Form 1099-OID is used to report original issue discount interest as part of your income. How the OID on a long-term debt instrument is figured depends on the date it was issued, as well as on the type of debt instrument. Rules differ for instruments issued after July 1, 1982, and before 1985; instruments issued after 1984; contingent payment debt instruments issued after Aug. 12, 1996; and inflation-indexed debt instruments issued after Jan. 5, 1997.
A debt instrument you purchased after the date of its original issue may have premium, acquisition premium, or market discount. If it has premium or acquisition premium, the OID reported to you may have to be adjusted.
The rules for including OID in income generally do not apply to U.S. savings bonds, tax-exempt obligations, and loans of $10,000 or less between individuals who are not in the business of lending money.3
The 1099-OID will include your account number as well as all or part of your taxpayer identification number (TIN), Social Security number, individual taxpayer identification number, adoption taxpayer identification number, or employer identification number. If you hold an OID debt instrument and receive a 1099-OID that shows your TIN and includes amounts belonging to another person, you are considered a "nominee." You must file another 1099-OID for each actual owner, showing the OID for the owner. The form will also show the reporting requirements, if any, under the Fair and Accurate Credit Transactions Act (FACTA).31
Additional information on the form includes the OID on a taxable obligation for the part of the year you owned it. You report this as interest income on your income tax return. The amount you report may depend on the type of debt instrument, the issue or acquisition date, and other factors.1
All versions of Form 1099-OID are available on the IRS website.1
Qualified stated interest on this obligation for the year is separate from the OID. If you held the obligation the entire year, report this as interest income on your tax return. If you disposed of the obligation or acquired it from another holder during the year, you have special filing instructions and your interest may be exempt from tax. If you forfeited interest or principal by withdrawing the money before the maturity date of the obligation, you may deduct this amount to figure your adjusted gross income on your income tax return.2
The information on your form may be different for covered and noncovered securities. You may also have special filing requirements if you held real estate mortgage investment conduit (REMIC) regular interests and collateralized debt obligation (CDO) interests.4
If you have OID interest that must be reported as income, the holder of the debt instrument should send you a copy of Form 1099-OID. If you haven’t received a 1099-OID and believe you should have, contact your holder.3
Yes, holders can file electronically. To do so, the holder must have software that generates a file according to the specifications in IRS Pub. 1220. The IRS also provides a fill-in-form option for Form 1099-OID.1
There are five copies of the 1099-OID. The holder of the debt instrument files Copy A with the IRS and Copy 1 with your state tax department. Copy B and Copy 2 are sent to you. Copy 2 is to be filed with your state tax return if required. The holder retains Copy C. You should receive Form 1099-OID in the mail. You do not need to submit it when you file your tax return, but you should hold onto it for your records.1
The 1099-OID is an important form when you report special kinds of interest and investment income on your tax return. The form gives you specific information that you need to report correctly and in the right tax categories. If you have questions—and these issues are complicated—work with a tax preparer or expert.V