Form 1099-OID Instructions

What is IRS Form 1099-OID?

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

Who needs to file Form 1099-OID?

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.

When is the Form 1099-OID due date?

Payers must be aware of two important deadlines related to Form 1099-OID:

Filing deadline with the IRS

The deadline for payers to submit Form 1099-OID to the IRS depends on the filing method:

• Electronic filing deadline: April 01, 2024
  If you are e-filing Form 1099-OID with the IRS, the deadline is March 31st of the year following the tax year for which the form is being issued.
Note: If the deadline falls on a federal holiday or weekend, the form is due on the next business day.

Avoid the stress of last-minute 1099-OID deadlines.

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• Paper filing deadline: February 28th
  If you are filing Form 1099-OID with the IRS using traditional paper methods, the deadline is February 28th of the year following the tax year for which the form is issued.

Recipient copies deadline: January 31

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.

Form 1099-OID penalty

If you miss filing Form 1099-OID within the deadline, the IRS will impose a penalty. Here are the Form 1099-OID penalty rates:

Form 1099-OID Instructions - How to fill out?

Let's see line-by-line instructions on how to fill out Form 1099-OID.

Payer details

Enter your name or business name, complete address, and TIN (SSN if you're an individual; EIN if you're a business)

Recipient details

Enter the recipient’s name, complete address, and TIN (SSN for an individual; EIN for a business).

• Account number: You must provide the account number if you have multiple accounts for the same recipient and filing more than one Form 1099-OID for that recipient.
• 2nd TIN not: If the IRS has notified you two times within the last 3 years that the payee provided an incorrect TIN, you can enter an "X" in this box. By doing so, the IRS will stop sending you further notices about this account's TIN.

FATCA Filing Requirement Checkbox

Check this box if you are

• a U.S. payer that is reporting on Form(s) 1099 as part of satisfying your requirement to report with respect to a U.S. account for chapter 4 purposes, as described in Regulations section 1.1471-4(d)(2)(iii)(A).
• a foreign financial institution (FFI) reporting payments to a U.S. account pursuant to an election described in Regulations section 1.1471-4(d)(5)(i)(A).

Box 1: Original Issue Discount

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.

Box 2: Other Periodic Interest

Enter any qualified stated interest paid or credited on this debt obligation during the year. You have two reporting options:

1. Report on Form 1099-OID: Enter the amount in Box 2 of this form.
2. Report on Form 1099-INT: You may choose to report qualified stated interest on Form 1099-INT instead of Form 1099-OID.

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.

Box 3: Early Withdrawal Penalty

Enter the amount of interest or principal forfeited due to early withdrawal of time deposits. This includes:

• Penalties for early withdrawal from Certificates of Deposit (CDs)
• Other time deposit forfeitures that are deductible from the recipient's gross income

Box 4: Federal Income Tax Withheld

Enter backup withholding if you have withheld any.

Box 5: Market Discount

Use this box only if all of the following conditions are met:

1. The security is covered.
2. The security was acquired with both market discount and Original Issue Discount (OID).
3. The recipient has notified you that they made a section 1278(b) election.

If these conditions are met:

• Enter the amount of market discount that accrued on the debt instrument during the tax year.
• Only report amounts of $10 or more.

Box 6: Acquisition Premium

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.

Box 7: Description

• Enter the CUSIP number, if available.
• If there is no CUSIP number, provide the stock exchange abbreviation, the issuer abbreviation used by the stock exchange, the coupon rate, and the maturity year (e.g., NYSE XYZ 12½ 25).
• If the issuer of the obligation differs from the payer, also include the issuer's name.

Box 8: Original Issue Discount on U.S. Treasury Obligations

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.

Box 9: Investment Expenses

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.

Box 10: Bond Premium

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.

Box 11: Tax-Exempt OID

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 to 14: State information

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

How to File Form 1099-OID

You can file Form 1099-OID, either electronically or by mail.

Electronic Filing (E-filing)

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:

1. Enter the required information, including:
1. Payer's name, address, and TIN
2. Recipient's name, address, and TIN
3. Discount details
2. Review all entered information for accuracy.
3. Transmit the form securely to the IRS.
4. Provide a copy to the recipient.

Paper filing

While less efficient, paper filing remains an option for those who prefer it. Here are the steps for paper filing:

Steps for paper filing:

1. Download Form 1099-OID from the official IRS website (www.irs.gov).
2. Print the form.
Note: The IRS requires special red ink forms for submission. You can order these from the IRS or approved vendors.
3. Complete all required fields using black ink. This includes:
1. Payer's information
2. Recipient's information
3. Discount details
4. Make a copy for your records.
5. Mail the original form to the IRS address specified in the Form 1099 General Instructions. The address varies based on your state. Refer to the Where to send Form 1099-OID - Mailing address section to get the address for your state.
6. Send a copy to the recipient by January 31st of the year following the reportable transaction.

Important considerations for paper filing

• Mail forms several weeks before the deadline to ensure timely arrival.
• Use certified mail for proof of timely filing.
• Ensure all copies are legible.

Alternatively, you can file Form 1099-OID electronically for faster processing and delivery, reducing the risk of delays or lost forms.

Where to send Form 1099-OID - Mailing address

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:

How to E-File Form 1099-OID with TaxZerone

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:

Required information for filing Form 1099-OID:

• Business details
• Recipient details
• Original issue discount for the year
• Periodic interest
• Early withdrawal penalty
• Market discount
• Federal and state income tax withheld

Steps to e-file Form 1099-OID using TaxZerone:

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.

Benefits of E-Filing Form 1099-OID with TaxZerone

E-filing Form 1099-OID with TaxZerone offers several advantages:

• IRS Form Validations: TaxZerone's system checks your returns for errors or missing information, ensuring accuracy before submission.
• Email Recipient Copies: Conveniently send recipient copies of Form 1099-OID via email, eliminating the need for manual mailing.
• Secure Portal Access (ZeroneVault): Recipients can access their return copies anytime, anywhere through the secure ZeroneVault portal.
• Competitive Pricing: TaxZerone offers industry-leading pricing, with rates starting as low as $0.59 per form, making it affordable for businesses of all sizes.

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.