Are you an owner of a financial institution? Did you pay interest for the investors throughout the tax year? Then you need to issue a Form 1099 INT to the investors at year-end and report the interest paid to the IRS.
Getting confused? We will clear the confusion by providing step-by-step instructions to submit the information returns within the due date. In addition to this, we provide a quick guide to easily file Form 1099 INT to the IRs and to the recipients.
What is IRS Form 1099 INT?
Form 1099 INT is an official Internal Revenue Service tax form that is mostly used to report interest income paid to an individual throughout the year. It breaks down all the interest income and related expenses. Payers use IRS Form 1099 INT when the interest paid to the investor is $10 or more during the year. In simple words, this form is mostly received by the individual who receives interest income from a savings account. Interest earned must be included as a part of earned income when filing tax returns to the IRS.
Who is Responsible to Issue Form 1099 INT?
Given below are the most common individuals who are responsible to issue Form 1099 INT to the IRS:
Firstly, banks issue the form to the individuals who receive interest income from savings accounts annually. For instance, if you earn $10 as interest for investing money in the saving’s account, then banks are responsible to issue 1099 INT Form. Banks pay certain account types of interests on the assets to the bank which can use to lend money or invest in treasury bonds.
Investment firms, credit unions issue IRS Form 1099 INT when they pay an investor as interest throughout the tax year. Not every account is interest-bearing. Other accounts such as money markets, higher-tiered checking accounts pay interest.
When to File Form 1099 INT?
File Form 1099 INT for each person:
- To whom you paid interest income, interest on the U.S saving bonds, and tax-exempt interest of $600 or more in a calendar year.
- When you withhold and pay foreign tax on interest for an individual.
- From whom you withhold any federal income tax under backup withholding rules irrespective of the amount of the payment.
- $10 or more paid as interest for specified private activity bonds. Additionally, an individual must file 1099 INT Form when they pay interest during the year to a private interest-bearing account.
How to Fill Out 1099 INT Form Step-by-Step
Consider the below information when filling out 1099 INT without any errors:
Before entering information on the form, identify whether you’re using “VOID or CORRECTED”. You’ll use VOID to cancel the previous 1099 INT Form. Use CORRECT when you’re filing information return to correct the inaccurate information. Ensure to maintain the accuracy of your tax information.
Payer and payee information
Enter the information about the payer and payee correctly. This includes name, address, phone number, and TIN. Make sure to enter a valid TIN to reduce the risk of backup withholding taxes.
FATCA filing requirement
Check the box when a U.S taxpayer uses this form to satisfy the requirement to report a U.S account.
What are the Exceptions to File Form 1099 INT?
Exceptions to filing Form 1099 INT are given below:
- You do not require to report the payments made to certain payees including corporations, a tax-exempt organization, U.S agency. Additionally, nominees or custodians, brokers, health savings accounts, any IRA have exempted Form 1099 INT recipients.
- Interest on an obligation issued by an individual, interest earned from sources outside the US, portfolio interest excluded from reporting.
- Tax-deferred interest such as interest that is earned but not distributed from an IRA is not reportable on the 1099 INT Form.
- Don’t report interest income when reporting interest on 1099 OID on obligation.
What are the Most Common Errors on Form 1099 INT?
There are many reasons that may cause errors on 1099 tax forms. the most common errors are listed below:
- As per the IRS guidelines, the payer is responsible to issue 1099 INT if the interest income exceeds $10.
- If you enter the interest income but indicated the amount was federal/state exempt.
- When the payer doesn’t include information for the current tax year if the form imported from the previous year’s tax return.
- If the payer includes incorrect interest income amount which leads to unreported taxable income.
- Absence of interest income on the tax return form.
- If the TIN of the payee is incorrect or the TIN doesn’t match.
File the information returns to the IRS electronically with Form 1099 online. We are an IRS-certified e-file provider to quickly process the information returned to the IRS safely. Along with this, we provide 256-bit security encrypted software to keep the information securely.