OID stands for "original issue discount". OID arises when a bond is issued for a price less than its face value or principal amount. Generally, you should receive a Form 1099-OID for this.
OID is the difference between the principal amount (the amount you would receive when the bond matures) and the issue price. Generally, you must claim part of the OID as interest income each year that you hold the bond (whether you receive the payment or not).
The amount that you report on your return must be adjusted if:
- you bought the bond at a premium
- the bond is indexed for inflation
- the obligation is a stripped bond or stripped coupon, or
- you received Form 1099-OID as a nominee for someone else
Generally, if the amount you need to report as income is less than the amount on your Form 1099-OID, you must make an OID Adjustment to reflect this. You would report the full amount first, then subtract out the appropriate amount. This subtracted amount would be your OID Adjustment.
Note: You may need to reference IRS Publication 1212 before making this adjustment since this can be complicated.
Where to enter Form 1099-OID?
To report the 1099-OID, go to:
- Federal Section
- Income - Select My Forms
- 1099-DIV,INT,OID - Interest income, dividends, and distributions
- Did you earn any interest or dividend income from a bank, brokerage firm or some other financial institution?
- Original Issue Discount, Form 1099-OID
The OID adjustment line is near the bottom of the screen.