instrument is issued. It is the difference between the stated redemption price at maturity and the issue price.

Table of contents:

Box 1 — Original issue discount

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the reported income in Banks, Savings, and Loans, Credit Unions, etc.
4. If the amount reported on Box 1 is more or less than the actual amount of Original Issue Discount enter any needed adjustments in Original Issue Discount (OID).

If the amount of OID reported in box 1 of Form 1099-OID, is greater than the actual amount of OID, an entry here will print below the subtotal on Schedule B with the description OID Adjustment and will reduce the subtotal by this amount to arrive at total interest income.

If the amount in box 1 of Form 1099-OID is less than the actual amount of OID, a negative entry will increase the interest income reported.

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Box 2 — Other periodic interest

The instructions for form 1099-OID state: if the obligation was held the entire year, the amount in box 2 should be reported as interest income on the tax return. If there's an amount in both boxes 2 and 8, the amount in box 2 is interest on a US Treasury obligation and is exempt from state and local income taxes. If there's an amount in both boxes 2 and 11, the amount in box 2 is tax-exempt interest and isn't included in interest income on your tax return.

If boxes 8 and 11 are blank:

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the box 2 amount in Banks, savings & loans, credit unions, etc.,.

If there is an amount in box 8:

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the box 2 amount in U.S. bonds, T-bills, etc. (nontaxable to state).

If there is an amount in box 11:

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the box 2 amount in Total municipal bonds.

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Box 3 — Early withdrawal penalty

Shows interest or principal forfeited if the taxpayer withdrew the money before the maturity date of the obligation, such as from a CD. This amount may be deducted  to figure your adjusted gross income on your income tax return.

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the amount in Early Withdrawal Penalty under the Other subsection.

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Box 4 — Federal income tax withheld

Shows backup withholding. Generally, a payer must backup withhold at a 28% rate if the taxpayer didn't furnish a taxpayer identification number (TIN) or did not furnish the correct TIN to the payer. See Form W-9, Request for Taxpayer Identification Number and Certification, for information on backup withholding. Include this amount on your income tax return as tax withheld.

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Scroll down to the Form 1099-INT section.
3. Enter the amount in Federal income tax withheld under the Tax Withheld subsection.

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Box 6 - Acquisition premium

Box 6 shows the amount of acquisition premium amortization for the year that reduces the amount of OID that is included as interest on your income tax return.

• If there's an amount in box 6, see the Instructions for Schedule B to see whether you must include the premium as taxable interest income.
• If the payer has reported a net amount of OID in box 1 or box 8, you must report the net amount of OID on Schedule B and you must not make an adjustment to this amount for acquisition premium.
• If there's an amount in both boxes 6 and 11, for a tax-exempt obligation that is a covered security acquired on or after January 1, 2017, and is issued with OID, the amount in box 6 shows the amount of acquisition premium amortization for the year that reduces the amount of your tax-exempt OID for the year.
• If the taxpayer decides that it is still needed, use the Total municipal bonds and Amortizable bond premium on tax-exempt bonds fields in the Tax Exempt Interest section of Screen 11 to add box 6 and box 11.

For more information, visit the community discussion for 1099-OID Box 6 and Box 11.

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Box 8 — Original issue discount on US Treasury obligations

Shows OID on a US Treasury obligation for the part of the year the taxpayer owned it. Report this amount as interest income on the federal income tax return, and see Pub. 1212 to figure any appropriate adjustments to this amount. This OID is exempt from state and local income taxes and isn't included in box 1.

1. Go to Screen 11, Interest Income (1099-INT, 1099-OID).
2. Enter the amount in U.S. Bonds, T-Bills (nontaxable to state).

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Box 9 — Investment expenses

Any amount shown is the taxpayer's share of investment expenses of a single-class REMIC. If filing a Form 1040, the taxpayer may deduct these expenses on the "Other expenses" line of Schedule A (Form 1040) subject to the 2% limit. This amount is included in box 2.

1. Go to Screen 25, Itemized Deductions.
2. Scroll down to the Miscellaneous Deductions (Subject to 2% AGI limitation) section.
3. Enter the amount in Investment Expense [A].

