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When it comes to reporting interest payments, the IRS has its own list of 1099-INT requirements including who must file 1099-INT, when filing is required, penalties, thresholds, and more.
Interest income reporting Form 1099-INT helps the IRS stay aware of interest income paid by banks and other financial institutions to individuals or entities.
Form 1099-INT reports interest payments of $10 or more. It is also applicable for backup withholding and foreign tax on interest.
Accurate filing of 1099-INT is very important. If there are any errors in your 1099-INT reporting, it can damage business reputation and signal a lack of compliance. The IRS uses the information provided in the form (recipient’s name, TIN, and the interest income paid) to match the data provided by the recipient. If there is a mismatch in the data, the IRS will take note of it, and it could trigger notices or penalties.
For institutions reporting under FATCA rules, you need proper documentation and a clear audit trial. If the IRS or foreign tax agencies start an audit process, they will demand clear evidence supporting every FATCA report. If the audit trail is missing any information, it can lead to penalties and even damage your reputation.
Before you start filing your 1099-INT forms, use our TIN Matching to verify the recipient TIN and name to significantly reduce your chances of notices and penalties.
The minimum 1099-INT filing threshold is $10 in interest income paid to individuals or entities (business or trusts). The form also requires reporting for businesses that pay $600 or more in interest as part of a trade or business.
So, who must file 1099-INT? Let’s break it down. 1099-INT filing requirements by the IRS mandate the form to be filed by:
1099-INT Exempt recipients
You are not required to file Form 1099-INT for payments made to certain payees, including, but not limited to:
Include all taxable interest paid during a tax year, including, interest from bank deposits, bonds, insurance dividends, and other taxable interest.
Report any penalty paid due to early withdrawal of funds from a time deposit (like CDs).
Report any interest earned from U.S. Savings Bonds and Treasury obligations.
Report any federal income tax withheld due to backup withholding 1099-INT rules.
Report investment-related expenses used only by single-class Real Estate Mortgage Investment Conduits (REMIC).
Report any foreign tax paid on interest income and the name of the country for which the foreign tax was paid.
Report tax-exempt interest, such as interest on municipal bonds issued by state or local governments.
Report interest subject to the alternative minimum tax (AMT) from specified private activity bonds.
Report market discount on bonds purchased in the market.
Reports amortized bond premiums for different bond types such as taxable covered securities, U.S. Treasury bonds, and tax-exempt bonds.
Add the CUSIP number used for identifying specific tax-exempt or tax credit bonds.
Report state-related data, including state name, ID, and amounts withheld for state income tax.
Box 4 of 1099-INT reports any federal income withheld. If you omit this information, you may risk CP2100 notices and penalties. The remedy to this mistake is to file a ‘CORRECTED’ 1099-INT with updated details within 30 days.
The IRS has a list of exempt corporations such as tax-exempt organizations, or government entities that do not require 1099-INT reporting. That’s why it’s considered a best practice to always confirm the entity type by collecting W-9 forms from the recipient.
If you don’t comply with FATCA rules and omit FATCA status from your 1099-INT filing, it might lead to penalties. Make sure to carefully check withholding rules as well as W-9 information.
Interest income below $10 does not have to be reported to the IRS since it falls below the 1099-INT requirement threshold, unless backup withholding was triggered.
Interest income reporting is mandatory for banks and financial institutions that fall under 1099-INT filing requirements. And staying compliant with IRS rules helps prevent audits, notices, and penalties.
Whether you’re managing FATCA documentation, avoiding backup withholding notices, or submitting high-volume filings, Tax1099 is here to make 1099-INT filing seamless and easier with:
Ans: Form 1099-INT filing requirements include reporting interest payments of $10 or more, reporting $600 or more in business or trade related interest, or any amount subject to backup or foreign tax withholding.
Ans: Your business doesn’t need to report interest payments under $10 unless you have applied backup withholding or withheld foreign tax on the interest.
Ans: Corporations are generally exempt from 1099-INT reporting unless they receive credits from tax-credit bonds or you are the nominee reporting on behalf of others.
Ans: If you are filing more than ten 1099-INT forms, you need to e-file using an authorized e-filing platform like Tax1099.
Ans: The IRS considers it a best practice to retain copies of all your 1099-INT records for at least 3 years. At Tax1099, we go a step further and store your tax records for at least 4 years for audit purposes.
Ans: Yes, you can issue a consolidated year-end statement that combines all the interest amounts. However, you have to keep in mind that the 1099-INT data must be clearly identified, and the form language/box numbers preserved as per IRS rules.
Ans: If you made an error in your 1099-INT forms, you can correct the form by submitting a ‘CORRECTED’ Form 1099-INT with all the correct details and resubmitting it to the IRS. You should also furnish a corrected copy to the recipient.
Start preparing today and make interest income reporting one less thing to worry about. E-file your 1099-INTs with Tax1099.
Start preparing today and make interest income reporting one less thing to worry about.