Interest Income Reporting for Marketable Treasury Securities

BACKGROUND

Like they say, taxes are a certainty,

and it’s no different for marketable

Treasury securities. But only Federal

tax applies; your Treasury securities

are exempt from state and local

income taxes.

The Bureau of the Fiscal Service

administers a direct-access

marketable securities program for

investors. Marketable securities can

be held in TreasuryDirect® or Legacy

Treasury Direct®. TreasuryDirect,

the centerpiece of our program, is

an online system that allows the

greatest flexibility in buying and

maintaining U.S. Treasury securities

– bills, notes, bonds, and TIPS – as

well as our non-marketable savings

bonds. Legacy Treasury Direct,

the predecessor to TreasuryDirect, is being phased out. Purchases and

reinvestments are no longer available in that system and securities cannot be

transferred into the system.

INTEREST INCOME: WHAT WE REPORT TO THE IRS

We report annually to you and the IRS all interest earned on Treasury bills and

all semiannual interest payments on Treasury notes and bonds. Specifically,

we provide:

• A 1099 – I N T reporting the total amount of interest earned and the

amount withheld and paid to the IRS for the previous calendar year.

NOTE: It’s reported using the taxpayer identification number (T I N) of

the first-named owner. If the interest includes amounts that belong

to someone else (other than a spouse), see IRS Publication 550,

“Investment Income and Expenses.”

• A 1099 – O I D reporting the total amount of original issue discount on

TIPS (see Original Issue Discount [O I D] and TIPS).

• A 1099 – B, also known as a Proceeds from Broker and Barter

Exchange, for notes and bonds that have matured while held in our

systems and that were:

• transferred into TreasuryDirect from the commercial book-entry

system or from Legacy Treasury Direct.

• transferred from one TreasuryDirect account to another.

• transferred into Legacy Treasury Direct from the commercial

book-entry system or from TreasuryDirect.

• transferred from one Legacy Treasury Direct account to another.

• We provide the 1099 – B by January 31 of the year following the date

of maturity.

BROKER REPORTING

Sometimes customers use a broker to buy Treasury securities and then

transfer them into their TreasuryDirect accounts. When this happens, brokers

are required to report any interest income while the security was held in their

system. Likewise, we’re required to report any interest income while it’s held

in our system. For this reason, it is possible for customers to get more than

one 1099 for the same security.

YOUR 1099 FORMS

• You’ll receive your 1099 forms differently, depending on which

system you have invested through.

• If you invest in TreasuryDirect, your 1099 will be available

electronically and you can print the form from your account. 1099

forms are available by January 31 of each tax year.

• If you invest in Legacy Treasury Direct, each year you’ll receive a 1099

during January (1042-S during March if you’re a foreign investor)

showing the interest you’ve earned.

• If you have registered securities, you’ll receive your 1099 through the

mail in January.

Duplicate Forms. If you need a duplicate 1099, here’s what to do for each of

our securities programs:

• TreasuryDirect. Simply access your account and print them again.

• Legacy Treasury Direct. For a duplicate form for the current tax

year, call 844-284-2676 (toll free) and speak with a customer service

representative. (If you’re outside United States, call +1-304-480-

6464.) For a duplicate form from a prior year, contact Treasury Retail

Securities Site, PO Box 9150, Minneapolis, MN, 55480-9150.

• Definitive Registered Securities. Write to us at the Treasury Retail

Securities Site, PO Box 9150, Minneapolis, MN 55480-9150 or call us

at 844-284-2676 (toll free).

INTEREST ON TREASURY BILLS

Treasury bills are short-term investment issues with maturities not exceeding

one year. You buy bills at a discount from their face (par) value, and the

difference between what you originally paid and what we pay you at

maturity (or what you get if you sell the bill before it matures) is your interest.

You don’t get interest payments during the life of the bill.

Take note: Interest from your bill is reportable in the year you sell it or it

matures, which is not necessarily the year you bought it!

For example, if you bought a 26-week bill in October 2004, it matured in April

2005. The interest is reported as earned in 2005—the year the bill matures.

INTEREST ON TREASURY NOTES and BONDS

Treasury notes and bonds pay interest every six months until they mature. We

report the interest for the year earned. This includes December 31 payments

unless that payment date is a non-business day (Saturday, Sunday, or a

Federal banking holiday). In that case, we report it as being paid in the next

tax year.

DISCOUNT ON TREASURY NOTES

When the purchase price of a Treasury note is less than its face value, the

difference is called a discount. Discounts may or may not be reportable,

depending on how much is involved. Refer to IRS Publication 550, under “U.S.

Treasury Bills, Notes, and Bonds.”

ORIGINAL ISSUE DISCOUNT (O I D) and TIPS

If you’re a U.S. citizen, not only do you get a Form 1099 – I N T for any TIPS you

own, you also get a Form 1099 – O I D reporting how much your TIPS increased

because of inflation. Even though you never physically received the money

reported as O I D income, the IRS requires us to report the increased value of

the security as income.