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Box 10 — Bond premium

For a taxable covered security, shows the amount of premium amortization allocable to the interest payment(s). If there's an amount in both boxes 10 and 11, for a tax-exempt obligation that is a covered security acquired on or after January 1, 2017, and issued with OID, the amount in box 10 shows the amount of premium amortization for the year that reduces the amount of your tax-exempt interest for the year. See the Instructions for Schedule B to determine whether you must report this amount on the tax return. You may need to enter the premium in the field labeled Amortizable bond premium on tax-exempt bonds if it applies to municipal bonds, Amortizable bond premium on Treasury obligations if it applies to U.S. bonds not taxable to states, or Amortizable bond premium for all other taxable bonds.

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Box 11 — Tax-exempt OID

For a tax-exempt obligation that is a covered security acquired on or after January 1, 2017, shows the tax-exempt OID on the obligation for the part of the year you owned it. See the Instructions for Schedule B to determine whether this amount must be included on the tax return.

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Entering a 1099-OID in tax years 2012 and prior

Box 1 - Original issue discount

1. Go to Screen 11, Interest Income.
2. Scroll down to the Form 1099-INT section.
3. Enter the reported income in Banks, Savings and Loans, Credit Unions, etc.
4. Enter any adjustments in Original Issue Discount (OID), if the amount reported in Form 1099-OID, Box 1 is more or less than the actual amount of Original Issue Discount to be reported.

Note: If the amount of OID reported in box 1 of Form 1099-OID, is greater than the actual amount of OID, an entry here will print below the subtotal on Schedule B with the description " OID Adjustment" and will reduce the subtotal by this amount to arrive at total interest income.   If the amount in box 1 of Form 1099-OID is less than the actual amount of OID, a negative entry will increase the interest income reported.

Box 2 - Other periodic interest

The instructions for form 1099-OID state that if the obligation was held the entire year, the amount in box 2 should be reported as interest income on the tax return.

1. Go to Screen 11, Interest Income.
2. Scroll down to the Form 1099-INT section.
3. Enter the amount in, Banks, savings & loans, credit unions, etc.,.

Box 3 - Early withdrawal penalty

Shows interest or principal forfeited if the taxpayer withdrew the money before the maturity date of the obligation, such as from a CD. This amount may be deducted  to figure your adjusted gross income on your income tax return.

1. Go to Screen 11, Interest Income.
2. Scroll down to the Form 1099-INT section.
3. Enter the amount in Early Withdrawal Penalty under the Other subsection.

Box 4 - Federal income tax withheld

Shows backup withholding. Generally, a payer must backup withhold at a 28% rate if the taxpayer did not furnish a taxpayer identification number (TIN) or did not furnish the correct TIN to the payer. See Form W-9, Request for Taxpayer Identification Number and Certification, for information on backup withholding. Include this amount on your income tax return as tax withheld.  .

1. Go to Screen 11, Interest Income.
2. Scroll down to the Form 1099-INT section.
3. Enter the amount in Federal income tax withheld under the Tax Withheld subsection.

Box 5 - Description

Shows the identification number (CUSIP number) or description of the obligation. The description may include the Dow Jones, issuer, coupon rate, and year of maturity.

Box 6 - Original issue discount on U.S. Treasury obligations

Shows OID on a U.S. Treasury obligation for the part of the year the taxpayer owned it. Report this amount as interest income on the federal income tax return, and see Pub. 1212 to figure any appropriate adjustments to this amount. This OID is exempt from state and local income taxes and is not included in box 1.

1. Go to Screen 11, Interest Income.
2. Enter the amount in U.S. Bonds, T-Bills (nontaxable to state).

Box 7 - Investment expenses

Any amount shown is the taxpayer's share of investment expenses of a single-class REMIC. If filing a Form 1040, the taxpayer may deduct these expenses on the "Other expenses" line of Schedule A (Form 1040) subject to the 2% limit. This amount is included in box 2.

1. Go to Screen 25, Itemized Deductions.
2. Scroll down to the Miscellaneous Deductions (Subject to 2% AGI limitation) section.
3. Enter the amount in Investment Expense [A].

For additional information on entering information from Form 1099-OID, see the IRS Instructions for more.

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