When you have interest that has been earned but not yet paid, you have accrued interest. When buying or selling bonds between interest dates, the interest is included in the price of the bonds. This type of interest is taxable to the seller and not the buyer where the interest that is earned from the date of the purchase to the end of the end of the year is taxable by the purchaser. If you have accrued interest, you should receive a 1099-INT from the IRS for each of the bonds that you held that provided at least $10 in interest.
The total interest amount will include the accrued interest that is taxable to both the seller and the purchaser. The purchaser will need to note the portion of interest that is accrued interest which will then be deducted from their total interest to show the amount that is attributable to the purchaser.
Where do I Report Accrued Interest in the Program
To report accrued interest in the program please follow this path:
- Federal
- Income (select my forms)
- 1099-INT, DIV, OID
- Did you earn any interest or dividend income from a bank, brokerage firm or some other financial institution?
- Select Interest Income, Form 1099-INT
Once you enter the accrued interest you will see that it has been reported on your Schedule B under Part I line 1.