If you see a negative amount on your Form 1099 – O I D, it means the inflation

rate dropped after you bought your TIPS, which dropped the value of the

security below what you paid for it (or below what it was during the last tax

year). We report negative O I D amounts only to investors, not to the IRS. (But

remember, you’ll never lose your original investment amount when you

purchase TIPS.)

If you get two 1099 – I N T forms—one from us and one from your broker,

it’s probably because either, one, you transferred TIPS from Legacy

Treasury Direct to the broker, or, two, you transferred TIPS from a broker to

TreasuryDirect or vice versa. Just like us, your broker must report the amount

of O I D you earned while it was maintained in their system. If you’re a foreign

investor, you’ll get a 1099 – I N T at maturity for any TIPS you hold.

SECURITY TRANSFER

The purchase price used for bills transferred into TreasuryDirect is shown

on the transfer instructions. Once your security has been transferred,

review the Security History >> Detail for each security transferred into your

TreasuryDirect account to verify the “Price per $100.” If the price shown is

wrong, send documentation showing the correct price to Treasury Retail

Securities Site, PO Box 7015, Minneapolis, MN, 55480-7015. We must receive

this documentation at least 10 business days before the security matures.

That way you can be sure the correct price will be on your appropriate

1099 – I N T. Otherwise, you’ll have to explain differences to the IRS when filing

your tax return.

The interest income reported on notes and bonds transferred into

TreasuryDirect is for the entire interest period, even if the transfer occurred

between interest payment dates. See IRS Publication 550, under “Bonds

Sold between Interest Dates,” for securities transferred into TreasuryDirect

between interest payment dates.

PREMIUMS

A premium is the amount by which the auction price of a note is higher

than its face value. If you pay the auction price by check, you’ll receive an

invoice for the difference. See IRS Publication 550, under “Bond Premium

Amortization.”

BACKUP WITHHOLDING

Payments you receive may be subject to backup withholding if:

• you don’t provide a valid T I N

• you don’t certify that you are not subject to backup withholding

• we are notified by IRS that you are subject to backup withholding

due to under-reported interest income, or

• IRS tells us the T I N you provided is wrong.

We report any backup withholding on Form 1099 – I N T under “Federal

Income Tax Withheld.” Include that amount on your tax return as tax

withheld.

VOLUNTARY WITHHOLDING

We can help you plan for your taxes, too. Treasury can withhold some of

your interest payments to help defray your tax burden. We’ll transfer your

withholdings to the IRS and report the withheld amount on Form 1099 – I N T

under “Federal Income Tax Withheld.”

TreasuryDirect. Simply access your account and schedule the percentage

you want withheld.

Legacy Treasury Direct. Call 844-284-2676 (toll free) and furnish your

Legacy Treasury Direct account number, taxpayer identification number, and

the percentage you want withheld.

Definitive Registered Securities. Write to us at the Department of the

Treasury, Bureau of the Fiscal Service, PO Box 426, Parkersburg, WV 26106-

0426 and furnish us your taxpayer identification number and the percentage

you want withheld from your definitive registered account.

FOREIGN REPORTING

We use IRS Form 1042-S to report income earned by nonresident alien

individuals or fiduciaries, foreign partnerships, or foreign corporations. We

mail it by March 15, the year after the income is earned.

FOREIGN WITHHOLDING

Securities issued on or after July 19, 1984, are not subject to withholding

if you’ve filed a properly executed IRS Form W-8BEN or W-8ECI with us.

(Generally, these forms are valid for three years.) Securities issued before July

19, 1984, are subject to withholding of 30 percent or the applicable treaty

rate.

WHERE TO SUBMIT CORRESPONDENCE

Send documents and forms to the appropriate address below.

For TreasuryDirect:

Treasury Retail Securities Site

PO Box 7015, Minneapolis, MN, 55480-7015

For Definitive Registered Securities:

Treasury Retail Securities Site

PO Box 9150, Minneapolis, MN, 55480-9150

For Legacy TreasuryDirect:

Treasury Retail Securities Site

PO Box 9150, Minneapolis, MN, 55480-9150

For more information or questions, call us at 844-284-2676 (toll free). Outside

the U.S. call +1-304-480-6464. These publications may also be helpful:

• For more information on tax treatment of investment income, see

IRS Publication 550, “Investment Income and Expenses.”

• For more information on backup withholding, see IRS Publication

550, “Investment Income and Expenses;” and Form W-9, “Request for

Taxpayer Identification Number and Certification.”

• For more information about foreign withholding, see IRS

Publication 515, “Withholding of Tax on Nonresident Aliens and

Foreign Corporations,” and Forms W-8BEN and W-8ECI.

• For general tax information, contact your local IRS office. You can

get IRS forms and publications from their website at www.irs.gov or

from the IRS distribution center for your state.

The information in this publication does not apply

to U.S. Savings Bonds.

www.treasurydirect.gov

844-284-2676 (toll free) • Outside U.S. call +1-304-480-6464

FS Publication 0011

Department of the Treasury

Bureau of the Fiscal Service

(Revised March 2019)