Form 1099-OID, or Original Issue Discount, is used to report the taxable income generated from the difference between the discounted purchase price and the face value of a debt instrument, such as bonds or notes
If you are a payer or issuer of these financial instruments, you are required to file Form 1099-OID to inform both the IRS and the recipient about the original issue discount income earned.
Accurate filing ensures compliance with IRS regulations and helps avoid potential penalties.
Payers must be aware of two important deadlines related to Form 1099-OID:
The deadline for payers to submit Form 1099-OID to the IRS depends on the filing method:
Avoid the stress of last-minute 1099-OID deadlines.
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Payers must deliver copies of Form 1099-OID to recipients by January 31st of the year following the relevant tax year. This allows recipients to accurately file their tax returns on time.
Missing these deadlines or providing incorrect information on Form 1099-OID can lead to IRS penalties. To avoid potential penalties, payers should take steps to ensure that Form 1099-OID is filed and distributed both accurately and on time.
If you miss filing Form 1099-OID within the deadline, the IRS will impose a penalty. Here are the Form 1099-OID penalty rates:
Days late | Penalty per return |
---|---|
Up to 30 days | $60 |
31 days late through August 1 | $130 |
After August 1 or not filed | $330 |
Intentional disregard | $660 |
Why risk penalties?
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Let's see line-by-line instructions on how to fill out Form 1099-OID.
Enter your name or business name, complete address, and TIN (SSN if you're an individual; EIN if you're a business)
Enter the recipient’s name, complete address, and TIN (SSN for an individual; EIN for a business).
Check this box if you are
Report the taxable OID on the obligation for the part of the year it was owned by the record holder. Do not include the amount reported in box 8.
Enter any qualified stated interest paid or credited on this debt obligation during the year. You have two reporting options:
Enter the taxable portion of the distribution in Box 2a. However, if you cannot reasonably obtain the data to calculate the taxable amount, leave this box blank.
Enter the amount of interest or principal forfeited due to early withdrawal of time deposits. This includes:
Enter backup withholding if you have withheld any.
Use this box only if all of the following conditions are met:
If these conditions are met:
If you have a covered security purchased with an acquisition premium, enter the amount of premium amortization for the portion of the year that holder owned the debt instrument.
Enter the amount of Original Issue Discount (OID) on a U.S. Treasury obligation for the part of the year it was owned by the record holder.
DO NOT include this amount in Box 1.
For single-class REMICs only. Enter the regular interest holder's pro rata share of investment expenses. This amount should reflect the expenses incurred in the tax year for which the form is being filed.
Calculate the bond premium by subtracting the face value of the bond from the purchase price. If you purchased the bond for $1,050 and its face value is $1,000, the bond premium is $50.
Enter the calculated bond premium in Box 10. This represents the excess amount you paid over the face value of the bond.
Determine the amount of OID accrued on the tax-exempt bond during the tax year. This is the portion of the discount that is considered earned for the year.
Enter the total amount of tax-exempt OID accrued during the year in Box 11. This amount should reflect the OID that is exempt from federal income tax.
Box 12: Enter the 2-letter state abbreviation for the state
Box 13: Enter the state identification number
Box 14: Report any state income tax withheld from the payment
You can file Form 1099-OID, either electronically or by mail.
E-filing is the IRS-recommended method due to its efficiency, accuracy, and quick processing notifications.
To e-file Form 1099-OID, you can use an IRS-authorized e-file service provider, such as TaxZerone. TaxZerone simplifies the e-filing process and allows you to complete it within minutes. Here's how it works:
Here's how to e-file Form 1099-R:
While less efficient, paper filing remains an option for those who prefer it. Here are the steps for paper filing:
Steps for paper filing:
Important considerations for paper filing
Alternatively, you can file Form 1099-OID electronically for faster processing and delivery, reducing the risk of delays or lost forms.
If you prefer paper filing, the mailing address for Form 1099-OID varies depending on your business location. Below is a table summarizing the mailing address for Form 1099-OID:
If your business operates in or your legal residence is… | Mail Form 1099-OID to… |
---|---|
Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Texas, Vermont, Virginia | Internal Revenue Service Austin Submission Processing Center P.O. Box 149213 Austin, TX 78714 |
Alaska, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, Wyoming | Department of the Treasury IRS Submission Processing Center P.O. Box 219256 Kansas City, MO 64121-9256 |
California, Connecticut, District of Columbia, Louisiana, Maryland, Pennsylvania, Rhode Island, West Virginia | Department of the Treasury IRS Submission Processing Center 1973 North Rulon White Blvd. Ogden, UT 84201 |
Outside the United States | Internal Revenue Service, Austin Submission Processing Center, P.O. Box 149213, Austin, TX 78714 |
Before you start e-filing Form 1099-OID, ensure you have all the necessary information to facilitate a smooth and efficient filing experience. Here’s what you need to gather:
Step 1: Complete Form 1099-OID
Open Form 1099-OID and fill out the necessary fields with the information you have gathered.
Step 2: Review and transmit the return
Carefully review all the entered information to ensure accuracy. Once verified, transmit the completed Form 1099-OID to the IRS.
Step 3: Provide the recipient copy
After successfully transmitting the form to the IRS, send a copy of the completed Form 1099-OID to the recipient.
E-filing Form 1099-OID with TaxZerone offers several advantages:
By using TaxZerone's e-filing solution, you can streamline your Form 1099-OID filing, save time, reduce errors, and provide a better experience for your recipients.